This article contributes to the literature on legitimacy by highlighting its paradox and constraints. While an optimal level of legitimacy-seeking behaviours may be necessary for organizational effectiveness, an excessive focus on legitimacy may lead to stakeholder mismanagement and have the opposite effect. These insights emerged from a longitudinal qualitative study of large-scale changes in public-sector health care in a Canadian province (1994-2002). In 1994, subordinate health care organizations underwent government-driven reforms to promote market-based logics of efficiency and cost reduction. Initial (...) years post reforms were characterized by a singular focus on government-driven priorities and inattention to other stakeholders. However, instead of giving benefits of legitimacy, these behaviours led to anger and activism from non-institutional stakeholders such as staff and community due to a decline in quality and patient satisfaction. Eventually, greater attention to stakeholder concerns ended the stand-off. These findings also elaborate Suchman's (Academy of Management Review 20(3), 571-610, 1995) framework on legitimacy and explain that legitimacy may occur for reasons other than institutionalization of values and be temporary in nature. (shrink)

This mixed-methods case study describes the experiences of a rural health organization in Canada that was a pioneer in undergoing institutionally driven radical change. This change was advocated by senior managers and physicians with the strong backing of the government. The senior managers and physicians made a strong case for the radical change and argued that a focus on efficiency and wellness would lead to improved service and quality of patient-care. However, this radical change initiative was resisted by nurses and (...) support staff who perceived that these changes were being driven by market-based institutional logics and questioned their ethical appropriateness in a public system. They also expressed a lack of trust given the large-scale layoffs in a prior restructuring. These findings run counter to extant theory by highlighting the role of agency despite institutional pressures. Specifically, change implementers not only face the burden of justifying ethical appropriateness of institutional logics, but also are required to engage in persuasive discourse that these institutional logics protect the interests of the members. (shrink)

Prior works in institutional theory are characterized by an assumption that the legal basis for authority of regulatory agencies is sufficient to ensure compliance by business organizations. From a business ethics standpoint, this would imply that regulatory oversight can hinder organizations’ pursuit of questionable business practices. However, the evidence for regulatory efficacy is far from clear as questionable business practices tend to persist despite regulatory monitoring. Drawing on the case of the regulatory failure to trigger a shift away from aggressive (...) banking practices in Ireland, which had serious social and economic costs, we highlight three barriers to deinstitutionalization: insufficient advocacy for change coupled with an inability to problematize the risks of extant business practices, unwillingness to impose change through the use of threats, power, or sanctions, and contradictions in the institutional environment that can obfuscate the regulators’ message. Thus, our study proposes that regulator-led change might not be as straightforward as previously theorized. In doing so, it advances prior theory through an explicit focus on the importance of three types of institutional work that are necessary for regulator-led deinstitutionalization. (shrink)

This study integrates institutional theory and social cognitive theory to describe how peripheral organizations can accidentally bring about radical change even in highly institutionalized and change-resistant fields. The empirical context is the field of banking in Ireland (1995–2001), where a peripheral bank triggered a shift away from traditionally conservative and risk-averse banking values toward aggressive values of entrepreneurial risk taking. The introduction of a new approach to banking was attributed to three factors: (1) a benevolent environment, which made this innovation (...) feasible and timely, (2) the state of the field, which had gaps that could be addressed through specialization, and (3) prior successes, which created hubris in the senior managers, thereby increasing the pace and scope of adoption of this approach. Eventually, what started as a specialized and entrepreneurial approach led to the spread of a risky approach to banking across the entire field. The study highlights the risks of hubris, in that media praise and early successes can increase the pace of adoption of innovations which offer short-term gains but are detrimental in the long term. (shrink)