Daunno: The role of institutional and market forces in divergent organizational change

22 important questions on Daunno: The role of institutional and market forces in divergent organizational change

What is the focus of the paper of Daunno?

A divergent (radical) change, in which organizations abandon an institutionalized template for arranging their core activities. Results show that those changes depend on both market forces (proximity to competitors, disadvantages in service mix) and institutional forces (state regulation, ownership and governance norms, mimicry of models of divergent change)

What are organizational templates? (Daunno)

Patterns for arranging organizational behavior that specify organizational structure and goals and reflect a distinct set of beliefs and values.

Recap: Organizations often arrange their core activities according to accepted models/templates. What causes them to abandon and replace them for a different one? (2)

1. Strong local market forces: i.e. low local demand and intense competition results in poor performance and it increases selection pressures> leading to exit and differentiation (= motivation)
2. Strong, heterogeneous institutional forces: influential but diverse regulations, norms and cognitive models (= opportunity)
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Organizations often arrange their core activities according to accepted models, templates, in their field. What is the consequence of this? (Daunno)

Some templates are so repetitive and enduring across an entire organizational field that actors take it for granted that this pattern is the right way to organize. Yet organizations do abandon such templates, diverging from accepted models. The study of Daunno investigates what causes them to abandon those institutionalized templates.

On which literature gap does Daunno base it's research?

It is not yet clear how the theory can be extended to account for divergent organizational change. Examining such change would help to link the "old" and the "new" institutional theories.

Prior studies may field different explanations for divergent organizational change because they examined organizational fields that differ in the kinds of market and institutional forces that affect them. What does Daunno do in this study?

Daunno formulates and tests 10 hypotheses on the effects of both market and institutional forces on divergent organizational changes, using data of hospitals.

Organizations that face strong. local market forces will probably make more divergent changes. Why is that according to Daunno? Formulate H1.

Those organizations experience low local demand for their products/services and intense competition among similar organizations at the local level. This will lead to divergent change as less-fit competitors move out of a market in search of alternatives to their current templates. This leads to:
H1: The lower the level of demand in an organization's local market, the more likely it is to make a divergent change.

The addition of an organization to a population, has stronger competitive effects on neighboring organizations than on those that are more distant. What is the impact on divergent changes, formulate H2? (Daunno)

Competition in a local market increases the likelihood that one or more of the proximate organizations will perform poorly and this will need to make a divergent change to differentiate itself. Thus:
H2: The closer the geographic distance between an organizations and its closest market competitors, the more likely that the organization will make a divergent change.

The size of organizations relative to competitors in their local market is likely to influence divergent change, why? Formulate H3. (Daunno)

The size will influence which of them will be unsuccessful and thus be forced to changed for an alternative template. Because it is likely that small organizations experience competitive disadvantages, the following hypothesis is formulated:
H3: Organizations that are smaller than their market competitors ar emore likely to make divergent changes.

What is the influence of service and product mix relative to competitors on divergent change according to Daunno? Formulate H4.

Organizations that produce goods/services that are more attractive will remain their status quo, the losers must differentiate and seek alternatives. Thus:
H4: Organizations that have disadvantages in services/products relative to local market competitors are more likely to make divergent changes.

According to Daunno institutional forces also play a role regardign divergent changes. Explain:

Divergent change occurs when an organizations abandons the institutionalized template. Heterogeneity in institutional elements can play a role in promoting divergent change when those elements are inconsistent with the dominant model.

Regulation (government policies etc.) can promote or inhibit divergent change. Which hypothesis is formulated by Daunno?

Government policies can thus produce contradictory effects on divergent change. Regulation can create structural inertia, routines reduce the ability to change, because routines can be taken for granted they can contribute to inertia. Daunno expects:
H5: Organizations that meet regulatory requirements in their fields are less likely to make divergent changes.

Government policy (legislation) can promote and prevent strong competition. What is the effect on divergent change? Which hypothesis of Daunno fits this thought?

Strong competition motivates organizations to consider divergent change, weak competition makes this unnecessary. Thus:
H6a: Pro-competition regulation will promote divergent organizational change
H6b: Anti-competition regulation will inhibit divergent organizational change

Governmental regulation/policies (legislation) also play a contradictory role in divergent change by either limiting or increasing resources (f.e. capital) for organizations. Which 2 hypotheses did Daunno formulated?

H7a: Legislation that provides resources to support current organizational templates will inhibit divergent organizational change.

H7b: Legislation that provides resources to support organization's use of alternative templates will promote divergent organizational change.

The most important norms and values of divergent change are those that make such change acceptable to actors who own/govern organizations. What is the difference in public/non-profit and profit organization according to Daunno? Which hypothesis suits this?

Public ownership diffuses both the costs and benefits of organizational performance and creates inertia rather than support for change. Further, publicly owned organizations typically are founded to meet needs that profit-organizations can't address. These and non-profit organizations find it difficult to use public assets for purposes other than those stated in their organizational charter. Thus:
H8: Public and private non-profit organizations are less likely to make divergent changes than for-profit organizations.

Governance norms that specify central control of complex organizations will promote divergent change among the various units or divisions that belong to such organizations. Why? Formulate a hypothesis that suits this (Daunno).

This is because central control weakens the importance, meaning, and identity of subunits, making it possible to view them as a whole. This increases the changes that divergent change will occur in organizational units that face adversity. Thus:
H9: Organizations that are member of multidivisional firms are more likely to make divergent changes.

Organizations that adopt alternative templates provide cognitive models of divergent change that spread in an organizational field through mimicry. How does this influence divergent change? Formulate the last hypothesis.

An organization is not likely to imitate other organizations that make divergent changes in its local market area because the need for such change is greatly reduced when neighbors already made it. That is why organization will imitate other organizations that face a similar or equivalent pattern of market and institutional forces. Thus:
H10: Organizations are more likely to make divergent changes to the extent that they have nonlocal model of such change in organizations that faced similar market and institutional forces.

What is the study's unit of analysis? How did Daunno gathered data?

They merged data from several sources, to construct a pooled, cross-sectional analysis file. The data set contained annual observations on 2064 rural hospitals.

Daunno's results provide relatively strong support for their hypotheses. Summarize their hypotheses/thoughts.

Daunno argued that strong, local market forces limit the critical  resources that organizations need to support their current templates,  while strong institutional forces make searches for new templates  acceptable and successful. In fragmented organizational fields, the  regulatory, normative and cognitive elements that typically promote  stability in behavior can also promote divergent change.

Which thought is not strong  supported according to Daunno?

Daunno find that there is no strong support for market demand as being a factor influencing divergent change. Maybe this is because of the healthcare characteristics.

Can the relative strong results of Daunno be generalized?

Be cautious: these results may hold only for a particular context. Perhaps the results change over time, as both institutions and markets evolve in this field. Empirical tests of the hypotheses in other industries are encouraged.

What could future research study according to Daunno?

Institutional and market forces may interact in important ways to affect organizational change, future research should aim to specify their roles more precisely.

The question on the page originate from the summary of the following study material:

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