Tools of the trade

Institutional pressures on business

Institutional viewThis tool seeks to understand the forces which act upon an organisation which establish acceptable behaviours

How does business change?Capture

new sourcesof value

Invest to maintain

competitive

advantage

Conform toexternal pressure

Adopt practices

to comply, defy, or

manipulate

Seekrole models for future

Seek successful examples

to replicate

Evolveleadership practices

Promote professional standards(Consumer behaviours

)

Radical paradigm shift (sustainable business design)

Develop radical new business models, market systems,

governance, and exchange mechanisms

How does business change?

Organisations exist in an environment which is made up of peers, competitors, governments, NGOs and other stakeholder organisations

This environment (or field) is often defined by the type and size of business

Within this ‘field’ there are certain expectations generated about what is normal or acceptable behaviour

The greater the pressure the more likely the organisations in the field will conform

What shapes behaviourDi Maggio & Powell, 1987

What forces shape behaviour?Institutions in society such as Peers, NGOs, and Governments SHAPE business behaviours towards a legitimate norm Businesses pursue legitimacy as an

organisational goal or endorsement which achieve political power…and social fitness

Di Maggio & Powell, 1987

What forces shape behaviour?Where Legitimacy is the generalised perception or assumption that the actions of an organisation are desirable, proper or appropriate within some social constructed system of norms, values, beliefs, and definitions

Suchman, 1995

Explicit coercive pressure on an organisation is that is considered to stem from political influence and the problems of legitimacy and arises from direct dependence on other organisations most importantly those with governments and other rule makers

Regulatory or governmental pressures

8

Di Maggio & Powell, 1987

Implicit coercive processes are assumed to derive from public opinion as represented in the mass media and from the monitoring and advocate activities of Non-Government Organisations (NGOs)

Reputational pressures to conform

9

Di Maggio & Powell, 1987

Uncertainty is a powerful force that encourages imitation are is an important driver for behavioural change

Mimetic processes are used when organisations are uncertain of an appropriate strategyThen model the behaviour of others who are seen as successful, legitimate, or to have adopted a viable solution to a managerial problem

Uncertainty and pressure to follow role modelsDi Maggio & Powell, 1987

Normative or professionalism processes are seen to be largely associated with professionalised networks between individuals or organisations as members of an occupation or through the acquisition of expected norms in the formal education or training of employees

Pressure to conform to professional standards

Which actors exhibit pressure?Waddock 2008

ProfessionNormative MimeticExplicit coercive Implicit coercive

Institutional pressures in CR&S Organisations experience institutional pressure which drives

similar and increasing levels of corporate responsibility Certain factors give rise to higher levels of responsibility

such as media observation, greater prevalence of CSR standards, pressure from supra-national bodies like the UN

Other factors limit the ability of organisations to respond to institutional pressures or reduce organisations’ dependence on institutional support – absence of financial resources, limited competition etc

Summary This perspective on responsible & sustainable

business suggests that businesses are under pressure to conform to expectations

Here external actors (stakeholders) combine to shape those expectations