The Wheel Comes Full Circle? An Integrated View of Organizational Responses to Institutional Pressures

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Abstract

In the face of increasing pressure to comply with institutional norms, firm managers may retreat from previous commitments to comply once they realize the challenges involved. This study examines how firms respond to institutional pressures in a particular way called reversion, in which an organization's managers temporarily comply when there are no consequences but resist when it is in their interest to resist. By integrating institutional and agency theories, we model the reversion decision as a tension between institutional constituents and organizational managers. An empirical analysis of a sample of Japanese firms that scheduled annual shareholder meetings during the 2001 through 2014 period was performed. Our findings show that although organizations’ susceptibility to certain institutional pressures determines initial organizational compliance, managers whose interests diverge from those of the institutional constituents can revert their decisions, especially when they have discretion in decision making to protect their own interests. These findings highlight the temporary nature of organizational responses to institutional pressures and help us understand how organizational agency can limit institutional control over an organization's actions.

Original languageEnglish
Pages (from-to)771-807
Number of pages37
JournalJournal of Management
Volume49
Issue number2
DOIs
Publication statusPublished - 2023 Feb
Externally publishedYes

Keywords

  • agency theory
  • corporate governance
  • institutional pressures
  • institutional theory
  • reversion response
  • shareholder meeting

ASJC Scopus subject areas

  • Finance
  • Strategy and Management

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