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«Interactions and engagement in institutional shaping Silvia Dorado 2008/2009 No. 1 Office of the Dean This working paper series is intended to ...»

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College of Business Administration

University of Rhode Island

William A. Orme


encouraging creative research

Interactions and engagement in institutional shaping

Silvia Dorado

2008/2009 No. 1

Office of the Dean

This working paper series is intended to College of Business Administration

facilitate discussion and encourage the Ballentine Hall

exchange of ideas. Inclusion here does not 7 Lippitt Road preclude publication elsewhere. Kingston, RI 02881 It is the original work of the author(s) and 401-874-2337 subject to copyright regulations. www.cba.uri.edu Interactions and engagement in institutional shaping.

Silvia Dorado, College of Business Administration University of Rhode Island sdorado@mail.uri.edu Paper submitted to Organization Science I am thankful to Julia Brandl, Tammar Zilber, Bettina Witneben, George Willis, and Hillary Leonard for feedback on previous drafts. Funding for this research was provided by IPC, gmbf.


This paper explores the question of why actors with a similar profile adopt very different forms of engagement in institutional shaping, including no engagement. The empirical context for the study is the mainstreaming of microfinance in Bolivia. This exploration furthers our understanding of institutional agency by suggesting that interactions determine actors’ interest to engage in institutional shaping.


Institutional shaping, that is, actors engagement in willful behaviors that preserve, change, or erode institutional fields, has become a central concern of institutional research (see Dacin, Goodstein, and Scott 2002, Lawrence and Suddaby 2006). Institutional fields are recognized clusters of organizations with boundaries, identities, and interactions framed and stabilized by shared institutional logics (Scott 2001), defined as “broader cultural beliefs and rules that structure cognition and guide decision-making in a field” (Friedland and Alford 1991, Lounsbury 2007: 289, Ocasio 1997, Thornton 2004). The question of why actors engage in institutional shaping is frequently answered by saying that they so “to realize an interest that they value highly” (DiMaggio, 1978: 14). But how is this interest in engaging engendered?

Researchers have explored this question by focusing on factors that can explain how actors escape institutional logics without abandoning institutional theory’s crucial insight that actors’ intentions, actions, and rationality are conditioned by the logics of the fields they might want to shape (Holm 1995).

They have invoked exogenous shocks such as “technological disruptions, competitive discontinuities, and regulatory changes” (Greenwood and Suddaby 2006: 28). These shocks can be sudden—such as a regulatory change (Kellogg 2007) or health crisis (Maguire, Hardy, and Lawrence 2004) or the recombination of organizational forms in Eastern Europe after the fall of the socialist system (Stark 1996)—or cumulative—such as adverse competitive performance (Kraatz and Moore 2002, Greenwood and Suddaby 2006, Jones 2001, Baker and Nelson 2005, Ruef and Scott 1998, Sine and David 2003) or the incorporation of new technologies (see Barley 1986, 1990, Van de Ven and Garud 1993, Garud, Jain, and Kumaraswamy 2002, Munir and Phillips 2005). What is not explained by taking recourse to exogenous events is why, within a given field (e.g., radiology), actors exposed to the same exogenous event (e.g., the introduction of “Magnetic Resonance Imaging”) often behave differently, some engaging in reshaping, others in reinforcing, the prevailing institutional logics (see Barley 1986).

Scholars have also suggested that breaks with institutional logics might be occasioned by other than exogenous events, that actors might, alternatively, be motivated by tensions that emerge from cracks, overlaps, and/or contradictions among the multiple, fragmented institutional logics that define a given field (Whittington 1992, Rao 1998, Seo and Creed 2002, Lounsbury, Ventresca, and Hirsch 2003). But research has also found individuals (e.g., therapists and feminists working together in a rape victims center) to be willing to accommodate themselves to tensions between institutional logics (e.g., therapy and feminism) (see Zilber 2002, Heimer 1999).

Yet another alternative explanation offered to why actors engage in institutional shaping is to suggest that access to political talents, access to resources, and field positioning afford some actors the means to escape the grips of dominant institutional logics (see, DiMaggio, 1988, 1991, Leblebici et al. 1991, Rao 1998, Fligstein 2001, Dorado 2005, Chung and Luo 2008). This perspective has helped to define the profile of actors most likely to engage in institutional shaping. It has not, however, explained why, among actors with a similar profile, some engage on changing institutions (Rao, 1998), while others choose to accommodate institutional tensions (Zilber 2002), or continue to embrace logics challenged by technological changes (Barley 1986) or environmental and organizational contingencies (Chung and Luo, 2008). In short, it has not answered how actors develop an interest to engage in institutional shaping.

As reported in this paper, a grounded theory (Strauss and Corbin 1998) study of the shaping of microfinance into an activity conducted by commercial financial organizations suggested interactions, that is, the way people “do things together” (Becker 1982: xi, 1986, Hallett and Ventresca 2006a), as a possible answer to this question. Microfinance organizations are concerned both with providing financial services to the poor and with their own financial sustainability. Their origin is traced to the founding of Grameen Bank in Bangladesh in the mid 1970s. Early on regarded as a developmental endeavor carried out by non-governmental organizations (NGOs), microfinance emerged as a form of financial intermediation carried out by commercial financial institutions with the launch of Banco Solidario (BancoSol) in Bolivia in 1992. BancoSol and organizations that made a similar transition (e.g., Los Andes in Bolivia, Mi Banco in Perú, and Bank-Rep in Kenya) shared with their NGO predecessors the mission of serving the disenfranchised, but unlike those organizations, provided exclusively financial services and were subject to legislation that mandated that their financial stability take priority over their social impact on clients.

La Paz, Bolivia’s capital city and the stage for this so called “mainstreaming” of microfinance (see Rhyne, 2001), is a rather small social space. At the time data was being collected for this study, it was common for the promoters and managers of microfinance organizations to meet, casually at a restaurant, or club in La Paz or, per the invitation of a donor organization, at a microfinance forum in Washington, D.C. (U.S.A.) or Frankfurt (Germany). The tightness of this social space facilitated, in the manner of a “petri dish,” the study of actors’ interactions in shaping microfinance, which would otherwise have been difficult to observe owing to the considerable number and geographic dispersion of sites in most fields (Barley and Tolbert 1997).

The fundamental contribution of the study reported in this paper is offering interactions to answer why actors who inhabit the same institutional context and share similar profiles are not equally likely to engage in institutional shaping. Institutional researchers have observed that interactions influence agents’ capacity to engage in institutional shaping by facilitating their access to resources and exposure to institutional opportunities (Aldrich and Fiol 1994, DiMaggio 1988, Rao 1998, Fligstein 1997). Those who have considered directly the role of interactions in institutional processes have added that interactions frame actors’ appreciation of their institutional context (Emirbayer and Mische 1998, Hallett and Ventresca, 2006a, b). This paper specifies this interactionist contribution arguing that interactions, irremediably and often unexpectedly, define and redefine not only actors’ capacity to engage in institutional shaping, but also their interest to engage. With this finding, the paper also responds to calls for research on how institutions are “inhabited” (Scully and Creed, 1997) by people doing things together (Hallett and Ventresca, 2006a: 213). For if we accept that interactions define actors’ interests, we are accepting that interpersonal (as opposed to institutional) factors, such as emotion (see Hallett 2003), are at play in processes of institutional shaping.

Finally, the paper highlights the value of studies that, like this one, explore simultaneously multiple forms of engagement in institutional shaping. This study identifies seven instances clustered around three forms of engagement: pioneering, furthering, and resisting. Exploring these three forms of engagement within the same context expands our understanding of institutional agency not only by identifying alternative forms of engagement, as called for in recent research (see Dorado 2005, Lawrence and Suddaby 2006); but also by showing that the same exogenous events and endogenous tensions can have a differential influence in each of these three forms. The study then calls attention to the need for research that further explores this differential influence considering among other questions whether, as suggested in this study, exogenous events are particularly relevant in pioneering engagements while endogenous tensions are particularly relevant in furthering and resisting ones.

In the next section, the paper lays out a theoretical exploration of the research question. A description of empirical methods follows. Empirical findings are then presented in three consecutive sections, namely a summary of the case, a chronological description of the seven instances of institutional shaping that are identified, and, an analytical exploration of those seven instances clustered into pioneering, resisting, and furthering actions. The paper concludes with a discussion of contributions of the study and directions for future research.

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Negotiated order theory (Strauss et al. 1964, Strauss 1978, 1982, Fine 1984, 1995, Basu et al. 1999, Modell 2006), the most developed organizational branch in interactionism, provides a good starting point for exploring how interactions influence institutional shaping. It suggests that the social order is continually (re)negotiated through negotiations (Strauss’s term for interactions) within a context of existing structural arrangements, themselves the result of earlier negotiations (Fine 1984), making it consistent with institutional theory’s understanding of the interplay of agency and structure as duality (Giddens 1979, Ranson, Hinings, and Greenwood 1980, Barley 1986, DiMaggio and Powell 1983, Barley and Tolbert 1997, Seo and Creed 2002, Dorado 2005).

This perspective is particularly interesting because scholars in this tradition have addressed, head on the difficulty of explaining how actors whose actions are framed by the institutional logics of a field shape this field. They were prompted by critics who argued that the theory provided a malleable image of structure without sufficient attention to how micro interactions (e.g., between a female nurse and a male doctor) are irrevocably framed by macro ones (e.g., between women and men in a western country) (Benson 1978: 497, Day and Day 1978). In response (see Maines 1977), negotiated order scholars argued that the context that defines actors’ negotiations, their “interactions with other actors to get things done” Strauss (1978: 2), has two separate components, a structural and a negotiation or interaction context (Maines 1977, 1979, Strauss 1978, 1982, Fine 1984, see also Modell, 2006, Bennington, Shelter, and Shaw, 2003, Basu et al. 1999). The structural context includes elements of the broader social order such as field institutional logics that permeate organizations (DiMaggio and Powell 1983, Heimer 1999, Thorton, 2004) and frame interactions (Hallett, 2003).

Actors’ interaction context is, in turn, defined by the sum total of “whatever agreements, understandings, pacts, contracts, and other working arrangements currently obtained frame the interactions among actors” (Strauss 1978: 5-6). Frequently called the mesostructure (Maines 1982, Fine 1995), this sum is assumed to define, as a sort of filter, the elements of the broader structural context “entering very directly as conditions into the course of the negotiation itself" (Strauss 1978: 99), that is, into actors’ current, and their expectations about future, interactions (Emirbayer and Mische 1998).

Strauss explicitly argued that the structural and negotiation contexts are connected, and suggested that although the structural context is larger and more encompassing than the interaction context, “changes in the former might impact on the latter, and vice versa” (1978:238-239).

In short, negotiated order addressed the criticism of malleability by identifying, within what institutional scholars call structural context, an interaction context that frames the elements of the structural context that impinge on actors’ behaviors. But our understanding of the empirical connection between interaction and structural context remains limited. We know that interactions among actors define the institutional logics that frame the actors’ behaviors (see Hallett and Ventresca 2006a). For example, Fine (1995), in his ethnography of kitchens, showed how the way in which actors interacted in the kitchens of four different restaurants framed how the cooks in those kitchens combined the economic logic of the restaurants in which they worked with their cultural aesthetic concerns about the presentation and flavor of food defined by their occupational backgrounds (see also Basu et al. 1999). We do not know, however, how actors’ interactional context defines their interest to engage in the shaping of the broader structural context. This is the question empirically explored in the study reported in this paper.

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