Institutional complexity

80 Take Away Concepts

Institutional orders set unique organizing principles that influence actor’s behavior.

Scholars recognize seven major institutional orders characterizing contemporary Western society: Family, Community, Religion, State, Market, Profession, and Corporation. Each institutional order is ruled by a central logic, a set of material practices and symbolic constructions, that sets a frame of reference that influences actor’s choices, their sensemaking, and their sense of identity. The institutional logic perspective is apt to analyze the interrelationships between institutions, organizations, and individuals within a social system. Between the institutional logic and the sense making activities of individual actors, we find the meso-level construct of organizational logic, that is the set of assumptions of what is considered to be legitimate and effective for an organization within a given context. A particular organizational logic, is empirically operational when a specific configuration of discourses is observable at the level of the organization. As we’ll see in the findings section, the concept of organizational logic will be used in Study2, to observe the transformations in the organizational logics of Telenor Group.

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the likelihood that the organization will be subject to institutional complexity (Greenwood, et al., 2011). The response to such conflicting prescriptions is challenging, producing internal frictions and uncertainty on how to move forward.

As Battilana and Dorado put it: “Dealing with multiple institutional logics is challenging for organizations because it is likely to trigger internal tensions that may generate conflicts among organization members, who are ultimately the ones who enact institutional logics” (2010, p. 1420).

Based on an in-depth analysis of the literature on institutional complexity, Greenwood at al. (2011) reveal two fundamental pitfalls regarding how institutional complexity has been approached so far by institutional scholars: (1) most studies consider only two logics, only a few studies analyze the effect of more than two logics at play at once, (2) most studies assume logics as inherently incompatible—

there is a lack of studies that examine the extent to which logics are incompatible (or not). A consequence of the first pitfall is that the complexity experienced by organizations is underestimated and the organizational responses not being properly understood. A consequence of the second pitfall is that implicit in most studies is the belief that the rise of a new logic requires the disappearance of the old dominant logic, due to their fundamental incompatibility.

In contrast to the first dominant pitfall, and in pursuit of a way to theorize how multiple logics can be reflected in professional work, Goodrick and Reay coin the term constellation of logics (2011). The authors define a constellation as a

“combination of institutional logics guiding behavior at any one point of time”

(Goodrick & Reay, 2011, p. 399). What is important in the context of a constellation of logics is the way logics are arranged and their mutual relationships. Goodrick and Reay (2011) argue that relationships among different logics within a constellation can be competitive as well as cooperative. Competitive relationships imply that strengthening one logic will necessarily weaken another one. In the conflict, one of the logics must win for the tension to be resolved. Cooperative relationships imply that alternative logics can together influence practice; thus, strengthening one logic might strengthen an alternative logic. Goodrick and Reay (2011) suggest that there are two ways logics can be cooperative. First, relationships can be facilitative:

changes in work practices with one logic can facilitate changes in work practices in another logic. Second, relationships can be additive: a specific work task reflects the influence of multiple logics. Table 3 provides an overview of the possible nature

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of logics’ relationships. Understanding those relationships is fundamental to understand how change occurs and stability maintained (Waldorff, et al., 2013).

Table 3. Overview of possible logics' mutual relationships.

Competitive Relationships Cooperative Relationships

Facilitative Additive

Strengthening one logic will necessarily weaken another one

Changes in work practices with one logic can facilitate changes in work practices with another logic

A specific work task reflects the influence of multiple logics

Recently, in relation to the second dominant pitfall, a group of scholars have explored how organizations combine and reconfigure logics, coining the notion of hybrid organizations (Battilana & Dorado, 2010; Jay, 2013; Pache & Santos, 2013;

Greenwood & Hinings, 1996). Within this context, under certain circumstances, institutional logics might be compatible (Greenwood, et al., 2011). Such understanding requires us to explore the nature of such incompatibility or compatibility.

Conflicting institutional demands may vary in relation to the nature of their prescriptions (DiMaggio & Powell, 1983; Oliver, 1991; Pache & Santos, 2010).

Those prescriptions can either engage organizations at an ideological level, prescribing the goals that are legitimate to pursue, or at a functional level, prescribing the means the organization should adopt (DiMaggio & Powell, 1983;

Oliver, 1991; Scott & Meyer, 1991; Townley, 2002; Pache & Santos, 2010). In their analysis, Pache and Santos (2010) argue that incompatibility at a goal level is substantially more challenging to resolve than one at a mean level, as it requires organizational members to question what their organization is about. Goals are simply not easily negotiable. Conflicts on means only are easier to tackle since “they focus on technical issues; these demands are relatively peripheral for organizations.

Such conflict may not necessarily be worth the cost of an institutional battle” (Pache

& Santos, 2010, p. 464). The negotiable nature of means enables the resolution of conflicts. While Pache and Santos describe incompatibility in terms of differences concerning goals and means, Goodrick and Salancik (1996) focus on organizational discretion. In their argument, discretion originates from the uncertainty inherent in the goals and practices prescribed; therefore, “actors may use their own particularistic interests to guide their further definition of appropriate action” (1996,

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p. 2). The higher the ambiguity of prescriptions, the higher the level of discretion.

In this context, the incompatibility between logics is mitigated, while the discretion of actors to reconcile logics is enhanced (Greenwood, et al., 2011). What both these approaches suggest is that if logics’ prescriptions are ambiguous, actors are provided with more discretion to resolve the tension produced by the complexity.

When logics are instead specific, organizations tend to experience a higher level of complexity.

Organizational Strategies to Respond to Institutional Complexity

In early research, scholars have addressed institutional complexity as something imposed on the organization (Kraatz & Block, 2008; Greenwood, et al., 2011), analyzing how the organization responds to the conflicting prescriptions of different logics (D'Aunno, et al., 1991; Oliver, 1991; Pache & Santos, 2010). A development from this point of view has certainly been the work on hybrid organizations, defined as “organizations that combine institutional logics in unprecedented ways”

(Battilana & Dorado, 2010, p. 1419). Such organizations, through a process of selective coupling, combine different elements from multiple competing logics in a systematic way to manage the incompatibility between logics, and to reduce the costs and risks associated with decoupling or compromising (Pache & Santos, 2013).

It is useful now to briefly describe the concepts of decoupling, compromising, and selective coupling. As Pache and Santos (2013) point out, the concept of decoupling has a long tradition in institutional theory (Meyer & Rowan, 1977; Westphal &

Zajac, 2001; Fiss & Zajac, 2006; Boxenbaum & Jonsson, 2008; Bromley & Powell, 2012; Crilly, et al., 2012). These studies suggest that when facing conflicting demands from competing institutional logics, organizations symbolically agree to one logic’s prescription while implementing the one of the competing logic, usually the one closer to the organizational goals. Thus, decoupling refers to “the process through which organizations separate their normative or prescriptive structures from their operational structures” (Pache & Santos, 2013, p. 974). One of the major assumptions of decoupling studies is that all organizational members adhere to the logic and are willing to defend it (Pache & Santos, 2013). Compromising refers to the attempt of organizations to accept and internalize institutional prescriptions, but in an altered form that balances conflicting expectations (Oliver, 1991).

Compromising can happen through internalizing the minimum indispensable elements to ensure conforming to institutional demands, or through negotiations

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with institutional referents to modify their expectations (Pache & Santos, 2013).

Pache and Santos (2013), with their comparative study of four work integration social enterprises, and in opposition to what previous literature suggests (that under conditions of conflicting institutional demands organizations tend to decouple or to compromise), found an alternative strategy that involved selective coupling of demands from different logics. The organizations under their analysis did indeed adhere to both logics at play—social welfare and commercial—selecting intact demands and showcasing a stable configuration over time.

As part of the stream of research on hybrid organizations, a group of scholars have explored how organizations engineer ad hoc conflicting logics to pursue new strategies and create new market opportunities (Tracey, et al., 2011; Kent & Dacin, 2013; Dalpiaz, et al., 2016). Under this light, institutional complexity becomes a potential source of opportunity for change (Dalpiaz, et al., 2016). Dalpiaz et al.

(2016) introduce the concept of recombinant strategies to explain how organizations purposefully combine different logics to pursue new market opportunities. The authors develop a theoretical model linking recombinant strategies for dynamic restructuring of organizational agency to the capacity of creating and pursuing new market opportunities. They argue that recombinant strategies reflect “explicit decisions about the desired relationship between elements of the two logics and their application to organizational activities” (p. 354). The authors recognize three possible recombinant strategies: compartmentalization, enrichment, and synthesis. Dalpiaz et al., in line with the mainstream approach, choose to analyze only two logics and their recombinant strategies. Their findings suggest that under a compartmentalization strategy the organization opts to adopt two separate sets of guiding principles as prescribed by the two logics. The new and the old coexist, while there is a preference to adopt practices suggested to be legitimate by the new logic. Under an enrichment strategy, the organization opts to enrich the first logic with selected elements of the new logic. The old logic maintains priority. Under a synthesis strategy, the two logics are synthesized into a third new one through a process of reinterpretation of the composing elements.

Take Away Concepts

Organizations are subject to institutional complexity whenever they face incompatible prescriptions from multiple institutional logics. A constellation of

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logics is a combination of logics guiding behavior at one time. Relationships among different logics within a constellation can be competitive as well as cooperative.

Conflicting institutional demands may engage organizations at an ideological level, prescribing the goals that are legitimate to pursue, or at a functional level, prescribing the means the organization should adopt. Incompatibility at a goal level is substantially more challenging to resolve than one at a mean level. Early research has conceptualized institutional complexity as something imposed on organizations.

Later research has analyzed how organizations engineer ad hoc conflicting logics to pursue new market opportunities. Under this stream, research shows three strategies organizations adopt to deal with institutional complexity: (1) compartmentalization, (2) enrichment, and (3) synthesis. These are all crucial concepts to highlight and remember, as they will all be extensively used in the findings section of Study2. As we’ll see Telenor Group is facing a high degree of complexity as resulting from the co-existence of multiple organizational logics. We will also see how both compartmentalization and enrichment strategies have been adopted in the context of the organization under analysis.