Antecedents and Consequences of Organizational Change: ‘Institutionalizing’ the Behavioral Theory of the Firm

Abstract

In this paper, we highlight the conditions under which organizations initiate changes in two distinct institutional contexts. While the focus within behavioral research has been on aspiration-driven organizational change, the effect of institutional dynamics on the probability of change has been given limited attention. Pooled cross-sectional data covering the period 1920-2001 in the baseball industry are regressed to examine a set of hypotheses that predict the drivers of organizational change in periods of institutional stability and instability, as well as the impact of these changes on performance. Our findings show that the role of aspiration-driven organizational change diminishes in environments characterized by institutional instability. Rather, mimetic and cognitive pressures pave the ground for responses to institutional dynamics. We also shed light on how the relative stability/instability of the institutional environment heterogeneously influences the implications of behavioral changes for organizational performance.

Keywords: Organizational change, institutional change

JEL Classification: M1