Selective Regulator Decoupling and Organizations’ Strategic Responses

Academy of Management Journal (Forthcoming)

57 Pages Posted: 1 Mar 2019

See all articles by Jonas Heese

Jonas Heese

Harvard Business School

Ranjani Krishnan

Michigan State University - Department of Accounting & Information Systems

Frank Moers

Maastricht University School of Business and Economics; European Centre for Corporate Engagement (ECCE)

Date Written: March 1, 2019

Abstract

Organizations often respond to institutional pressures by symbolically adopting policies and procedures but decoupling them from actual practice. Literature has examined why organizations decouple from regulatory pressures. In this study, we argue that decoupling occurs within regulatory agencies and results from a combination of conflicting institutional pressures, complex goals, and internal fragmentation. Further, regulatory decoupling is selective, i.e., regulators fail to adequately enforce standards only for one set of organizations. Regulated organizations that benefit from selective regulatory decoupling use non-market strategies to maintain their favorable regulatory status and in the process selectively decouple their norms in one organizational activity but not others. As an empirical context, we use the hospital industry where regulators have to balance conflicting pressures to be tough on fraud, while maintaining the community’s access to essential but unprofitable services such as charity care and medical education. In response, hospital regulators selectively decouple and exhibit leniency in enforcement of mispricing practices towards beneficent hospitals, defined as hospitals that provide more charity care and medical education. In turn, beneficent hospitals selectively decouple their service and profit goals by providing unprofitable services to uninsured patients, while mispricing insured patients to earn higher reimbursements.

Keywords: selective regulator decoupling; nonprofit organizations; beneficence; mispricing; upcoding

Suggested Citation

Heese, Jonas and Krishnan, Ranjani and Moers, Frank, Selective Regulator Decoupling and Organizations’ Strategic Responses (March 1, 2019). Academy of Management Journal (Forthcoming). Available at SSRN: https://ssrn.com/abstract=3345166 or http://dx.doi.org/10.2139/ssrn.3345166

Jonas Heese (Contact Author)

Harvard Business School ( email )

Soldiers Field Road
Morgan Hall 397
Boston, MA 02163
United States

Ranjani Krishnan

Michigan State University - Department of Accounting & Information Systems ( email )

270 North Business Complex
East Lansing, MI 48824-1034
United States
517-353-4687 (Phone)
517-432-1101 (Fax)

Frank Moers

Maastricht University School of Business and Economics ( email )

Maastricht

HOME PAGE: http://www.maastrichtuniversity.nl/sbe

European Centre for Corporate Engagement (ECCE) ( email )

Tongersestraat 53
Maastricht, 6211LM
Netherlands

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