This research addresses to interrelated questions:
Q1 ‘How were reform ambitions translated into companies goals, means and strategies?’
Q2 ‘How Italian companies use Management control systems to make their responses aligned with the reform ambitions?’
In order to provide an answer to the main research question, various sub-research questions have been formulated. The sub-research questions are formulated in order to address the main research question and are stated below.
1. Which Institutional Pressures do the companies face?
2. What are the response of the firms to the Institutional pressures?
3. What goals, objectives and approaches the companies use to align their strategy to the ambition’s reform?
4
In order to address the main research questions, the sub research questions will be studied and investigated at the same time.
Literature
Institutionalism finds its origin within the 19th century but faced various and substantial changes over the time. The first statements regarding institutionalism stems from prominent scholars, such as; Marx, Weber, Durkheim, and many others. Weber argues that rational order has become an
"iron cage" in which humanity has been locked and which, due to the power and efficiency of bureaucracy (rationalism more extreme form), was completely irreversible.
However DiMaggio and Powell argue that is possible to revisit the metaphor of the "iron cage"
because, perhaps building on the work of Meyer and Rowan (1977), we can see that bureaucracy is continuing to grow and organizations are becoming increasingly homogeneous, but the processes that are driving this are (unlike in Weber's model), "making organizations more similar without necessarily making them more efficient"( DiMaggio and Powell 1983).
A shared understanding stemming from the early institutionalism is that organizations are not independent but operate in the context of institutional arrangements and social processes. According to Di Maggio & Powell (1983), in the early institutionalism: “issues of influence, coalitions and competing values were central, along with power and informal structures”. The old institutionalism focuses on internal dynamics attaining the individual organizations. The origin of organizational theory stimulated the development of institutional theory and resulted in a paradigm shift.
The new institutionalism shows an important linkage between the institutional environment and organizational behaviour (March, 1965). The early institutionalism differs from the new
institutionalism, via its “emphasis on legitimacy, the embeddedness of organizational fields, and the centrality of classification, routines, scripts, and schema” (Greenwood & Hinings, 1996). In the new institutionalism, originated between 1970 and 1980, scholars emphasized cognitive structures.
Scholars highlight the importance of compliance to the external institutional environment for organizational survival. They note that compliance to the institutional environment provides organizations with benefits such as; legitimacy, status improvement, an increase of internal and external loyalty, entrance to resources, stability, community and society support, acceptance and security. It must be noted, that these benefits as a result of organizational behaviour do not
5
necessarily increase an organization’s effectiveness (DiMaggio & Powell, 1983; Meyer & Rowan, 1977; Oliver, 1991). The new institutional theory focus in opposition to the old institutional theory on the external environment attaining the organizational field/society.
Neo institutional theory is one of the most dominant perspectives in organizational theory. The uniqueness of this perspective is rooted in its emphasis on the primacy of culture, highlighting how social structures of resources and meanings are created and have important consequences.
There was a break from the classical isomorphism as naïve urgency of assimilating to other entities toward an institutional approach to rationality that imply the role of intelligent
performance-oriented managers implying the concept of agency in the relations between this actor micro process and institutions.
This kind of institutional approach to rationality has more recently become manifest in the use of the concept of institutional logics that refers to broader cultural beliefs and rules that structure cognition and guide decision-making in a field. The emergence of the concept of logic has been a key turning point in redirecting attention back to the kind of institutional rationality suggested by Meyer and Rowan (1977) as well as the study of institutional sources of practice variation.
Institutional logics can be understood as:
[…] the socially constructed, historical pattern of material practices, assumptions, values, beliefs, and rules by which individuals produce and reproduce their material subsistence, organize time and space, and provide meaning to their social reality (Thornton and Ocasio, 1999, p. 804).
The main purpose of the Neo institutionalist is to show how variation in extant practice makes possible the creation of something distinctly different – for example, a new practice. This requires social recognition that variation in the enactment of practice is substantively different enough to warrant attention as a deviation from established practice. This often entails some sort of collective action by actors who see a potential to benefit from such deviation in the form of a new socially legitimated practice. Such collective action needs to mobilize resources and meaning in support of the new activity and then theorize this activity in a way that will be acceptable to incumbents in an established field (Burns and Scapens 2000).
6
Neo institutional theory provides Convergence of the elements of the old- and new-institutional theory. Neo Institutional Theory in fact, can provide model of change linking organizational context and intra-organizational dynamics.
Since our purpose is to study the effect of the reforms and the responses to that reforms the theoretical background that better fit in my research is the Neo institutional theory in the light of institutional change. Institutional change could be defined as a difference over time in an institution.
The relevance of the contribution of the work of Greenwood and Hinings is to understand the transition from reforms as promoters of organizational change at the field level. Firstly, they articulate the circumstances in which a convergent organizational change is to be expected or radical (Greenwood and Hinings, 1996). Secondly, they adopt a broad perspective on institutional theory that brings together traditional issues of power, competing values and coalitions with new issues of legitimacy and inclusion of the organizational sectors (Greenwood and Hinings, 1996) this is fully adapted to a complex context in which there are many actors interacting with each other and with the organization and where there is a high degree of uncertainty.