Satisficing and Permissive Institutionalization in the Market: The Case of American Manufacturing

• In Event: 373 - Section on Organizations, Occupations and Work Paper Sessions. Institutional Logics and Institutional Complexity

Abstract

While economic theory has difficulty explaining inefficient organizational practices, sociological institutionalism explains them via the weight of legitimacy pressures, imitation due to uncertainty, or internal coalition politics based on competing institutionally derived identities. But what about competitive fields where managers of for-profit firms are overwhelmingly concerned with technical performance and a dominant institutional logic specifies a best practice widely agreed to be technically optimal, yet many organizations deviate from the prescribed practice? I find such a situation in the American manufacturing field, based on interviews with 109 individuals in 31 firms, and 169 hours of participant observation. I show that two practices associated with the postfordist logic of the capitalist firm – lean production and worker empowerment – are deeply institutionalized as best practice in the field, yet many mangers selectively adopt only the most basic aspects of each, resulting in substantially more limited innovation and continuous improvement capabilities than comparable factories. Existing institutional theory cannot explain such outcomes because, when considering strategic action (rather than automatic cognition), it assumes individuals maximize. In contrast, I find that the main factor explaining deviation from best practice is managerial aspiration level (satisficing). Aspiration level has a surprisingly strong influence because the dominant logic is normative (has no enforcement mechanisms) and suppliers of complex components are embedded in supply chain relations that attenuate competitive pressures. The analysis develops institutional theory with a satisficing microfoundation and demonstrates the latter is necessary to explain patterns of variation that are not predicted by maximization-based accounts.

Author

• Matt Vidal, King's College London