Serving Two Masters: Industry Fields, Geographic Communities, and Institutional Pluralism*

Transcription

1 1 Serving Two Masters: Industry Fields, Geographic Communities, and Institutional Pluralism* Christopher Marquis Harvard University 333 Morgan Hall Boston, MA András Tilcsik University of Toronto 105 St. George Street Toronto, ON, M5S 3E6 March 11, 2013 *We thank Julie Battilana, Frank Dobbin, Vince Feng, Shon Hiatt, Kim Pernell, Ryan Raffaelli, Sameer Srivastava, and Lynn Yin as well as audience members at Indiana University and the ABC network conference in Banff, Canada, and members of the Dobbin Research Group at Harvard University for comments on a prior version of this paper.

2 2 Serving Two Masters: Industry Fields, Geographic Communities, and Institutional Pluralism ABSTRACT This study examines how organizations respond to simultaneous institutional pressures from two distinct sources: their industry peers and their local geographic neighbors. We emphasize that responses to such institutional pluralism depend on the nature of uncertainty that firms experience as a result of changes in their broader external environment (e.g., economic volatility and globalization) and as a result of their position at the intersection of two different institutional fields a focal industry and a local geographic community. To understand this ubiquitous type of pluralism, we develop two novel constructs: (1) field strength highlights why the strength of institutional pressures from different sets of peers varies over time; (2) institutional equivalence illuminates how the presence of peers at the industry-community intersection occupied by the focal firm affects its responses to institutional pluralism. We demonstrate the utility of these concepts through a longitudinal analysis of philanthropic contributions by Fortune 1000 firms over nearly four decades. This study sheds new light on how organizations address the complexity of institutional pluralism and the organizational implications of globalization and economic uncertainty.

3 3 When we conducted a strategic review of our philanthropy, we benchmarked against our industry peers as well as locally based companies. Foundation President, major U.S. energy company A classic insight of institutional theory is that organizations look to peers in their field for cues to appropriate behavior (DiMaggio and Powell, 1983). A more recent but equally important institutional insight is that organizations are typically embedded in more than just one field (Kraatz and Block, 2008), receiving behavioral cues from several sets of peers (Greenwood, et al., 2011) and experiencing multiple institutional prescriptions projected by different audiences (Greenwood and Meyer, 2008: 263). The juxtaposition of these two insights raises a fundamental question: When organizations are embedded in multiple institutional fields, which set of peers do they emulate, and what factors shape their response to such situations? How do organizations respond, for example, when they receive different cues from their industry peers (DiMaggio and Powell, 1983; Scott, et al., 2000) and peers in their geographic community (Freeman and Audia, 2006; Lounsbury, 2007; Marquis and Battilana, 2009)? Although simultaneous embeddedness in industries and geographic communities is a fundamental and ubiquitous source of institutional pluralism a situation faced by an organization that operates within multiple institutional spheres (Kraatz and Block, 2008: 243), limited research has examined the institutional complexity of such situations (Pache and Santos, 2010; Greenwood, et. al., 2011). Related research suggests that organizations might ignore one or both peer groups (Oliver, 1991); relate independently to the different institutional constituencies (Davis and Greve, 1997); establish balance or compromise between them (Rowan, 1982); or combine different cues into a hybrid organization (Haveman and Rao, 2006; Battilana and Dorado, 2010; Pache and Santos, 2012). To date, however, most researchers have only

4 4 speculated about the contingencies that determine how organizations navigate their simultaneous presence in multiple fields (Friedland and Alford, 1991; Greenwood et al., 2011). To more systematically explain variation in organizational responses to pluralistic institutional influences, we develop a multilevel approach that addresses how organizational responses vary due to uncertainty stemming from organizations (1) broader external environment and (2) position at the intersection of different fields. Figure 1 illustrates our multilevel approach. At both the field and organizational levels we introduce novel concepts to reflect the key sources of uncertainty faced by organizations that experience institutional pluralism. First, in considering how the effects of different fields vary, we identify field strength as a concept that illuminates how uncertainty in the broader social and economic environment (DiMaggio and Powell, 1983; Milliken, 1987) such as uncertainty due to macroeconomic volatility or increasing globalization leads to variation in the strength of pressures stemming from different fields over time (Tolbert and Zucker, 1983; Powell et al., 2005). Second, at the organizational level, we develop the concept of institutional equivalence and focus on how an organization s position at the intersection of fields creates uncertainty about which set of peers to emulate when facing conflicting pressures (Galaskiewicz and Wasserman, 1989). We show that these two mechanisms, field strength and institutional equivalence, are essential to understanding how organizations address pluralistic pressures. --- Insert Figure 1 about here --- First, we define field strength as the extent to which the focal organization experiences conformity pressure from a group of peers at a given time; thus, field strength captures the force of isomorphic pressures on an organization from a particular field at a particular time. When field strength is high, the focal organization s behavior closely conforms to that of its peers in a

5 5 field. We examine field strength by showing how shifts in firms external environments over time and across contexts reduce or increase uncertainty for firms and so affect the relative strength of different fields, such as those formed around an industry or a local community. For example, an intriguing question in this regard is how globalization has affected the relative strength of institutional pressures stemming from local community fields (Warren, 1967; Marquis, Davis, and Glynn, 2013). While some have suggested that globalization weakens local influences on actors (e.g., Meyer, Boli, Thomas, and Ramirez, 1997), others have concluded the opposite (e.g., Giddens, 2003). Our framework allows us to usefully recast and address this puzzle in terms of field strength and, more generally, to identify how pluralistic institutional forces are historically contingent and context-dependent. Second, looking across organizations, we define institutional equivalence as the extent to which two organizations are embedded in the same set of institutional fields. Some organizations, for example, have close institutional equivalents as they share the intersection of an industry field and a local community with several peers; for example, automakers in Detroit have historically had locally headquartered peers that also operated in the same industry field (Klepper, 2007). In such cases, a firm has peers that are, to a large extent, its institutional equivalents because they operate in the same industry-based and community-based institutional fields. Other firms, by contrast, occupy an industry-community intersection alone and thus have no peers operating in the same set of fields; for example, DTE Energy is the only major firm headquartered in Detroit that operates in the electric and gas utility industry a unique position at the overlap of an industry field and a local community. We elaborate how the presence or absence of institutional equivalents affects an organization s responses to institutional pluralism.

6 6 To examine our proposed constructs empirically, we chose a context in which the simultaneous influence of industry and community institutional pressures is clear and readily analyzable: corporate philanthropy. While research has consistently shown that institutional pressures stemming from a firm s focal industry are key to understanding philanthropic actions (Wolch, 1995; Brammer and Millington, 2005), the literature also highlights the powerful effect of local normative environments on corporate philanthropy (Marquis, Glynn, and Davis, 2007). As Useem (1988: 83) notes, local philanthropic norms in the community where a firm is headquartered are perhaps the most significant...factor shaping a company s giving. Thus, when making decisions about philanthropy, firms not only benchmark against other firms within their industry, but also against other [firms], particularly those within their local geographic context (Bertels and Peloza, 2008: 60). We specifically examine industry and local community influences on the philanthropic contributions of Fortune 1000 firms between 1970 and Our theoretical contributions extend recent efforts at understanding field-level processes, and highlight how and why there is variation in institutional effects on organizations (Greenwood et al., 2011). While our concept of field strength contributes to understanding how institutional fields separately and independently exert influences of varying strength on organizations, institutional equivalence is relevant to understanding the interplay of simultaneous and potentially conflicting pressures that arise from different institutional fields. The application of this framework, in turn, helps resolve important puzzles concerning the consequences of globalization, economic volatility, and the interplay of local and nonlocal institutional pressures.

7 7 INSTITUTIONAL PLURALISM AND CORPORATE PHILANTHROPY Theorists have emphasized the importance of understanding how multidimensional and conflicting institutional fields shape organizations (Friedland and Alford, 1991; Thornton, Ocasio and Lounsbury, 2012). Yet, most research has examined conflicting pressures within an institutional field (Greenwood et al., 2011). Some of this work has focused on the process of transition between dominant logics in a particular field, such as the publishing industry moving from an editorial to a market logic (Thornton and Ocasio, 1999); the U.S. healthcare industry shifting from a focus on patient care to a business logic (Scott et al., 2000); and French cuisine transitioning from traditional to nouvelle focus (Rao, Monin, and Durand, 2003). Another strand of this research has focused on tensions within an institutional field, such as the conflict between different investment logics (Lounsbury, 2007; Battilana and Dorado, 2010; Almandoz, 2012). While this research illustrates the importance of considering different institutional pressures, its focus on processes within a given field is susceptible to the general critique that institutional research is not comparative across different institutional fields as DiMaggio and Powell (1983) originally envisioned but, instead, mostly constitutes a set of industry-based case studies (Davis, 2010). In this study, rather than exploring pluralism within a given field, we examine pluralism that stems from an organization s location at the intersection of distinct fields (Figure 2). This approach is important because such pluralism is ubiquitous, and only by examining multiple different fields can researchers identify how its effects vary over time and across contexts. --- Insert Figure 2 about here --- To illuminate the implications of pluralism due to simultaneous presence in multiple fields, our multilevel framework (Figure 1) focuses attention on both (1) the broader external environment in which particular institutional fields (such as an industry or a community) are

8 8 situated, and (2) the position of an organization at the intersection of different fields. The basic insight underlying this framework is that environmental uncertainty, or the degree to which future states of the world cannot be anticipated and accurately predicted (Pfeffer and Salancik, 1978: 67) is a fundamental reason why organizations emulate other organizations that they encounter in an institutional field (Thompson, 1967; DiMaggio and Powell, 1983). Building on this idea, we develop two sets of hypotheses, summarized in Table 1. First, we argue that the field strength of industry and community pressures varies over time as a result of changes in the nature and level of uncertainty in the macro environment. Second, we contend that an organization s position at a given community-industry intersection defined primarily by the presence or absence of institutional equivalents occupying the same intersection is a powerful determinant of how it manages the uncertainty that results from pluralistic institutional pressures. --- Insert Table 1 about here --- Field Strength and the Contingent Nature of Institutional Pressures The first component of our multilevel model illuminates how the strength of different field pressures on organizations may vary depending on changes in the broader external environment. Prior research has shown, for example, that the strength of professional institutions in medicine declined as commercialization increased (Scott et al., 2000; Dunn and Jones, 2010). Our argument is at a more general level, focusing on how the extent to which firms experience isomorphic pressures from different institutional fields is both historically contingent and context-dependent (Tolbert and Zucker, 1983; Powell et al., 2005). Our theorizing addresses how the nature of uncertainty faced by firms varies as a result of macro-environmental phenomena, which affect the extent to which firms pay attention to peers from different fields.

9 9 In particular, for each of the two types of institutional pressures we consider, industry and community, we examine how field strength may change as important social and economic features of the external environment shift. First, we hypothesize that the strength of industry isomorphism the extent to which organizations emulate their industry peers is contingent on the level of economic uncertainty in the external environment. While isomorphic processes resulting from industry membership have been documented extensively (e.g., Mizruchi and Fein, 1999; Scott, 2008), previous investigators have provided little insight into the general processes whereby these effects may vary as other external conditions change. Second, we consider how the strength of community isomorphism the extent to which firms emulate other firms headquartered in the same metropolitan region was affected by increasing globalization of the U.S. economy. We focus on a firm s headquarters community because it has been shown to be an important institutional field where the firm s key executives reside and look to the actions of other locally headquartered companies for standards of appropriateness (Marquis, Glynn, and Davis, 2007: 927; for a review, see Marquis and Battilana [2009]). External environmental change and the strength of industry-based pressures. Building on the core contribution of institutional theory, we assume that firms face strong institutional pressures that stem from their focal industry (DiMaggio and Powell, 1983). Much research has shown that industry peers are the most crucial set of referents for understanding firm-level institutional processes (Scott, 2008). For example, firms follow the behavior of their industry peers when adopting fundamental organizational practices such as structural form (Fligstein, 1985) and business strategy (Deephouse, 1996). In the context of philanthropy, prior research has consistently shown that firms emulate industry peers when setting contribution levels. Most firms actively gather information about other firms philanthropic activities (Bertels

10 10 and Peloza, 2008), and peer company comparisons are a major factor when companies determine their philanthropic budgets (see Useem and Kutner, 1986). As Bertels and Peloza (2008: 63-64) have noted in a recent interview-based study, executives were all keenly aware of the CSR activities of competitors. For example, one senior manager explained, If [an industry competitor] steps up to the plate and tackles a big issue people ask and what are you doing? Thus, a consistent finding is that industry membership is a critical determinant of philanthropy (e.g., Wolch, 1995; Brammer and Millington, 2005). How does increasing environmental uncertainty affect industry isomorphism? A basic assumption of early institutional theory is that increased uncertainty causes organizations to look to their industry peers for guidance even more than usual, resulting in greater levels of imitation (DiMaggio and Powell, 1983). For example, Galaskiewicz and Wasserman (1989: 476) illustrated that, as uncertainty about a practice increases, so too does the extent to which organizational decision makers will try what others have done and have found to work. Thus a compelling null hypothesis is that environmental uncertainty will increase the level of industry isomorphism. However, significant other research and theorizing suggest that industry peer effects may actually become weaker under uncertain conditions, particularly when uncertainty concerns features of the broader external environment, such as the general economic situation (Thompson, 1967; Pfeffer and Salancik, 1978; Oliver, 1991). For example, in a study of firm financing behaviors, Mizruchi, Stearns and Marquis (2006) found that greater levels of uncertainty due to volatility in the environment as proxied by the number of mergers and acquisitions in the U.S. economy in a given year led to less imitation of network peers in financing decisions. These authors argue that, under greater economic uncertainty, corporate decisions require more justification within the firm, which weakens the force of external

11 11 influences. Others have similarly shown that volatility in the external environment can intensify concerns about efficiency and, in this way, also focus attention on issues internal to organizations, rather than on social legitimacy or normative emulation (Chattopadhyay, Glick, and Huber, 2001: 939, emphasis added; see Staw et al. [1981] and George et al. [2006]). In such cases, increased uncertainty weakens an industry s field strength because corporate decisions require more internal justification, thus reducing the extent to which organizations look to their industry peers. This argument applies directly to the case of corporate philanthropic decisions because such decisions have been shown to be relatively discretionary, having questionable financial impact (Margolis and Walsh, 2003). Indeed, there is significant debate about the appropriateness of philanthropy as a business activity, and philanthropic decisions are frequently driven by organizational leaders idiosyncratic preferences rather than core business considerations (Friedman, 1970; Marquis and Lee, 2013). Accordingly, under conditions of economic uncertainty in the environment, increased internal scrutiny on business decisions may temper the effect of industry-based institutional pressures that frequently drive philanthropy. This enhanced scrutiny and internal focus will likely reduce an industry s field strength, leading to less emulation of industry peers than otherwise. Hypothesis 1 (H1): The influence of industry peers philanthropic giving on the focal firm s giving is weaker when uncertainty due to volatility in the economic environment is high rather than low. External environmental change and the strength of community-based pressures. A long line of research has emphasized that fields form not just around industries but also around geographic communities, and so a second type of important institutional pressure experienced by organizations stems from community embeddedness (Warren, 1967; Marquis and Battilana,

12 ). Community embeddedness has been shown to be persistent (Marquis, 2003; Howard- Grenville, Metzger and Meyer, 2012) and affect practices as diverse as corporate governance (Davis and Greve, 1997; Kono et al., 1998), strategy (Lounsbury, 2007), and organizational foundings (Almandoz, 2012). Indeed, the notion that geographic communities, particularly headquarters communities, constitute pertinent fields for shaping organizational behaviors is clearly borne out in research on corporate philanthropy. It is well established that the philanthropy of local corporations is deeply embedded within community-based social relationships (Galaskiewicz, 1997; Marquis, Glynn, and Davis, 2007), and that local normative processes significantly influence firms social engagement (Bertels and Peloza, 2008). For example, in the urban grants economy of the Twin Cities, Galaskiewicz (1997) found significant peer pressure among local businesses to support nonprofits. In Atlanta, Glynn (2008) showed that the social organization of the city and its leading companies, such as Coca Cola and Georgia Power, powerfully influenced corporate support for the Olympics. As executives interviewed by Bertels and Peloza (2008: 62-63) put it, We take our cues from the other big companies in town and when we look around at how we can get involved, we do so on a citywide basis. We look to see who is setting the standard and set that as our goal. As these studies illustrate, local corporate peers exert a significant institutional influence on firms philanthropic activities. Over the course of the twentieth century, technological advances have permitted firms to engage in more geographically distributed economic and social relations, which has influenced how local actors respond to community pressures. While research has traditionally focused on the expansion of organizational relations due to new transportation and communication technologies (e.g., Baltzell, 1958; Mills, 1956; for a review, see Marquis and Battliana [2009]),

13 13 recent studies have shown that social and cultural responses to these trends are complex. On the one hand, a standard and intuitively appealing null hypothesis is that globalization is working to undermine the importance of local and even national boundaries in many arenas of human endeavor (Scheuerman, 2010) and that there is broad-scale convergence to global norms across different levels of analysis (Meyer, Boli, Thomas, and Ramirez, 1997; see Guillen, 2001). On the other hand, some scholars have suggested reasons why organizations might cling to local features and resist global trends (Robertson, 1995; Giddens, 2003). Research on resistance to globalization has focused on how universalistic economic and cultural processes are frequently viewed as a threat by local actors who have location-specific cultures and identities (Robertson, 1995). For instance, Fiss and Hirsch (2005) showed that the framing of globalization as a threat has become increasingly dominant in the media since globalization began to receive significant attention in the mid-1980s. Scholars have found that as economic globalization has proceeded, it has come to be increasingly seen as a threat to local interests (Dunning, 1998; Moran, 2002). That is, local actors often view foreign companies as outsiders, uncertain of their motivations and commitment to the community, while the in-group of community members are seen as more trustworthy and reliable. For instance, when bankers who resisted the entry of larger, more universal banks into local U.S. communities established new community banks, they received significant support from local consumers who trusted locally based organizations more than out-of-town banks (Almandoz, 2012). This suggests that, when faced with external threats as a result of the globalization of the economy, communities may coalesce, rather than crumble. Thus the threat from outside actors due to economic globalization might lead to a greater focus on local peers, thereby strengthening community institutional influences. In general, as Giddens (2003: 13) noted, rather than simply

14 14 pulling away power or influence from local communities, the threat or push down effect of globalization often fosters a revival of local identities and connections. For example, in a study of downsizing in Spain, Greenwood and his colleagues (2010) described how global pressures for downsizing fuelled resistance based on the strong local identities of regions. Such effects of local resistance and revival, in turn, might be especially prominent in the case of corporate philanthropy because it is deeply embedded in local relationships and identity (Galaskiewicz, 1997; Marquis, Glynn, and Davis, 2007). Thus, contrary to the standard view that globalization necessarily undermines local influences, we expect that the globalization of the U.S. economy has increased the field strength of local communities, causing local institutional influences on firms philanthropic decisions to become stronger. Hypothesis 2a (H2a): The influence of community peers philanthropic giving on the focal firm s giving has become stronger as globalization of the U.S. economy has increased. This hypothesis, however, might not apply uniformly across all geographic communities; that is, in addition to the strength of fields varying over time, they may also vary across different contexts. In particular, prior studies suggest that the cohesion of an institutional field (such as a geographic community) is an important determinant of how much influence that field exerts on the organizations embedded in it (Bansal and Roth, 2000; Greenwood et al., 2011). Building on this literature, we argue that the existence of certain institutional structures in a community likely fosters both greater certainty and more stability regarding appropriate actions among local actors. In such communities, institutional pressures are likely to be both stronger in general and more stable in the face of external changes than in communities that lack such institutional structures. Particularly relevant to understanding variation across U.S. communities and our context of philanthropy is the strength of the community elite infrastructure. The effect of local elites on

15 15 community outcomes was an important focus of early sociological research (Mills, 1956; Baltzel, 1958; Friedland and Palmer, 1984), and recent evidence suggests that variation across U.S. cities in the strength of the local elite social infrastructure continues to affect contemporary phenomena (Marquis, Davis, and Glynn, 2013). A key finding across many studies is that firms in cities with a more developed local elite social infrastructure are more likely to have similar business practices, such as director relations, corporate structures, and political behaviors (Mizruchi, 1992; Kono et al., 1998; Palmer and Barber, 2001; Palmer and Zafonte, 2011). Numerous scholars have argued, for example, that exclusive upper-class clubs in cities provide critical venues for executives to interact and influence one another, leading to similar organizational practices across locally based firms (e.g., Useem, 1988; Domhoff, 2010; Zald and Lounsbury, 2010). With regard to philanthropic giving specifically, prior studies suggest that cohesion among local elites reduces uncertainty about giving amounts and targets and therefore plays a key role in philanthropic giving in communities (Galaskiewicz and Wasserman, 1989). Likewise, the cohesion and social interconnectedness of the local elite affects the extent to which locally based firms coalesce behind the goal of supporting local nonprofits (DiMaggio and Anheir, 1990; Osterower, 2002; Marquis, Davis, and Glynn, 2013). This suggests that in communities with a more developed elite social infrastructure, firms will be especially likely to emulate local peers that is, community institutional pressures will be particularly strong. Hypothesis 2b (H2b): The influence of community peers on the focal firm s philanthropic giving is stronger in communities with a more developed elite social infrastructure. Moreover, we expect that institutional pressures that stem from such communities are not only strong but also highly stable in the face of macro-environmental changes. Thus, the effects resulting from the threat of globalization on community cohesion described above will likely

16 16 have a relatively weak impact on communities with a more developed elite social infrastructure. In general, a strong local institutional infrastructure that creates elite cohesion will likely foster certainty and stability regarding normative expectations in the community, and these wellestablished and clear expectations will be relatively unsusceptible to external changes (Marquis, Davis, and Glynn, 2013). In addition, strong elite cohesion in such communities might also weaken the perception of external threats, such as the threat of economic globalization. Thus local elite cohesion and consensus might act as a counterweight to global forces such that those forces will appear relatively less threatening to organizations in communities with a welldeveloped elite social infrastructure. By contrast, in communities that lack such infrastructure, institutional pressures are likely to be less stable in the face of external changes, and economic globalization might be seen as a greater threat to local interests, thereby pulling together local actors and fostering a higher degree of community isomorphism than before (Marquis, Glynn, and Davis, 2007). Hypothesis 2c (H2c): The increase in community peer effects due to the globalization of the U.S. economy predicted in Hypothesis 2a was smaller in communities with a more developed elite social infrastructure. Organizational Position at the Intersection of Fields While our above discussion explores how uncertainty due to macro-environmental changes affects field strength, the second part of our multilevel investigation focuses on an organization s position at the intersection of different institutional fields: an industry and a geographic community. We argue that, as a result of this position, institutional pressures from different fields interact to shape organizations behavior. We then consider two key factors that influence the strength of this interaction: (1) the focal organization s visibility and (2) the presence of institutional equivalents, that is, peers that occupy the same intersection between

17 17 different institutional fields. In doing so, we shift our focus from broader macro-environmental processes to factors that define an organization s position at the overlap of fields (Figure 1). Simultaneous Embeddedness in Multiple Institutional Fields. While existing research has provided some rationale for why industry-based and community-based institutional pressures might shift over time, much less explored has been the potential interaction of different types of institutional pressures. If an organization is simultaneously embedded in multiple fields, then how does the strength of one field affect the strength of another? And how do organizations respond to uncertainty due to conflicting pressures that might arise from different fields? Existing theories suggest several possibilities. For example, an organization may try to eliminate the tension due to an uncertain situation by complying with pressures from one field while ignoring, dismissing, or co-opting pressures from another (Pfeffer and Salancik, 1978; Oliver, 1991;Kraatz and Block, 2008 ). Thus, when different fields give rise to incompatible demands, an organization might simply follow one set of peers (e.g., industry peers) while giving relatively little attention to the behavior of other peers (e.g., geographic neighbors). In such cases, organizational action will be shaped by pressures from one field and remain largely independent of pressures in the other (Davis and Greve, 1997). More often, however, organizations that are at the intersection of two fields pay simultaneous attention to pressures from each field and attempt to accommodate multiple demands at the same time (Oliver, 1991; Kraatz and Block, 2008). Thus, a common organizational response to conflicting institutional pressures is the use of balancing tactics, which involve obtaining an acceptable compromise on competing objectives and expectations in order to achieve parity among or between multiple stakeholders (Oliver, 1991: 153; see also Rowan [1982]). As a result, when different fields give rise to inconsistent pressures and pull the

18 18 focal organization in different directions, the uncertainty created by such conflicting demands will likely lead to a compromise between opposing pressures, causing relatively little organizational change in either direction. In such cases, the conflicting pressures from different fields weaken one another. By contrast, when the pressures arising in different fields are in alignment with one another, there is less uncertainty about appropriate action and so the focal organization will be particularly responsive to these consistent and mutually reinforcing pressures. --- Insert Figure 3 about here --- Accordingly, Figure 3 depicts the predicted philanthropic behavior of firms that are simultaneously attentive to both their industry field and their local geographic context. This figure suggests that, when organizations are paying simultaneous attention to two fields, there will be a positive interaction effect between the two field pressures. That is, when both sets of peers increase their philanthropic contributions (i.e., the pressures are aligned), there will be a strong increase in the focal firm s contributions. Similarly, when both types of peers decrease their contributions, there will be a relatively large reduction in the focal firm s giving. By contrast, when the two peer groups pull in different directions, there will be relatively little change in the focal firm s philanthropic contributions. Hypothesis 3a (H3a): The interaction between industry peers philanthropic contributions and local peers contributions is positively related to the focal firm s contributions. The strength of this interaction effect, however, may vary depending on organizational characteristics. As Martin (2003: 7) noted, different actors have attributes that make them susceptible to the field effect; the force that impinges upon some object in a field is a function both of the field effect, and of some characteristic of the object itself. Perhaps the most studied

19 19 organizational characteristic that moderates institutional pressures is firm size, and competing hypotheses exist about how size affects organizational responses to institutional pluralism (Greenwood et al., 2011). On the one hand, size may denote greater power and provide an organization freedom to deviate from institutional expectations. For example, large, high-status professional service firms are able to diverge from prevailing cultural expectations because they are too large to be controlled by regulatory agents (Greenwood and Suddaby, 2006). On the other hand, considerable research suggests that, in fact, large organizations are especially susceptible to pluralistic pressures. In particular, organizational size often intensifies institutional demands because it provides visibility and attracts greater attention from institutional constituents and the media. Thus, large firms often constitute visible exemplars and are, as a result, shaped by institutional pressures more forcefully than are smaller organizations (see Greenwood et al. [2011] for a review). Consequently, conflicting institutional pressures will likely pose a greater challenge for large, highly visible organizations and require them to balance the different pressures carefully. Accordingly, in our context, when industry pressures and local pressures are inconsistent, the uncertainty created by conflicting demands will be particularly acute for large firms, causing these firms to seek a balance between inconsistent pressures. Smaller, less visible firms will likely enjoy greater discretion over how to respond to conflicting demands and, rather than necessarily making a compromise, could more freely disregard pressures from either institutional field. In sum, large firm size will reinforce and small size will weaken the patterns captured in Figure 3. Hypothesis 3b (H3b): The positive interaction effect between industry peer effects and local peer effects on philanthropic giving (H3a) will be stronger in the case of large firms than in the case of small firms.

20 20 Institutional Equivalence. In the above section on firm size, we focused on an important and widely recognized variable in the literature on institutional pressures. In this section, we introduce a novel concept, institutional equivalence, to capture a much less recognized organizational feature that is nevertheless key to understanding responses to institutional pluralism. We define institutional equivalence as the extent to which two organizations are embedded in the same set of institutional fields, and so experience a similar set of institutional pressures. 1 In our context, for example, two firms are institutional equivalents if they operate in the same industry and are headquartered in the same geographic community that is, if they are industry peers that are also local geographic peers. Building on this concept, we argue that the presence or absence of institutional equivalents in other words, the extent to which the focal organization shares its position at the intersection of multiple institutional fields with other organizations is essential to understanding responses to institutional pluralism. --- Insert Figure 4 about here --- Figure 4 illustrates institutional equivalence. Firms A and B both exist at an intersection (or overlap) between two institutional fields, but their positions at that intersection are fundamentally different. Firm A occupies the intersection on its own; Firm B shares it with others. While Firm A is in a unique position vis-à-vis the two fields, Firm B has institutional equivalents: peers in the same position at the industry-community institutional intersection. 1 This concept is fundamentally different from structural equivalence, which captures how similar network positions in the broader social structure of relationships influence actors. Structural equivalence is defined as the extent to which two nodes are connected to the same others, that is, if two nodes are connected to the same people and not connected to the same people, then they structurally identical; they have the same degree, same closeness centrality, same betweenness (Borgatti, 1998; Mizruchi, 1993). Institutional equivalence, on the other hand, captures the similarity of institutional pressures that organizations experience from being in the same fields regardless of how similar their network ties and positions are. For example, two banks in Boston might have very different patterns of ties (e.g., one may be a central node surrounded by a dense network; the other may reside in a peripheral position in a sparser network) such that they are far from being structural equivalents; yet, because they both operate in the field of finance and in the same geographically defined field, they are subject to some of the same institutional pressures.

21 21 What are the implications of having institutional equivalents for how organizations respond to institutional pluralism? One might intuitively expect that the existence of institutionally equivalent peers will lead the focal organization to experience the two fields as highly connected and, therefore, to strive to balance the influence of its peers from each of the different fields. There are, however, compelling reasons why such situations might play out differently. When institutional equivalents exist, they will likely serve as an obvious reference category of imitable peers, implying that the focal organization will pay relatively little attention to industry-only peers (i.e., industry peers headquartered in different communities) and localonly peers (i.e., geographic neighbors that operate in a different industry). Instead, organizations in such a position will likely be particularly influenced by peers in a third reference category: their institutional equivalents, which occupy the same industry-community intersection. Thus, institutional equivalents provide a clear reference category, thereby reducing uncertainty about where to look for appropriate behaviors. For example, there is evidence that as the hightechnology industry developed, high-tech firms in Boston were much more influenced by peers that were both in the same community and in the same industry than by high-tech firms headquartered in other locations or Boston firms that operated in other industries (Saxenian, 1994). Thus, for firms that share an institutional intersection with other organizations, institutional equivalents local industry peers constitute an important and unique reference category, which overshadows the influence of industry-only and community-only peers. Hypothesis 4a (H4a): If a firm has local industry peers, there will be a significant positive relationship between change in local industry peers philanthropic giving and the focal firm s giving, even after controlling for the influence of non-local industry peers and community peers that operate in other industries. What does this hypothesis mean for how organizations without local industry peers i.e., without institutional equivalents manage conflicting institutional pressures? One might

22 22 intuitively expect that firms without institutional equivalents will have greater flexibility in responding to inconsistent pressures than do firms with institutional equivalents. For example, as network scholars noted, where peers are difficult to identify, peer pressure has less effect on opinion and behavior (Burt, 2010: 361). Thus, organizations without closely equivalent peers may experience the intensity of conflicting demands less sharply and be less compelled to find a compromise when the institutional fields in which they operate give rise to conflicting pressures. There are, however, compelling reasons why firms without institutional equivalents will experience conflicting institutional pressures especially acutely. As one of a kind, such organizations lack a set of readily imitable peers and, as a result, likely experience greater uncertainty and a need to reconcile inconsistent pressures on their own. As discussed above, for example, DTE Energy in Detroit does not have local peers in the same industry and so must look to non-local industry peers and local peers operating in other industries. Thus, rather than enjoying independence from institutional pluralism, firms without equivalent peers will be more compelled to watch for cues emitted by both fields and to actively balance inconsistent demands that might arise. Hence, the patterns depicted in Figure 3 (and summarized in H3a) will apply particularly strongly to firms that lack institutional equivalents. Therefore, we hypothesize: Hypothesis 4b (H4b): The positive interaction between industry peer effects and local peer effects (H3a) will be stronger for firms without institutional equivalents than for firms with institutional equivalents. Sample and Dependent Variable DATA AND METHODS We studied the philanthropic contributions of Fortune 1000 corporations in the U.S. between 1970 and Data on these contributions were from the National Directories of Corporate Giving (Foundation Center, ), a data source used in prior organizational

23 23 research (e.g., Fombrun and Shanley, 1990; Tilcsik and Marquis, 2013). Because these data are only available in even-numbered years, the sample in our main models included 14,169 firmyears and 2,790 firms. 2 For each firm-year, we recorded corporate philanthropic contributions (CPC), that is, the total dollar amount of grants given to charity either through a foundation or directly by the corporation. We log-transformed (+1) this variable to correct for skewed values. 3 Independent Variables We defined industry peers as Fortune 1000 firms in the same two-digit SIC code as the focal firm. This definition is consistent with the standard practice of defining two businesses as unrelated if they operate in different two-digit SIC codes (Gertner, Powers, and Scharfstein, 2002: 2501; see Beckman and Haunschild, 2002). Nevertheless, we conducted robustness checks with three-digit SIC codes, which yielded conclusions identical to those of our main analyses. Data on the average CPC of industry peers in a given year came from the National Directories of Corporate Giving (log-transformed; +1). We defined community peers as Fortune 1000 firms headquartered in the same corebased statistical area (CBSA) as the focal firm. A CBSA is core area containing a large population nucleus, together with adjacent communities having a high degree of economic and 2 The National Directories of Corporate Giving provide data on corporate philanthropic contributions for every even-numbered year from 1980 through 2006; in the 1970s, these data were available for 1970, 1974, and Thus, our 1970s observations represent unequally spaced observations. We conducted three types of sensitivity analyses to address this. First, we re-ran models without 1970s observations. Second, we re-ran models for the full period with a random effects GLS estimator developed by Baltagi & Wu (1999), which accommodates unequally spaced longitudinal observations. Third, we re-ran models for the full period using used generalized estimating equations, an estimation method that helps accommodate unequally spaced observations. Across all these specifications, we obtained substantively similar findings to those in our main analyses. 3 Because new firms emerge and some old firms disappear over time, this dataset represents an unbalanced panel. A battery of standard econometric tests using different selection variables (Nijman & Verbeek, 1992; Wooldridge, 2002; Verbeek, 2008) indicated no selection bias due to this issue.

24 24 social integration with that core (U.S. Census Bureau, 2010). Using this definition, we calculated the average CPC of community peers for each year (log-transformed; +1). Given the above definitions of peer groups, we conceptualized a firm s institutional equivalents as its community peers that are also its industry peers. Accordingly, the dummy variable institutional equivalence took the value of 1 if the focal firm had at least one such peer. To tap the relative uncertainty of the external environment, we first drew on prior studies demonstrating that the number of mergers and acquisitions in the economy provides a useful proxy for environmental volatility experienced by firms (Mizruchi, Stearns and Marquis, 2006; see Stearns and Allan, 1996). Merger and acquisition waves, in particular, increase the extent to which corporate managers [face] the risk of losing control of their firms, causing managers [to] experience genuine vulnerability as even large corporations disappear during such waves and do so in the presence of enormous publicity given to the wave of takeovers, hostile and otherwise (Mizruchi, Stearns and Marquis, 2006: 317). Thus we collected data on the annual number of mergers and acquisitions from the Statistical Abstracts of the United States (U.S. Census Bureau, 2011), the trade journal Mergers and Acquisitions, and the SDC Platinum M&A database. For robustness, we also employed an additional indicator of economic uncertainty, using a well-established measure in the literature on industry dynamism (e.g., Dess and Beard, 1984; Bergh and Lawless, 1998; Datta, Guthrie, and Wright, 2005). For each SIC code, this indicator is constructed by first regressing the total amount of industry sales against time over a given period; the standard error of the regression coefficient represents the level of dynamism in an industry during that period. These standard errors are then divided by total industry sales during the relevant period, resulting in a standardized indicator of industry dynamism (Keats and Hitt,

25 ; Simerly and Li, 2000; Bluedorn and Ferris, 2004). To create this measure, we used the COMPUSTAT database of firms and five-year and three-year moving windows. We used this measure to re-estimate the models pertaining to H1 and found that the conclusions of our primary analyses were robust to this alternative specification. To measure the globalization of the U.S. economy, the main analyses measured foreign economic penetration by the annual inflation-adjusted per capita foreign direct investment (FDI) flow into the U.S. FDI is a widely used proxy for foreign economic penetration in political science and sociology (e.g., Firebaugh, 1992; Kentor, 1998; Richards, Gelleny, and Sacko, 2001). To examine the robustness of this measure, we have conducted additional analyses with several alternative measures, including the real U.S. trade deficit and trade volume (both on a per capita and a per-gdp basis). Our results remained similar. Moreover, to the extent possible, we also collected inward FDI data at the state level. The Bureau of Economic Analysis (BEA) provides such data for 1977, 1980, 1987, 1992, 1997, 2002, and 2007; neither the BEA nor any other agency collected systematic state-level FDI data before 1977 or at more regular intervals. Given the limited availability of these data, we did not employ state-level FDI measures in our main analyses. However, we conducted robustness checks with a state-level FDI variable and found substantively similar results as in our primary models. 4 In our main analyses, we measured firm size as sales (in millions of dollars; logged), a variable derived from COMPUSTAT. Alternative measures such as total firm assets and number of employees yielded similar results but would have led to significantly more missing 4 We obtained the state-level data from the BEA s Foreign Direct Investment in the United States surveys, which cover the universe of foreign companies (nonbank) affiliates in the U.S. Our specific measure captured the value of foreign direct investors commercial property, plant, and equipment by state. Because these data were only available roughly every five years, observations were given values from the nearest year for which the BEA provided data (e.g., observations in 2006 were given the 2007 values; observations in 1986 were given the 1987 values; etc.).