Marco Conceptual

DiMaggio and Powell (1991, p. 150) note that coercive isomorphism results from both formal and informal pressures exerted on organizations by other organizations upon which they are dependent and by cultural expectations in the society within which organizations function. It refers to the manipulation of incentives by powerful actors to encourage others to implement policy changes (Simmons, et al., 2008). The underlying assumption of coercion is that there is an unequal distribution of power among actors and that strong actors exploit their dominant position to impose their preferences for policy change on the weak (Simons & Elkins , 2004). Coercive isomorphic pressures can also take the form of external pressures exerted by governments, regulatory institutions, or other agencies to adopt the structures or systems that they favour. These pressures are often associated with legal requirements, health and safety regulations, and so on, but may also stem from contractual obligations with other actors, which constrain organizational variety (Asworth et al, 2007).

Coercion theorists suggest that policies diffuse from the centre both actively through “conditionality” and passively through “unilateralism”. Such coercion may come from powerful states or from international organizations like the IMF and the World Bank via conditions attached to their lending (Marsh & Sharman, 2009; Simmons, et al., 2008; Simons & Elkins , 2004). By the same token, DiMaggio & Powell, (1983) argue that isomorphic pressures can occur in a coercive manner and could emerge from formal and infromal pressures exerted on organizations by powerful actors upon which weak ognizations are dependent. In the realm of international accounting, there is evidence to suggest that international organizations have used foreign aid and loans as a coercive mechanism to push for accounting harmonization in less developed countries (Lasmin, 2011; Zeghal & Mhedhbi, 2006; Botzem, 2012; Camfferman & Zeff, 2007; Islam, 2009). As noted in the work of Hassan et. al (2014, p. 373) who focus on the motives for the decision of the Iraqi government to adopt IFRS, they found that the decision to adopt IFRS was as a result of coercive pressures from western and international aid agencies such as the World Bank and the International Monetary Fund.

The role of coercive isomorphic pressures in institutional theory, particularly in explaining policy adoption choices, highlights the impact of political forces on the one hand and an emphasis of resource dependency notion on the other hand rather than technical influences on organizational change. While it may hold true that organizations are pressured

by powerful ones to adopt policies that are deemed to be technically efficient, the choice of such policies themselves does not reflect a rationalized process of decision making but what is pre-constructed as efficient. Rather, it seeks to reinforce the notion that powerful institutions legitimize institutional forms constructed as efficient and pressure others to tow to the same line (March & Olsen, 2006).

The work of Annisette (2004) on the true nature of the World Bank and its construction of ‘best economic policies’ in the eradication of poverty illustrates the effect of coercive institutional pressures exerted on developing countries to adopt liberalized economic policies. Further studies by Neu and Ocampo (2007) and Neu et. al (2010) portray international organizations as agents for the diffusion of international norms, which are constructed and packaged as efficient policies to mediate the economic problems in developing countries. Nevertheless, the sign value of such actions by international organizations remain in the fact that, it is the legitimating position of their policy choices imposed on the adopting countries rather than and a rationalized approach by actors in these countries to construct what is deemed as economically efficient.

The support of the World Bank, International Monetary Fund and other international organizations such as the United Nations UNCTAD-ISAR towards a globalized single set of accounting standards is yet another form of legitimizing the standards of the IASB (Aggestam, 1999). In particular, the application of these standards as a mode of governance towards resource allocation to developing countries reflect how the bank construct what is economically efficient on the behaviour of these countries (Graham & Annisette, 2012; Harrison, 2004). Through the prescription of accounting rules to be followed in the disbursement of funds, the World Bank and the IMF are able to exert pressure on developing countries into the adoption of international accounting standards. Nevertheless, as we may come to see in the case studies in chapters 4-7, important institutional facets that create fertile grounds for the incubation of coercive pressures precede such pressures from the World Bank. To be clear, it is difficult for one to think of how successful these pressures from the World Bank will be in countries that have a total breakdown of vital state institutions that can adopt and implement international accounting standards. Classical examples in the context of IFRS adoption in Africa are the cases of African countries that are currently experiencing prolonged civil wars such as Somalia, DRC Congo, Central African Republic, and Liberia which emerged from a civil war quite recently. While the

Bank continues its funding initiatives in these countries, its capability of imposing international accounting standards remains limited.

The dissertation argues that neo-institutional theorists rightly point to institutional coercive isomorphism as a rich and important source of policy diffusion in developing countries. Nevertheless, it falls short of adding that these pressures can only be successful if other institutional features of the adopting country are properly aligned with those of international organizations. Unless other institutional frames can be easily influenced by international organizations, such pressures will only produce limited policy adoption outcomes (see chapter six and seven) for the empirical case of IFRS-non-adoption in Cote d’Ivoire and Liberia.