MATERIALES HERRAMIENTAS Y EQUIPO

There has been a long-standing interest among organizational sociologists, particularly those with a neoinstitutional perspective, in the role of public policy in institutional stability and

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change. In their seminal paper on institutionalization, Meyer and Rowan (1977, p. 347-8) posit that, as the centralized state expands its dominance over diverse domains of social life,

organizations adopt practices institutionalized by the state. DiMaggio and Powell (1983, p. 150) also list government mandates as one source of coercive isomorphism, one of the three

mechanisms of institutional diffusion (see also Tolbert and Zucker 1983).

Subsequent studies build on these initial insights and present a sophisticated account of the role of public policy in institutional change. In particular, a body of studies on modern personnel practices in the United States suggests that public policy plays a more subtle role than simply dictating specific actions (Baron, Dobbin, and Jennings 1986; Dobbin and Sutton 1998; Dobbin et al. 1993; Edelman 1990; 1992; Sutton and Dobbin 1996; Sutton et al. 1994). New policies often outlaw preexisting practices without providing clear mandates, leaving

organizations themselves to formulate proper responses. Hence, the effect of public policy is not only direct but also indirect, a matter of constituting a new institutional environment to which organizations adapt.

Organizational sociologists who study the behavior of firms build on these further insights and explore how public policy shapes business strategies. Here again, its role is an indirect one through the manipulation of the institutional environment in which important corporate decisions are made. The modern state establishes and enforces rules for economic exchanges, which in turn determine the “institutional basis of power relations” among key economic actors (Campbell and Lindberg 1990, p. 642). By affecting the distribution of economic resources and power among key stakeholders of firms, such rules crucially defines “who has claims on the profits of firm” (Fligstein 1996, p. 658). Therefore, major shifts in public policy reshape the power relations among key stakeholders and affect their ability to promote

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and enforce their preferred business strategies, often leading to significant changes in dominant business strategies (Davis, Diekmann, and Tinsley 1994; Davis and Thompson 1994; Dobbin and Dowd 1997; 2000; Fligstein 1990; Roy 1997; Stearns and Allan 1996).

Previous studies have demonstrated this indirect effect of public policy, through its impact on power dynamics among key stakeholders, on business strategies. For example, Fligstein (1985; 1987; 1990) shows that when the Celler-Kefauver Act of 1950 banned horizontal mergers (i.e., mergers between firms in the same industry), it stimulated intra-firm power struggles among managerial groups who promoted different solutions; ultimately, finance managers prevailed in their push for conglomerate mergers. The Reagan-era antitrust policy, however, again permitted horizontal mergers and provoked another round of power struggles, this time, between executives of conglomerate firms and corporate raiders targeting such firms (Davis, Diekmann, and Tinsley 1994; Stearns and Allan 1996). In response to the threat of hostile takeovers, large U.S. firms pursued the strategy of focusing on their core businesses and within-industry mergers, rather than conglomerate mergers and diversification.

In another example, Dobbin and Dowd (2000) demonstrate that the shift in government’s antitrust policy in the late 19th century intensified inter-industry power struggles between railroad firms and financiers, who pushed for different models of managing competition. When antitrust laws banned cartels, large railroads moved to adopt predatory tactics of destroying competitors through a rate war. But financiers, with stock in many firms that might become prey, opposed predation, by threatening to cut capital flows to predators, and instead championed amicable mergers.

In this paper, I attempt to advance the literature on how public policy shapes business models in two main ways. First, I explore how public policy affects the ability of actors and

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groups to resist, as well as to promote, institutional change. Although many previous studies posit that policy shifts lead to institutional change by redefining power relations among interest groups, they rarely examine how a new policy actually affects the power of competing groups to promote or resist change. Instead, they mostly rely on proxy measures of intra- or inter-

organizational power struggle.4 More important, even studies that examine power struggle more directly tend to focus on how a new policy empowers groups who promote institutional change but rarely examine how the policy undermines the power of groups who may resist the change. As the literature on social movements suggests, mobilization of change agents often arouses counter-mobilization of groups who thrived under the status quo (Ingram and Rao 2004; Meyer and Staggenborg 1996; Vogus and Davis 2005). If the latter groups are powerful enough, drastic institutional change is unlikely (Ahmadjian and Robbins 2005). In such cases, a new policy may also contribute to institutional change by limiting the ability of such groups to resist it.

The second way in which I hope to advance the literature is by examining how policy shifts affect both the institutionalization and the deinstitutionalization of practices that are promoted by competing groups. Scott (1995) identifies three sources of institutionalization— regulative, normative, and cognitive-cultural. Obviously, public policy is an important source of regulative legitimacy. On the one hand, endorsement by the government legitimizes a given organizational practice (Baum and Oliver 1991; 1992; Ruef and Scott 1998; Russo 2001). On the other hand, competition or incongruence with the existing public-policy regime delegitimizes a given organizational form (Ingram and Simons 2000; Simons and Ingram 2003). In addition to this obvious effect of public policy, however, I suggest that a new policy can reinforce or undermine the other sources of institutionalization. Both organizational ecologists and

4 _{For instance, Fligstein (1990) suggests that in each historical period a different managerial group prevailed and}

runs separate models for each period. This way, his analysis captures the effect of shifts in power but cannot show how the shifts occurred.

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institutionalists have argued that increases in the density of a given organizational form or practice increases its cognitive-cultural legitimacy and thereby facilitates its diffusion across organizations (DiMaggio and Powell 1983; Hannan and Freeman 1989). I suggest that this density-dependent legitimation process may itself be dependent on public policy regimes. When a new policy prioritizes the claims of one group over those of others, the prevalence of a practice championed by the privileged group will further legitimize the practice, while dampening a similar density-dependent legitimation process for practices backed by other groups. In doing so, policy shifts can accelerate both the institutionalization of practices promoted by newly

empowered groups and the deinstitutionalization of practices supported by groups negatively affected by policy shifts. In the following, I will argue that these two public-policy-driven mechanisms of institutionalization were at work in the transformation of layoff policies of many large U.S. companies.