Abstract
Organizational forms imbued with values of modernity – that is, rationality, efficiency and equity – diffuse rapidly around the world. Nonetheless, when sustained by beliefs, norms and regulations contrasting with those prevalent in the receiving country, their adoption may be delayed, and within-country legitimation may not proceed smoothly. We study the diffusion of multiplex cinemas – a form conceived in the US and attuned to the cinema-as-commerce logic – across Europe, where the cinema-as-art logic prevails. Our findings reveal that the cultural meanings embodied by multiplexes shaped the founding rates of this organizational form in three ways. First, countries with larger normative and regulative distance from the US retarded the adoption of the first multiplex. Second, camouflaged entries and, at increasing density, opposition from local interest groups were observed. Third, the embodiment of global cultural scripts of progress and modernity allowed multiplexes to overcome local opposition. The normative distance of the country from the US amplified the fluctuating dynamics of within-country legitimacy. A new specification of density-dependent legitimation is presented to model the cultural-cognitive legitimacy of rationalized but alien organizational forms.
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Notes
In the present paper we define as a rationalized organizational form, an organizational form theorized with reference to one or all the pillars of modernity – that is, efficiency and progress or equity and justice. In so doing we build on Drori et al. (2006a: 206), who defined rationalization as “the explicit organization of clearly defined social entities and their roles, relationships, and activities around clear and general rules and toward clear and general purposes.” Scientization, higher education and the professionalization of management through business schools are considered the pillars supporting the global culture of rationalized organizations – even more so upon the worldwide expansion of the neoliberal ideology.
Camouflage is the method through which an otherwise visible social entity remains indiscernible through dissimulation (see Hargadon & Douglas, 2001; Zuckerman & Kim, 2003). Camouflage differs from “bricolage,” which refers to processes of “recombination of old institutional elements” supporting institutional change jointly with translation – that is, with the addition of new institutional elements (Campbell, 2004: 28).
In order of adoption, the countries are: Sweden, Belgium, the UK, Norway, Spain, Ireland, Germany, Portugal, Malta, Austria, Switzerland, France, Denmark, Netherlands, Czech Republic, Luxemburg, Hungary, Italy, Greece, Finland, Poland, Slovakia, Romania, Slovenia, Estonia, Lithuania, Russia, Latvia, Croatia and Bulgaria.
Organization ecologists have developed the concept of supranational density-dependent legitimation, and have analyzed its effect on national level entry rates. However, they never hypothesized about its influence on the chances of founding the first instance of the form in the focal country. Nonetheless, the narrative is that the cognitive legitimacy of an organizational form overcomes national boundaries, as its underlying concept diffuses more widely than the material and human resources necessary to support the form (Hannan & Carroll, 1992). Hannan et al. (1995) corroborated this view by analyzing the entry rates of automobile manufacturers in various countries, ultimately finding that national spread was driven primarily by the European density of automobile producers, whereas competition was driven only by national density (see also Wezel & Lomi, 2003).
Institutional theorists tend to use the adjective “cultural” in a broader sense than cross-cultural psychologists, to take into account both the cognitive (meanings) and the normative (norms and values) dimensions of institutions. Thus we call normative distance the construct grounded in cross-cultural psychology developed by Kogut and Singh (1988), named by these authors “cultural distance,”. Our regulative distance clearly covers Scott's regulative pillar.
An alternative measure was constructed as well, building on the work of Hofstede (1980). In particular, to proxy for the cultural distance between the United States and each European country, we followed the procedure outlined by Kogut and Singh (1988). The findings obtained when employing this variable in the testing of Hypothesis 3 turned out to be qualitatively similar to those reported in the Results section.
The robustness of our findings was proven by employing a different proxy for economic freedom. Economic liberalism was also measured as the distance of each country from the US freedom score released by the Heritage foundation – see http://www.heritage.org/Index/Ranking.aspx. The results obtained when employing this measure in the adoption rates analyses turned out to be consistent with those reported here – that is, increasing distance from the US significantly slowed down the adoption of the first multiplex cinema. As for the founding rates, Hypothesis 4b appears supported even when resorting to this alternative index – see Results section.
Mean centering allows the accomplishment of two goals: it is strongly recommended in the case of polynomial equations, as it alleviates the problems of extreme collinearity (Cohen, Cohen, West, & Aiken, 2003: 204); and by mean-centering, the main effects become more meaningful, because they characterize the overall relation better. Consider also that mean-centering does not hurt either: research shows that the models “are mathematically equivalent and the results for the uncentered case can be obtained from the mean-centered model” (Echambadi & Hess, 2007: 443).
A further robustness check was run by employing year fixed effects rather than period effects. Two reasons led us, however, to prefer period effects. First, by employing year fixed effects the models faced problems of convergence. The results obtained, however, turned out to be qualitatively similar to those presented here. Second, given the relatively limited number of observations (487) and countries (20), the addition of 26 further variables to the model would be too costly in terms of degrees of freedom. In further analyses not reported in the paper we also controlled for calendar time (i.e., industry age). The results obtained from this procedure proved to be qualitatively similar to those presented in Table 5.
The piecewise specification allows a semi-parametric specification of the hazard rate: while it is required to remain constant within each piece, it is allowed to vary across them. The robustness of our findings was, however, tested by employing alternative specifications (exponential and Weibull). The results obtained turned out to be similar to those presented here.
The results obtained when employing an AR(1) correlation matrix turned out to be qualitatively similar.
Estonia, Latvia, Lithuania, Luxemburg, Russia, Croatia, Bulgaria, Malta and Romania were excluded.
As a considerable number of local multiplexes are part of cinema chains, in analyses not reported here we replaced the variable multiplex density by the number of organizations owning at least two establishments in the focal country. The results obtained turned out to be qualitatively similar to those presented in Table 4. The extreme correlation between these variables (0.90) makes it hard to disentangle the two effects, though.
As multicollinearity may threaten our estimates, in analyses not reported here, we employed orthogonal polynomials. The trend of findings obtained turned out to be similar to that reported here.
Analyses not reported here indicate that when using a different specification of the regulative distance construct – that is, by employing the measure of the Heritage foundation (see Models and Methods section) – the results of the interactions appear as expected and statistically significant. As this alternative measure of economic freedom appears partial, we invite caution in interpreting such results.
In the uncentered specification the main effects of the polynomial specification of density are not statistically significant. This result is fully aligned with our theory, which suggests that in countries fully aligned with US values and beliefs, camouflage and opposition should not be manifest. The coefficient estimate of the main effect of normative distance is −0.33 with p<0.05.
Recent articles by Hoetker (2007) and Zelner (2009) discuss the interpretation of interaction effects in nonlinear models. According to the procedure proposed by Zelner, the estimated coefficients and their standard errors are used to make 1000 draws, generating 1000 sets of regression coefficients, whose distribution yields the same mean and standard error as the initial estimates. The expected values of the dependent variable are calculated by employing the sets of simulated coefficients and the predictors, set at their sample mean values. An unconstrained (country level) fixed effect model (Allison & Waterman, 2002) was employed, as no panel command (e.g., xtnbreg or xtgee) is available in this routine. We then use the Intgph command to visualize and interpret the statistical significance of the simulation (Zelner, 2009). The estimates obtained from the unconstrained models in which normative distance is interacted with density indicate that each of three interaction coefficients appears statistically significant in most of the data points of our sample. We are grateful to one of the reviewers for suggesting this approach.
The variables involved in the interactions reported in the Appendix have been mean-centered.
It is true that the more extensive use of camouflage among late entrants remains hardly observable in our data. Multiscreen theaters, however, represented an initial and temporary response of local cinema owners to the threat of multiplexes becoming established, and may be argued to represent a camouflaged adoption of the cultural logic of multiplexes. Building on this argument, we went back to our data sources and collected further information concerning the number of multiscreen theaters in each of the countries. Indeed, GEE regression, which employs the same set of control variables as reported in Table 5, indicates that the larger the normative distance of the focal country, the larger the number of multiscreen theaters observed therein. The opposite holds true, however, when considering economic freedom. The substantial number of missing data in the number of multiscreen variables (i.e., about 30%), however, invites caution in the interpretation of these results.
As Scott (2001: 60) put it: “Entrenched power is, in the long run, helpless against the onslaught of opposing power allied with more persuasive ideas” (see also Ruef & Scott, 1998).
We thank an anonymous reviewer for highlighting this issue.
“[C]orporations look more like the strategic actors of game theory than do the states which are more often the targets in social movement analysis” (33).
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Acknowledgements
The authors contributed equally. The authors acknowledge their debt of gratitude to Witold Henisz for his editorial work. The manuscript benefited considerably from the comments of three anonymous referees. The participants to the EGOS and to the Academy of Management conferences, and to the seminars held at the Alberta School of Business, at the Hong Kong University of Science and Technology, at Lille I and at INSEAD provided insightful comments on earlier versions of the manuscript. We also wish to thank Severino Salvemini for his encouragement at the beginning of the study, Michael Woywode for his contribution in the early stages of development of this project, and Klaus Beck, Henrich Greve and Devereaux Jennings for their insightful comments.
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Accepted by Witold Henisz, Area Editor, 17 February 2011. This paper has been with the authors for four revisions.
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Delmestri, G., Wezel, F. Breaking the wave: The contested legitimation of an alien organizational form. J Int Bus Stud 42, 828–852 (2011). https://doi.org/10.1057/jibs.2011.22
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DOI: https://doi.org/10.1057/jibs.2011.22