Contested Institutional Change: External goals versus internal performance feedback

Abstract

Institutional entrepreneurs often facilitate the spread of desired practices by advocating new performance goals for organizations, yet little is known about how organizations respond to these goals—especially when the institutional logic underlying the goals is contested. We combine insights from institutional logics and the behavioral theory of the firm to develop a model that addresses how organizations react to such contested goals and also to noncontested profitability goals. We show that Canadian firms either adopted or resisted practices consistent with the logic of board reform as a function of gaps between firms’ aspirations and performance. These outcomes are evaluated in terms of profitability and of a corporate governance performance score devised by institutional entrepreneurs. We also demonstrate that a firm sets its aspiration level differently depending on the type of performance goal to which it is responding.