Legitimacy, Isostatic Pressures, and Collective Inertia: An Institutionalist Account of Incumbentss Responses to Discontinuous Technologies

Abstract

We combine institutional theory with research on discontinuous change to explore the phenomenon of collective inertia — i.e., the sluggish responses to the emergence of a new technology observable among all incumbents in an industry. We start by investigating why collective inertia is particularly likely to occur in the case of a discontinuous technology. Our premise is that technologies become encapsulated in regulatory, normative, and cultural-cognitive institutions. Therefore, technological discontinuities elicit strong isostatic institutional pressures — i.e., coercive, normative, and mimetic forces that render incumbents prone to reject discontinuous technologies and thus explain why collectives of incumbents remain essentially similar, despite exogenous jolts. We also propose that collective inertia varies among industries as a consequence of three moderators of institutional pressures: regulatory stringency, which reinforces coercive pressures to continue relying on the old technology; the influence of template-creating institutions, which amplifies normative pressures to collectively adhere to the technological status quo; and the salience of legitimate leaders, which fosters the collective’s tendency to follow particularly inert industry leaders. We highlight the role of legitimacy traps in incumbent responses to discontinuous technologies, propose a more balanced view of legitimacy, delineate differences between isostasy and isomorphism, and discuss other theoretical and practical implications.