The Origins of Strategic Practice: Product Diversification in the American Mutual Fund Industry

Abstract

Although strategy research has systematically investigated the organizational antecedents and consequences of diversification behavior, little attention has been paid to the role of larger institutional forces. Institutional researchers have aptly demonstrated how broader cognitive, normative and regulative structures affect organizational practices, but have not focused a great deal on how institutional forces shape strategic action. Building on recent efforts to develop more sociological perspectives on strategy, we show how institutional changes driven by the professionalization project of money managers in the mutual fund industry facilitated the widespread use of product diversification as a routinely used organizational strategy. Implications for strategic management research are discussed.