Waiting and Seeing: Learning and customization as drivers of late-stage firm adoption behavior

Abstract

A central assumption of neo (or new) institutional theory is that, while early adopters of a new idea or business practice seek economic benefit, later adopters seek legitimacy, often as a result of uncertainty. In spite of empirical support, it is not clear that this dichotomy of economic (early) versus institutional (later) actors constitutes a comprehensive theory of the motivations driving firm adoption behavior. An alternative, old conceptualization of institutions presents some organizations as embodying values above and beyond their technical functions. This earlier perspective presents organizations as more agentic, but is vague in its explanation of which firms become institutions and how value is added. This paper helps address these issues and bridge the new and old perspectives by considering the question: To what extent do later adopting firms act for economic reasons? By drawing on the mechanisms of inferential learning and customization, I propose a model at the intersection of the institutional and learning literatures that identifies four potential strategies for late-stage adopters. By interpreting the actions of others and customizing according to their needs, firms can identify economic opportunity, while infusing their actions with greater meaning. As such, this theory helps delineate more effectively the complex motivations that drive firm adoption behavior at all stages of diffusion.