Institutional logics and power sources: Merger and acquisition decisions

• Main Authors: GREVE, Henrich R., ZHANG, Cyndi Man
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2017
• Subjects: Business; Organizational Behavior and Theory; Strategic Management Policy
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/4324; https://ink.library.smu.edu.sg/context/lkcsb_research/article/5323/viewcontent/Institutional_logics_power_sources_pv.pdf
• Institution: Singapore Management University

Institutional theory has explained greater prevalence of many strategic actions by increases in their legitimacy over time, but has not developed theory on how firms decide between actions backed by competing institutional logics. We address this shortfall by applying theory of organizational coalitions and power to predict effects of external influence through ownership and internal influence through decision participation. We analyze how the old state socialism logic and the new market capitalism logic compete for influencing the Chinese firms’ engagement in merger and acquisitions. We found that the logics affected firm M&A decisions through the coalitions committed to each logic, both reflected in the external power source of ownership and in the internal decision making structure of the board of directors. We also found that the strength of each coalition changed as the market capitalism logic became established and influenced the other coalition.