Delayed adoption of rules: A relational theory of firm exposure and state cooptation

• Main Authors: ZHANG, Cyndi Man, GREVE, Henrich. R.
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2018
• Subjects: Resource dependence; power; state rule change; firm compliance; institutional theory; Organizational Behavior and Theory; Strategic Management Policy
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/5086; https://ink.library.smu.edu.sg/context/lkcsb_research/article/6085/viewcontent/DelayedAdoption_2016_afv.pdf
• Institution: Singapore Management University

Thestate creates and changes rules that coerce firms, but firms can delay or decouple responses to rule changes in order to managethe cost of demands. Theoryof compliance to thestate has not yet considered the degree to which the firm candelay adoption because of low exposure to rules and state linksthat allow cooptation, butboth of these relations between state power and firm ability to counteract itcan affect the adoption decision. This makes the response to state rule changes a more strategic outcome than the theoryof coercive isomorphism implies. We develop a relational theory of delayed firmcompliance to a state rule change that considers firm exposure due todiscrepancy from the rule, and firm cooptation of the state due to state links,and test the theory by examining the adoption of the split-share structurereform, a state-mandated corporate governance reform among listed firms inChina. We find that exposure and cooptationinfluenced the speed of adoption and the decoupling from reform intentions. We also found thattheir effects on firm response to coercion weaken when the new rule becomesinstitutionalized. Ourtheory of delayed compliance is also likely to apply tocoercive pressure from other powerful organizations than the state.