Organizations, policy, and the natural environment: Institutional and strategic perspectives

Canadian Journal of Administrative Sciences, Jun 2003 by Sharma, Sanjay

Organizations, policy, and the natural environment: Institutional and strategic perspectives Andrew J. Huffman and Marc J. Ventresca (Eds.). Stanford University Press 528 pages, ISBN 0804741964 paper

The institutional perspective is an effective lens for examining the business-natural environment relationship because environment and sustainability are "complex notions with extremely complex institutional fields" and cannot be easily reduced to simple management models or matrices (Ehrenfeld, Chapter 20). Moreover, the complex interconnectedness of local issues and global environmental problems requires an understanding of the political and social dynamics between the actors linked to the common issue and problem (Meyer, Foreword).

The research in this book adopts a neo-institutionalist perspective that argues for a dynamic ongoing interaction process between actors in an institutional field via which collective rationalities, meanings, and courses of action around an issue are developed. Therefore, organizations are not only created and legitimated by their institutional environment, but they also attempt to change its rules and norms. Hence, institutionalism is seen here as a negotiated political, social, moral, and cultural process between actors in an organizational field rather than as a causal outcome of "top down" institutional forces. Such processes explain why certain environmental issues such as the Exxon Valdez oil spill and the Kyoto Protocol are actively debated and acted on, while other issues with a greater environmental impact remain obscure. Moreover, such processes also explain why institutional forces may lead to heterogeneous outcomes and strategies among individual organizations rather than isomorphic stability, inertia, and convergence.

The research in the book is discussed here around three themes, which do not necessarily match the five sections arranged by the editors. The opening chapters explain the emergence of the institutional environments within which the members of an organizational field develop their understanding and strategies to manage their interface with the natural environment. Institutions are important for focusing the attention of the field on environmental issues and weak institutions are better than no institutions (Frank, Chapter 2). In Chapter 3, Jennings, Andersen, and Martens examine the development of enforcement mechanisms rather than the regulations themselves. They find that in British Columbia traditionally normative modes of regulation have tended to become more coercive over time even as the cognitive aspects are being constructed. This contrasts with the U.S. evidence (Hoffman) where cognitive understanding led to regulative rather than normative enforcement standards. They speculate that Canada's dependence on trade with the U.S. will continue to move it toward a more regulative and coercive enforcement regime as compared to the normative and conciliatory institutional environment within which organizations have operated in the past.

In their study of the emergence of environmental conflict resolution in the U.S., Morrill and Owen-Smith (Chapter 4) examine how institutional entrepreneurs generalize or theorize from political narratives in the form of subversive stories to develop the building block of collective rationalities and action by actors in the field. Similarly, in examining the market mechanism of SO^sub 2^ pollution futures in the U.S., Levin and Espeland (Chapter 5) explain how the social construction of commensuration provides a technical solution to a social problem and thereby determines what is included and what is left out in the metrics of pollution. For example, the EPA focuses on the quantity of air emissions from a manufacturing facility but ignores spatial considerations such as wind patterns, ecological sensitivity, and population density of the area over which the pollution spreads-all factors critical for determining the impact of the pollution. Therefore, Mylonadis (Chapter 16) argues that the ambiguity surrounding environmental impacts, objectives, and causal linkages calls for open-sourcing of environmental regulations by inviting broad stakeholder input into appropriate policies and institutional structures.

The second theme explains how interactions between field level forces may lead to heterogeneous environmental strategies rather than isomorphic outcomes. This may be more so for firms in industries facing a high regulatory intensity where there is a potential for strong negative reputational effects. In such contexts, firms are likely to differentiate themselves on their environmental performance so that stakeholder attention and sanctions hinder the operating license of other firms in the industry (Hart, Milstein, & York, Chapter 6). Heterogeneity may also be due to each company interpreting the institutional environment through its unique lens composed of its history, organizational culture, and competitive positioning and also because organizations belong to multiple overlapping organizational fields (Levy & Rothenberg, Chapter 7). King, Lenox, and Barnett (Chapter 17) explain heterogeneity in organizational strategies by arguing that when stakeholders are unable to pinpoint and separate the environmental impacts of an individual firm versus an industry or are unable to sanction/reward individual firms for industry impacts, then individual firms will have the incentive to differentiate themselves by building reputational fences around themselves to mitigate the reputation commons problem.