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Simon Fraser University
Business Administration
BUS 374
Rebecka Peterborough

MEMORANDUM DATE: June 21, 2013 TO: Professor Rajiv Kozhikode Teaching Assistant: Pooria Assadi FROM: Team 14 - BUS 374 D100 301083028 Ye,Kailun 301158518 Yao,Lingli 301127593 Yu,Mei Juan 301157221 Thakur,Karamveer Singh 301157488 Xia,Shuman SUBJECT: Exploring the Limits of the New Institutionalism: The Causes and Consequences of Illegitimate Organizational Change Summary and Key Assumptions Matthew S. Kraatz and Edward J. Zajac examine both the neo-institutional theory and the adaptation perspective from their article “Exploring the Limits of the New Institutionalism: The Causes and Consequences of Illegitimate Organizational Change”. The paper starts by describing the New Institutionalism theory as well as the institutional environment which rejects the idea of the technical environment. The authors also distinguish institutional environment which “views organizations as captives of the institutional environment in which they exist,” from technical perspective which “views organizations as rational actors, albeit in a complex environment,” (Kraatz & Zajac Pg 813). Kraatz and Zajac use a survey study on liberal art colleges in the Unites State to test the hypothesis in regards to the propositions of the neo-institutional theory. These colleges are equally under the influence of the institutional pressures for conformity as well as the technical environmental pressures. The results of the study indicate that under the traditional adaptation perspective the technical environment pressure eventually forced the colleges to change and those who did not change would be subject to performance problems. Moreover, changes made by colleges resulted in increased heterogeneity and did not result in any increased risk of organizational death or sickness. Lastly, the results also indicate that maintaining or establishing legitimacy should be viewed as only one of several possible paths towards a better organizational adaptation to the technical environment escape from the iron cage of strong institutional environment (Kraatz & Zajac Pg 832). All of the results from the study are contrary to the propositions of the new institutional theory and the results do not suggest conformity or the risk of making illegitimate organizational changes. Finally Kraatz and Zajac conclude from the study results that the neo-institutional theory does not accurately explain the changes made within the organizational field. Real world Phenomenon (eBay) Establish of our idea, eBay, field, and objects Kraatz and Zajac’s study rejects the propositions of the new institutional theory and they suggest there were possible flaws in the design of the study. The study was based on the data of liberal art colleges, and the example of education may not be able to reflect and apply to other disciplines such as technology and government. Therefore the study may lack ecological validity. In this paper, we will use a real world phenomenon to challenge the authors’ conclusion about the validity of the neo-institutional theory by applying the neo-institutional theory and its propositions to a real world example. Such as conformity, legitimate changes within the field and technical environmental influence on organizations. E-commerce has become a pervasive business nowadays. As the technology grows rapidly, Internet has become essential in our everyday lives. The emerging e-commerce has widened the opportunity for brick & motor businesses to move into e-comers and conduct transactions electronically. E-commerce has also lead to a new discipline of organizational field and has absorbed more and more small and even private businesses to conduct transactions through the Internet. One of the popular forms of e-commerce is shopping online or online retailing, which allows people to buy and sell online and break limitations of traditional in person shopping. However, the field of e-commerce is still an abstract concept, by combining the idea of e-commerce and Internet Corporation such as eBay and Amazon; we can then turn the abstract concept of e-commerce into a concrete representation of an organizational field. We modeled the eBay network as a well-established and highly structured organizational field which allows organizations such as small or private sellers to conduct business within the e- commerce field. Since DiMaggio and Powell gave a clear definition to “organizational field”, a wide range of debates have taken place in an attempt to improve the definition of the concept. An organizational field can be viewed as a structured network, which is integrated and intertwined, emerging as structured and structuring environments for organizations as individuals revealed from topological and structural cohesion studies (Rossoin. 2006). At this point, some might question eBay’s credibility as an organizational field. But, if we view the individual sellers or stores on eBay as single organization that connect to other organizations which conform to the well-structured field, eBay can be considered as an organizational field. Moreover, eBay also shares other characteristics of an organizational field as the organizations within eBay contain different statues ranging from high to low. Its organizations are also subject to the rating levels of the buyers and whether the seller is a member of the Power Seller program which requires seller to be active on eBay for over 90 days. All of these characteristics of sellers on eBay match the status of the organizations in the “field” theory. Conformity and low-high status The business plan of eBay has constantly included actions to attract the largest number of heterogeneous sellers and buyers, who trade not just collectibles, but a wide variety of common retail products (Anderson et al., 2007). After bringing and transferring the businesses to the platform of eBay, the heterogeneous buyers and sellers must follow the general rules and conditions of eBay which include registering on the website, listing items online, electronic
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