When World Collide

WHEN WORLDS COLLIDE: THE INTERNALDYNAMICS OF ORGANIZATIONAL RESPONSESTO CONFLICTING INSTITUTIONAL DEMANDS

ANNE-CLAIRE PACHEESSEC

FILIPE SANTOSINSEAD

Organizations are increasingly subject to conflicting demands imposed by theirinstitutional environments. This makes compliance impossible to achieve, becausesatisfying some demands requires defying others. Prior work simply suggests thatorganizations develop strategic responses in such situations. Our key contribution isto provide a more precise model of organizational responses that takes into accountintraorganizational political processes. As a result, we identify situations in whichconflicting institutional demands may lead to organizational paralysis or breakup.

Since the microfinance institution Compartamoslisted its shares for over $1 billion in April 2007, ithas stirred up an increasingly fierce debate. ToMr. Yunus and its other critics, the Mexican bankis no better than an old-fashioned loan shark,earning its huge profits by charging poor borrow-ers a usurious interest rate of at least 79% a year.Perhaps sensing opinion turning against it, thebank has belatedly sprung to its own defense,issuing a defiant justification of its business inan 11-page “letter to our peers.” And it managesto make a convincing case for its strategy of fight-ing poverty with profits (The Economist, 2008: 20).

How does an organization respond when in-fluential stakeholders hold contradicting viewsabout its appropriate course of action? In thecase of microcredit, key institutional constitu-ents disagree about whether or not maximizingprofits is a legitimate goal for a microfinanceinstitution. Some microfinance experts, mostlyoriginating from the finance and economicsfields, view the generation of large profits asdesirable, because this will attract more invest-ment in microcredit, increase competition, and,in turn, lead to a decrease in interest rates, fu-eling a dynamic cycle that can improve thequantity and quality of services provided to poorborrowers. Other microfinance experts, originat-

ing from the social sector, including the influen-tial founding father of the field of microfinance,Muhammad Yunus, argue that the generation ofsubstantial profits at the expense of poor peopleis morally wrong and, hence, illegitimate fororganizations with a social purpose.

Because the Mexican microfinance institutionBanco Compartamos adopted the first view anddecided to go for an IPO, its legitimacy in thefield of microfinance was overtly challenged.Although initially silent about this challenge,Compartamos leaders eventually felt the needto take deliberate action to explain theirchoices, hoping to convince external observersof their appropriateness and, thus, to reclaimthe organization’s contested legitimacy. Thiscase is an illustration of how organizations arefaced with and try to respond to conflicting pres-sures from their institutional environments. In-terestingly, while institutional scholars ac-knowledge that organizations are often exposedto multiple and sometimes conflicting institu-tional demands (Djelic & Quack, 2004; Friedland& Alford, 1991; Kraatz & Block, 2008; Meyer &Rowan, 1977), existing research makes no sys-tematic predictions about the way organizationsrespond to such conflict in institutional prescrip-tions. The goal of this paper is to address thisgap.

Organizations scholars have long recognizedthat organizations are embedded in social envi-ronments that influence their behaviors. Institu-tional theory, in particular, offers a rich and

We sincerely thank Julie Battilana, Thomas D’Aunno,Gokhan Ertug, Morten Hansen, Richard Scott, Thierry Si-bieude, and Patricia Thornton for their insightful commentsand suggestions. We are grateful to associate editor RoySuddaby and three AMR reviewers for their helpful guid-ance and support.

� Academy of Management Review2010, Vol. 35, No. 3, 455–476.

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coherent account of how organizations complywith regulative, normative, and cognitive envi-ronmental elements in an attempt to secure le-gitimacy and support (DiMaggio & Powell, 1983).It suggests that organizations addressing multi-ple and competing demands face a dilemma:satisfying one demand may require violatingothers (Pfeffer & Salancik, 1978), thus potentiallyjeopardizing organizational legitimacy.

Recent theoretical developments in institu-tional theory suggest that the availability ofcompeting institutional models of action createslatitude for organizations to exercise some levelof strategic choice (Clemens & Cook, 1999; Do-rado, 2005; Friedland & Alford, 1991; Seo &Creed, 2002; Whittington, 1992). Building on thisargument, a few models attempt to identify or-ganizational response strategies to multipleand conflicting institutional demands. Kraatzand Block (2008) describe four adaptation strat-egies to what they call “institutional pluralism.”They propose that organizations may attempt toeliminate the sources of conflicting institutionaldemands, compartmentalize them and deal withthem independently, reign over them throughactive attempts at balancing them, or forge anew institutional order. Yet the antecedents ofthese strategies are not discussed in theirmodel.

The implications of a multiplicity of demandsare also addressed in Oliver’s (1991) model ofstrategic responses to institutional demands,which integrates institutional theory and re-source dependence arguments. Although Oliv-er’s model proposes a useful typology of re-sponses to institutional demands in general, itlacks predictive power when discussing re-sponses to conflicting demands in particular. Itmerely suggests that organizations find it diffi-cult to acquiesce to what is expected from themand, thus, are highly likely to resort to moreresistant strategies, such as compromise, avoid-ance, defiance, or manipulation.

Therefore, although current models recognizethat compliance with conflicting institutionaldemands is problematic and point to alternativeresponse strategies, they remain silent aboutthe conditions under which different responsestrategies are likely to be mobilized. This can beexplained by the fact that these models treatorganizations as unitary actors developing stra-tegic responses to outside pressures and largelyignore the role of intraorganizational dynamics

in filtering and resolving conflict in institutionaldemands (Greenwood & Hinings, 1996).

In summary, we lack a framework that allowsus to understand more systematically the influ-ence of conflicting institutional pressures on or-ganizational processes and behaviors (Kraatz &Block, 2008; Lounsbury, 2007). We intend to fillthis gap by addressing the following researchquestion: How do organizations experience andrespond to conflicting institutional demands?With its focus on organizational agency andchoice, this research endeavor requires under-standing the details of microlevel action (Hirsch& Lounsbury, 1997)—that is, understanding howactors within organizations experience, assess,and manage competing institutional expecta-tions. To do so, we move beyond the view, dom-inant in neoinstitutional studies, of organiza-tions as unitary and tightly integrated entitiesmaking univocal decisions (Kim, Shin, Oh, &Jeong, 2007; Selznick, 1996), and we explore therole played by intraorganizational processes inorganizational decision making. The explora-tion of intraorganizational dynamics allows usto go beyond Oliver’s (1991) broad prediction ofincreased organizational resistance to multipleconflicting demands and to identify, with moreprecision, the conditions under which specificresponse strategies are used.

We begin by identifying the contexts in whichconflicting institutional demands are likely toarise and be imposed on organizations. We thenexplore the way in which conflicting institu-tional demands are experienced by organiza-tions. After this, we develop a model that pre-dicts organizational responses to suchconflicting demands as a function of the natureof the conflict and the intraorganizational repre-sentation of that conflict. The proposed modelpredicts nonlinear responses in terms of levelof resistance and identifies situations inwhich the institutional conflicts may lead toextreme organizational outcomes, such asbreakup or organizational paralysis. We con-clude by discussing the contributions and lim-itations of the proposed model and suggestingdirections for future research.

THE ORIGINS OF CONFLICTINGINSTITUTIONAL DEMANDS

Institutional theorists argue that institutionalenvironments provide meaning and stability to

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social behavior, shaping and constraining or-ganizational actions. Institutional influencesare exerted on organizations through rules andregulations, normative prescriptions, and socialexpectations (Scott, 2001). They are also carriedover through “institutional logics” (Thornton,2004; Thornton & Ocasio, 2008), which arebroader cultural templates that provide organi-zational actors with means-ends designations,as well as organizing principles (Friedland &Alford, 1991). In this paper we use the term insti-tutional demands to refer to these various pres-sures for conformity exerted by institutional ref-erents on organizations in a given field.Conflicting institutional demands then refers toantagonisms in the organizational arrange-ments required by institutional referents. Orga-nizations facing conflicting institutional de-mands operate within multiple institutionalspheres and are subject to multiple and contra-dictory regulatory regimes, normative orders,and/or cultural logics (Kraatz & Block, 2008).

The phenomenon of conflicting institutionaldemands and its impact on organizations is at-tracting increasing attention from institutionalscholars (D’Aunno, Succi, & Alexander, 2000;Marquis & Lounsbury, 2007; Purdy & Gray, 2009;Rao, Monin, & Durand, 2003; Thornton, 2002;Zilber, 2002). Yet the study of specific organiza-tional responses to conflicting institutional de-mands has been neglected. A few empiricalstudies have identified idiosyncratic organiza-tional responses to conflicting institutionalpressures for conformity (Alexander, 1996, 1998;D’Aunno, Sutton, & Price, 1991; Elsbach & Sutton,1992; Reay & Hinings, 2009), without proposing amore general framework. Although two theoret-ical models (Kraatz & Block, 2008; Oliver, 1991)have outlined generic response strategies toconflicting demands, they do not explore theconditions under which specific responses aremobilized. Overall, despite significant progress,we still lack a systematic examination of howconflicting institutional demands are imposedon organizations, as well as how organizationsrespond to them.

Understanding how organizations respond toconflicting demands first requires understand-ing when such conflict is likely to arise in a fieldand how it is imposed on organizations. Orga-nizational fields (DiMaggio & Powell, 1983) arethe level at which environmental processes op-erate to shape organizational behaviors. They

vary in the configuration of their wider struc-tures and legitimating rules (DiMaggio & Pow-ell, 1983; Meyer & Rowan, 1977), as well as in thecomplexity of their resource and power arrange-ments (Pfeffer & Salancik, 1978). As a result, theyalso vary in the nature of the demands that theyexert on organizations and in the way they im-pose and monitor these demands.

Building on the work of Scott and Meyer (1991),we propose that conflicting institutional de-mands are particularly likely to emerge in frag-mented fields. Fragmentation refers to the num-ber of uncoordinated organizations or socialactors on which field members depend (Meyer,Scott, & Strang, 1987). In a highly fragmentedfield, such as the educational sector in theUnited States (Scott & Meyer, 1991), organiza-tions rely on and are responsive to multiple anduncoordinated constituents. This differentiatesthem from unified fields, such as the militaryfield in most democratic countries, where orga-nizations depend on a few coordinated decisionmakers. The coexistence of multiple uncoordi-nated actors and their respective logics aboutwhat constitutes effective (Whetten, 1978) or le-gitimate (Deephouse, 1996; Ruef & Scott, 1998)behavior increase the likelihood that institu-tional expectations may compete.

We further propose that once conflicting de-mands emerge in fragmented fields, the likeli-hood that they will actually be imposed on or-ganizations is a function of the ability of thesecompeting institutional referents to enforce theirdemands. This is in itself a function of the de-gree of the field’s centralization (Scott & Meyer,1991). Centralization characterizes a field’spower structure and accounts for the presence ofdominant actors at the field level that supportand enforce prevailing logics. Such powerful ac-tors include regulatory authorities (Holm, 1995)that coerce organizations to behave in a certainway through their legal power, major funders(Ruef & Scott, 1998) that exercise their domi-nance through resource dependence relation-ships, and educational and professional organi-zations (Greenwood, Suddaby, & Hinings, 2002)that influence behaviors through normative so-cialization and accreditation processes.

Highly centralized fields typically rely on oneprincipal constituent, whose authority in thefield is both formalized and recognized (Meyeret al., 1987). Such central actors have the legiti-macy and authority to arbitrate and resolve po-

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tential disagreement between disparate playersand, in turn, impose relatively coherent de-mands on organizations. In contrast, decentral-ized fields are poorly formalized and character-ized by the absence of dominant actors with theability to constrain organizations’ behaviors. Insuch decentralized fields institutional pressuresare rather weak, and, when incompatible, theycan be easily ignored or challenged by organi-zations, since the referents exerting them havelittle ability to monitor and enforce them. Themost complex fields for organizations to navi-gate are moderately centralized fields, whichare characterized by the competing influence ofmultiple and misaligned players whose influ-ence is not dominant yet is potent enough to beimposed on organizations.

In summary, we argue that a structure that isparticularly likely to impose conflicting institu-tional demands on organizations is one where ahighly fragmented field is moderately central-ized. In such fields competing demands can beexpected to emerge owing to the multiplicity ofinstitutional referents inherent in high levels offragmentation. They are, in addition, likely to beimposed on organizations because of the exis-tence of a few powerful referents that do nothave enough power to clearly dominate the fieldon their own and resolve conflict, but neverthe-less have enough power to constrain organiza-tions to take their demands into account. Thus,we propose the following.

Proposition 1: Fragmented fields thatare moderately centralized are morelikely than other fields to impose con-flicting institutional demands on or-ganizations.

Scott’s (1983) study of health care organiza-tions in the United States illustrates this propo-sition. He highlights the fragmented character ofthe field, where organizations are expected tosatisfy multiple and sometimes conflicting re-quirements from a wide variety of funding agen-cies, each in charge of specific programs. Healso describes the field’s dual authority struc-ture—which thus qualifies as a moderately cen-tralized field—with public authorities in chargeof funding authority and health care professionsin charge of programmatic authority. While pub-lic authority control systems stress concentra-tion of decision making and formalization ofprocedures, professional control systems have

historically emphasized delegation of decisionmaking and the construction of safeguards tosupport the autonomy of independent practitio-ners (Scott, 1983), thus leading to long-lastingirreconcilable demands. Reay and Hinings(2009) describe a similar dynamic in the healthcare field in Alberta, Canada.

Organizations that are embedded in frag-mented and moderately centralized fields, suchas health care, are thus likely to face enduringconflicting demands. This type of field structurehappens to be quite prevalent, occurring in awide range of sectors. These include biotechnol-ogy (Powell, 1999), microfinance (Battilana & Do-rado, in press), alternative dispute resolution(Purdy & Gray, 2009), museums (Alexander,1996), symphony orchestras (Glynn, 2000), mu-tual funds (Lounsbury, 2007), drug abuse treat-ment centers (D’Aunno et al., 1991), law firms(Cooper, Hinings, Greenwood, & Brown, 1996),and community banking (Marquis & Lounsbury,2007). In order to understand how organizationsin these disparate fields respond to institutionalconflicting demands, we now explore how theyexperience this conflict.

HOW ORGANIZATIONS EXPERIENCECONFLICTING INSTITUTIONAL DEMANDS

Not all organizations experience conflictinginstitutional demands in a given field in a sim-ilar way, since field-level institutional pro-cesses are filtered and enacted differently bydifferent organizations (Greenwood & Hinings,1996; Lounsbury, 2001). Institutional demands,which emanate from an organization’s broaderregulatory, social, and cultural environments,permeate organizational boundaries throughtwo central mechanisms. First, they can be con-veyed by actors located outside the organizationwho disseminate, promote, and monitor themacross the field. These external actors might belocated in professional organizations, regula-tory bodies, or funding agencies. They exercisecompliance pressures on organizations bymeans of resource dependence relationships(DiMaggio & Powell, 1983; Oliver, 1991; Pfeffer &Salancik, 1978). When organizations depend onkey institutional referents for resources, such asfunds, staff, or license to operate, they are likelyto comply with what these stakeholders expectfrom them to secure access to these key re-sources.


Second, institutional pressures also manifestthemselves internally as a result of hiring andfiltering practices (DiMaggio & Powell, 1983). In-stitutional demands are conveyed by staff mem-bers, executives, board members, or volunteerswho adhere to and promote practices, norms,and values that they have been trained to followor have been socialized into. Organizationalmembers, by being part of social and occupa-tional groups, enact, within organizations,broader institutional logics (Friedland & Alford,1991; Thornton & Ocasio, 1999) that define whatactors understand to be the appropriate goals,as well as the appropriate means to achievethese goals (Scott, 2001).

Researchers have argued that an organiza-tion’s experience with institutional demandsvaries depending on the interpenetration ofthese external and internal pressures (Green-wood & Hinings, 1996). For example, Fiss andZajac (2004), in their study of the adoption of ashareholder value orientation among Germanfirms, showed that firms’ decisions to prioritizethe creation of value for their shareholders(rather than for other stakeholders) are influ-enced by pressures from both powerful externalshareholders and powerful internal executives.These two mechanisms interact, since the hiringof organizational members espousing a giveninstitutional logic can be a response to confor-mity pressures from external institutional con-stituents (D’Aunno et al., 1991; Lounsbury, 2001;Zilber, 2002). Thus, in order to understand varia-tions in organizational responses to conflictingdemands, we propose exploring how the institu-tional context interacts with intraorganizationaldynamics. This requires moving away from aconception of organizations as unitary actorswho are either passive recipients of (DiMaggio& Powell, 1983) or active resistors to (Oliver,1991) external constraints to a view of organiza-tions as pluralistic entities shaped by (and po-tentially shaping) the institutional pressuresthey are subject to (Barley & Tolbert, 1997).

In this vein, we conceptualize organizationsas complex entities composed of various groupspromoting different values, goals, and interests(Greenwood & Hinings, 1996). We argue thatthese groups play an important role in interpret-ing and enacting the institutional demands ex-erted on organizations (Delmas & Toffel, 2008),as well as in making decisions in the face ofthese institutional constraints (George, Chatto-

padhyay, Sitkin, & Barden, 2006). This view oforganizations as filters of institutional demandsechoes early conceptualizations of organiza-tions in institutional theory (Selznick, 1949, 1957),as well as more recent developments (Georgeet al., 2006; Greenwood & Hinings, 1996; Hirsch &Lounsbury, 1997; Kim et al., 2007; Selznick, 1996;Seo & Creed, 2002), both of which suggest thatintraorganizational processes are an importantfactor explaining differences in organizationalresponses to institutional pressures. This con-ceptualization allows us to understand that or-ganizations, when facing similar conflicting de-mands, may experience them differently and, inturn, mobilize different responses.

Building on this approach, we argue that anorganization’s response to conflicting institu-tional demands is a function of the nature ofthese demands and of the degree to which thedemands are represented within the organiza-tion. We contend that organizations may differin their response strategies depending on whatthe conflict is about and on the motivation oforganizational groups to see one of the compet-ing demands prevail. We propose exploring in asystematic fashion the impact of the interactionof these two factors—nature of demands andinternal representation—on the mobilization ofvarious response strategies.

Nature of Demands

The nature of demands is an important factorwhen studying organizational responses to con-flicting demands because it allows us to predictthe degree to which these demands are negotia-ble. Conflicting institutional demands may dif-fer with regard to the nature of their prescrip-tions (DiMaggio & Powell, 1983; Oliver, 1991).Specifically, they may influence organizationsat the ideological level, prescribing which goalsare legitimate to pursue, or they might exertpressures at the functional level, requiring orga-nizations to adopt appropriate means or courses ofaction (DiMaggio & Powell, 1983; Oliver, 1991; Scott& Meyer, 1991; Townley, 2002).

An example of conflicting demands involvinggoals is illustrated by Purdy and Gray’s (2009)study of U.S. state offices of dispute resolution. Ithighlights that these offices draw support fromdifferent institutional referents who disagreeabout whether their goal is mainly “democratic”or “bureaucratic”: whereas public policy advo-


cates view the purpose of these offices as im-proving policy decisions by involving dispu-tants in the decision process, judicial advocatesview it as enhancing the efficiency of the U.S.justice system by handling a large volume ofroutine cases. These two goals are conflicting tothe extent that the realization of the democraticobjective—requiring specific resources and pro-cesses to allow for the participation of dispu-tants— undermines the realization of the bu-reaucratic objective of handling as manyroutine cases as efficiently as possible.

An illustration of conflicting institutional de-mands at the means level is provided by West-phal and Zajac’s (2001) study of stock repurchaseprograms by U.S. corporations at the end of the1980s. The authors show that two organizationalconstituencies (in this case stock market ana-lysts and management professionals) holdingconvergent views about the profit generationgoal of corporations diverged in their percep-tions of which control practices were most ap-propriate to achieve this goal. While stock mar-ket referents pressured public corporations toadopt stock repurchase plans in order to in-crease earnings per share and reduce manage-rial autonomy, management professionals per-ceived these pressures as inappropriate, sincethey were too restrictive to their managerial dis-cretion of using cash reserves for investments oracquisitions that could increase future earnings.

Although presented here as discrete catego-ries, goals and means sometimes overlap.Meyer and Rowan (1977) argued that programsand technologies, which are primarily means toachieve organizational goals, sometimes be-come myths: they become taken-for-grantedmeans-ends designations imbued with a goal-like status. For example, Zilber (2002) showedhow the practice of speakers’ taking turns ingatherings at a rape crisis center in Israel be-came an embodiment of the center’s feministmission of fighting against domination and wasthus promoted and defended by organizationalmembers. When technical prescriptions are soinstitutionalized that they become ends in them-selves for the constituencies implementingthem, conflict around these prescriptions quali-fies, in our model, as a conflict around goals.

In summary, the key distinction that we pro-pose is between demands that involve conflictat the goals level (which may or may not involveconflict at the means level) and demands that

are harmonious at the goals level yet lead todispute about the means (functional strategies,processes) required to achieve these goals.Functional and process demands are materialand peripheral and, thus, are potentially flexi-ble and negotiable. In contrast, goals are ex-pressions of the core system of values and ref-erences of organizational constituencies andare, as such, not easily challenged or negotia-ble. This distinction is likely to influence orga-nizational responses.

Internal Representation

When trying to understand how organizationsrespond to conflicting institutional demands,the dimension of internal representation allowsexploring the internal dynamics at play and, inparticular, the stakes involved in the conflict.Organizations differ in the extent to which com-peting institutional demands are internally rep-resented—that is, in the extent to which orga-nizational members adhere to and promote agiven demand (Kim et al., 2007). As describedearlier, such internal representation can be theoutcome of hiring practices that, accidentally orpurposefully, bring into the organization mem-bers (such as professional staff members, man-agers, board members, or regular volunteers)who adhere to various normative and cognitivetemplates (D’Aunno et al., 1991; Lounsbury, 2001).Internal representation is also influenced bybroader societal institutional logics that provideorganizational members with cognitive tem-plates that influence their perception of whichobjectives and practices are appropriate (Fried-land & Alford, 1991; Thornton, 2002). Organiza-tional members who have been socialized ortrained into a specific institutional logic arelikely to be committed to defending it should itbe challenged.

The extent of internal commitment to institu-tional demands matters for organizational re-sponses, as highlighted by Greenwood andHinings (1996) in their model of radical organi-zational change. These authors argued that or-ganizations are likely to resist institutional de-mands when an alternative template issupported internally by at least one internalgroup. In a recent empirical study Kim and co-authors (2007) showed that the enactment ofpressures for changes in the presidential selec-tion system in Korean universities can be pre-


dicted by the absence or presence, within theorganization, of groups committed to the promo-tion of the old selection system. To understandhow organizations respond to conflicting insti-tutional pressures, it is therefore important toconsider the extent to which the different sidesof the conflict are represented internally. Wepropose distinguishing situations in which in-ternal representation is absent from situationsin which a single side of the conflict is internallyrepresented, as well as from situations in whichmultiple sides (two at least) of the conflict areinternally represented.

Conflicting institutional demands may be rep-resented by external actors only, leaving inter-nal constituencies relatively impartial to thedispute. While such absence of internal repre-sentation may not be frequent given the abovementioned permeability of organizations to in-stitutional influences, it is nevertheless possi-ble, especially in new organizations or in orga-nizations entering a new field where membersmight not yet have been exposed to and social-ized into the pressures of the field. In such casesorganizational members exhibit “indifferentcommitment” (Greenwood & Hinings, 1996) to theinstitutional conflict.

In cases of single internal representation, oneor all internal groups are overtly committed toone side of the conflict and are likely to takeaction to promote and defend it. Alexander’s(1996) study of American museums in the 1920sprovides a good illustration of a case where asingle conflicting demand was representedwithin the organization. Alexander showed thatexternal funders expressed demands on muse-ums for popular and accessible exhibitions thatconflicted with the view of powerful internalprofessionals—the curators—who favoredscholarly and erudite exhibitions, leading tostrategic and programmatic tensions.

In cases where multiple sides of the conflictare internally represented, different organiza-tional groups exhibit “competitive commitmentpatterns” (Greenwood & Hinings, 1996) that leadthem to fight against each other to make thetemplate they favor prevail. Glynn’s (2000) studyof the Atlanta Symphony Orchestra provides avivid illustration of the tensions that arise fromthe promotion of competing ideologies by twokey internal constituencies. Musicians, espous-ing the “artistic excellence” logic of their profes-sion, sought to develop “a world-class orchestra

in a world-class city.” Managers, however, pro-moting the “economic utility” ideology they hadbeen trained into, focused on building “the bestorchestra . . . [they could] afford” (2000: 288). As aresult of this competitive commitment, the twogroups engaged in a passionate battle overwhat the orchestra’s core competencies wereand how its resources should be allocated, withmusicians emphasizing investment in artistryand managers emphasizing cost containment. Asimilar pattern is illustrated by Chen andO’Mahony’s study (2006) of volunteer productioncommunities, which shows that the coexistenceof two competing logics championed by differ-ent organizational groups led to the emergenceof internal tensions.

In summary, the dimensions of internal repre-sentation that we propose allow us to accountfor intraorganizational political processes thataffect organizational responses to institutionalpressures. In particular, we identify situationswhere the conflict existing at the field level isinternalized and enacted within organizations,generating particularly challenging situations.

Overall, we suggest that once conflictemerges and is not resolved at the field level,how organizations experience this conflict is in-fluenced by the nature of demands and the in-ternal representation of the conflict. The natureof demands influences the negotiability of theconflict, and the level of internal representationinfluences the stakes involved in the response.These factors are summarized in Table 1.

We now explore how these factors shape or-ganizational responses to conflicting institu-tional demands.

HOW ORGANIZATIONS RESPOND TOCONFLICTING INSTITUTIONAL DEMANDS

What do organizations do when faced withpowerful competing institutional demands? Re-cent developments in institutional theory recog-nize that exposure to conflict in institutional pre-scriptions requires organizations to exercisesome level of strategic choice (Clemens & Cook,1999; Dorado, 2005; Friedland & Alford, 1991;Sewell, 1992; Whittington, 1992). This body ofwork acknowledges that the existence of antag-onistic demands challenges the taken-for-granted character of institutional arrangements,makes organizational members aware of alter-native courses of action, and requires them to


make decisions as to what demand to prioritize,satisfy, alter, or neglect in order to secure sup-port and ensure survival. In such situationschoice is not only an option; it becomes a neces-sity because more than one course of action isconsidered appropriate (Whittington, 1992).

This process is described in detail by Seo andCreed (2002), who, building on the work of Ben-son (1977), identify institutional contradictionsas the key driver of purposeful action (referred toas praxis) within an institutional context. Theypropose that the inherent contradictions of so-cial structures provide a continuous source oftensions and conflicts within and across institu-tions, thus reshaping the consciousness of or-ganizational actors and motivating them to takeaction to alleviate the tensions. They also pointto misaligned interests as an important determi-nant of praxis, recognizing that the degree towhich actors are dissatisfied with a given insti-tutional demand is positively related to theemergence of agency within an institutionalcontext. We build on these views to develop ourmodel of organizational responses to conflictinginstitutional demands.

A Repertoire of Responses to ConflictingInstitutional Demands

What repertoire of responses can organiza-tions choose from when facing conflicting insti-tutional demands? In a model of strategic re-sponses to institutional processes, Oliver (1991)proposed a detailed typology of strategies avail-able to organizations as they face institutionalpressures: acquiescence, compromise, avoid-ance, defiance, and manipulation (listed here inincreasing order of resistance to the demands).Considering that conflicting institutional pres-

sures are a special case of institutional pres-sures, we propose relying on Oliver’s exhaustivetypology to explore in more detail the specificresponses mobilized by organizations as theyface the challenge of dealing with conflictinginstitutional demands.

Acquiescence refers to organizations’ adop-tion of arrangements required by external insti-tutional constituents. The most passive re-sponse strategy, acquiescence can take threedifferent forms: it can result from habit (i.e., theunconscious adherence to taken-for-grantednorms), from the conscious or unconscious imi-tation of institutional models, or from the volun-tary compliance to institutional requirements(Oliver, 1991).

Compromise refers to the attempt by organi-zations to achieve partial conformity with allinstitutional expectations through the mild al-teration of the demands, through the mild alter-ation of the responses, or through a combinationof the two. When using compromise, organiza-tions aim for at least partially satisfying all de-mands. They might try to balance competingexpectations through the negotiation of a com-promise, they might conform only to the minimalinstitutional requirements and devote resourcesand energy to pacify the resisted constituents, orthey might attempt to actively bargain alter-ations of the demands with institutional refer-ents (Alexander, 1998; Oliver, 1991).

Avoidance refers to the attempt by organiza-tions to preclude the necessity to conform toinstitutional pressures or to circumvent the con-ditions that make this conformity necessary.Avoidance tactics include concealing noncon-formity behind a facade of acquiescencethrough pure symbolic compliance, buffering in-stitutional processes by decoupling technical

TABLE 1Key Factors Influencing the Experience of Conflicting Demands

Key Factors DimensionsInfluence on ConflictExperience

Nature of demands ● Conflict over means only (not involving goals) Negotiability of conflict● Conflict over goals

Internal representation ● Absence of internal representation of conflicting demands Stakes involved in the● Single internal representation of conflicting demands; one

side represented onlyresponse

● Multiple internal representations of conflicting demands;two sides (or more) represented


activities from external contact, or escaping in-stitutional influence by exiting the domainwithin which the pressure is exerted (Alexander,1998; Oliver, 1991).

A more aggressive strategy, defiance refers tothe explicit rejection of at least one of the insti-tutional demands in an attempt to actively re-move the source of contradiction. Defiance canbe exercised through dismissing or ignoring in-stitutional prescriptions, overtly challenging orcontesting the norms imposed, or directly at-tacking or denouncing them (Oliver, 1991).

Finally, manipulation refers to the active at-tempt to alter the content of institutional re-quirements and to influence their promoters. Ol-iver (1991) pointed to three specific manipulationtactics: organizations may attempt to co-opt thesources of the institutional pressures to neutral-ize institutional divergences, to influence thedefinition of norms through active lobbying, or,more radically, to control the source of pressure.Table 2 summarizes this detailed typology ofresponse strategies.

A Model of Organizational ResponseStrategies to Conflicting Institutional Demands

Organizations have been shown to mobilizedifferent strategies in the face of multiple insti-tutional pressures for compliance (Dacin, Good-stein, & Scott, 2002; Kim et al., 2007; Lounsbury,2001; Lounsbury, 2007). Scholars have predictedthat organizations will acquiesce more readilyto demands exerted by those powerful institu-tional referents on which they depend for legit-imacy or resources (DiMaggio & Powell, 1983;Oliver, 1991; Pfeffer & Salancik, 1978). This baseprediction, however, is inadequate when explor-

ing the issue of responses to conflicting institu-tional demands. First, in conflict situationsplain compliance is problematic, since comply-ing with one demand requires defying the com-peting other(s). Second, organizations often facecompeting demands that emanate from moder-ately centralized fields, where institutional con-stituents hold roughly similar levels of power(by way of the equivalent dependence relation-ship that organizations have developed withthem). This makes the argument about powerdifferentials ineffective as a predictor of orga-nizational responses.

Our argument builds on and extends Oliver’s(1991) model, which addresses multiple conflict-ing institutional demands as one out of ten an-tecedents to strategic responses. Oliver’s modelpredicts that organizations facing a multiplicityof conflicting pressures are unlikely to simplyacquiesce and, rather, are likely to resort to com-promise, avoidance, defiance, or manipulation.The predictive power of the model is thus quitelow when it comes to specifying responses toconflicting demands, because it is unable to dis-tinguish between alternative resistance strate-gies. In our model we rely on Oliver’s base pre-diction to rule out full acquiescence as a likelyresponse to conflicting institutional demands,yet we expand her model by identifying deter-minants of the use of various resistant strate-gies.

The core of our argument is that the nature ofthe institutional conflict (means versus goals)interacts with the degree of internal representa-tion (absence, single, or multiple) to shape theexperience of conflicting demands and influ-ence the strategies mobilized by organizationsin response. We now explore in a systematic

TABLE 2Available Response Strategies to Institutional Demands

Strategies Tactics Definition

Acquiescence Habit, imitate, comply Adoption of demandsCompromise Balance, pacify, bargain An attempt to achieve partial conformity in order to at least

partly accommodate all institutional demandsAvoidance Conceal, buffer, escape An attempt to preclude the necessity to conform to

institutional demandsDefiance Dismiss, challenge, attack Explicit rejection of at least one of the institutional demandsManipulation Co-opt, influence, control Active attempt to alter the content of the institutional

demands

Source: Oliver (1991).


fashion how they do so. We start by discussingexpected responses to institutional conflictsover organizational means and then move todiscussing the more challenging situations ofinstitutional conflicts over organizational goals.To predict responses we analyze how costly (interms of the mobilization of resources that itrequires) as well as how risky (in terms of po-tential loss of legitimacy) a response strategymight be in a given situation. This analysis ismade from the point of view of intraorganiza-tional groups and takes into account their levelof attachment to the competing demands. Wealso evaluate the likelihood of success of thepredicted responses, as well as potential unin-tended consequences for the organization.

Conflicts over means only. First, we focus onconflicting institutional demands that agree onthe goals an organization should pursue yet dis-agree on which means should be put in place toachieve these goals. We propose that such in-stances of conflicting institutional demands areonly mildly challenging for organizations. Sincethey focus on technical issues, these demandsare relatively peripheral for organizations. Suchconflict may not necessarily be worth the cost ofan institutional battle. Moreover, the demands’content is potentially flexible and negotiable.The peripheral and negotiable character ofthese competing demands increases the likeli-hood of achieving a compromise between them.

In the absence of internal representation ofthe demands, the impulse to actively resist orchallenge institutional pressures will be rela-tively low. We predict that under such condi-tions organizations are likely to resort to com-promise or avoidance. These two strategiesshare the commonality of partially satisfying(truthfully or symbolically) institutional de-mands. As a result, they involve only a moderatelevel of risk for organizations of losing institu-tional support. Compromise allows organiza-tions to find an acceptable middle ground be-tween alternative practices and thus toplease—at least partially—institutional refer-ents. When compromise is challenging toachieve (when, for instance, demands are fullyincompatible over the long run), avoidance, asan attempt to reduce the amount of tension ex-perienced, is a viable strategy. For example,public schools, which are under permanentpressure from the state to operate within thelimits of an allocated budget while being pres-

sured by parents to increase the resources in-vested in mentoring and development opportu-nities for their students, are likely to engage incompromise strategies; they may bargain withbudgeting authorities to negotiate additionalmonies to satisfy parents’ requests for morementoring, or mobilize volunteer resources to doso without stepping out of their budgetary con-straints. Alternatively, they may try to avoid par-ents’ pressures (the state budgeting constraintbeing more difficult to avoid) by limiting theextent of parents’ scrutiny and their participa-tion in the schools’ programming. And whileparents’ organizations may have an interest indirectly attacking and challenging publicschools’ funding policies, it is unlikely that theschools themselves will engage in such a battle.

Defiance and manipulation, in contrast, in-volve the mobilization of political capital andthe overt contestation of institutional demands.As a result, they are more costly as well as morerisky for organizations, which may lose institu-tional support in the process. In a context whereconflict deals with peripheral issues and mem-bers are relatively impartial to the dispute, webelieve that these strategies are less likely to beused. Therefore, we propose the following.

Proposition 2: When facing conflictingdemands focusing on means, and inthe absence of internal representationof these demands, organizations aremore likely to resort to compromiseand avoidance than to other responsestrategies.

When one side of the demands is internallyrepresented, the intraorganizational dynamicchanges since the presence of internal champi-ons for one set of demands enhances internalcommitment to conflict resolution in favor of theinternally promoted demand. Although compro-mise would be a feasible strategy to secure le-gitimacy at a relatively low cost, it is not likelyto be adopted since it would go against theinterests of internal groups. We propose that insuch situations avoidance is a more likely strat-egy. In fact, avoidance tactics such as symboliccompliance or decoupling have been shown tobe particularly used in such circumstances (Els-bach & Sutton, 1992; Meyer & Rowan, 1977) sincethey allow organizations to fake conformitywhile maintaining discretion over actual prac-tices. Westphal and Zajac (1994), for instance,


showed that in a context where external marketanalysts’ preference for CEO long-term incen-tive plans clashed with the managerial logic oflow-risk compensation contracts, powerfulCEOs—that is, the supporters of the manageriallogic—influenced their organizations to symbol-ically adopt long-term incentive plans while notactually implementing them.

In addition, organizations may be likely tomobilize defiance strategies since membersmay be willing to go a step further in protectingtheir own interests, going so far as to defy someof the contested prescriptions. Alexander’s studyof American museums (1996) precisely points tothis dynamic, showing that to respond to conflictbetween funders’ and curators’ views of whattypes of museum exhibitions were appropriate,curators were able to devise strategies that al-lowed them to enforce their own conceptions. Tosymbolically respond to funders’ pressures, cu-rators favored more popular formats while keep-ing intact the scholarly content of their exhibi-tions, which they considered too important to bealtered. Yet in an act of defiance to their insti-tutional funders’ pressures, they also voicedtheir perception that “corporations and govern-ment have distorted the types of shows that mu-seums put on” and their belief that corporations,in particular, “constrain and flaw exhibitions”(1996: 829).

Finally, we argue that organizations facingsuch a type of conflict are not likely to resort tomanipulation strategies; the high cost of thisstrategy makes it relatively unattractive in acontext where demands are only peripheral.

Proposition 3: When facing conflictingdemands focusing on means whereone side of the demands is internallyrepresented, organizations are morelikely to resort to avoidance and defi-ance than to other response strategies.

When two sides of the conflict are internallyrepresented, response strategies may differ inimportant ways. This may occur, for example, inorganizations where unions are strongly repre-sented and promote practices that contradict thepractices promoted by management. It may alsooccur when two different professions coexistand fight for dominance within an organization.This is the case in multidisciplinary partner-ships, where consultants and auditors (Green-wood & Hinings, 1996) or lawyers and accoun-

tants (Suddaby & Greenwood, 2005) holddifferent values and different views about theappropriate way to organize work. Situationswhere two sides of the conflict are internallyrepresented may also result from the use of co-optation strategies in earlier attempts to ad-dress conflicting demands by, for example,bringing opposing stakeholders onto the boardof organizations (Selznick, 1949).

The internal representation of at least twoparties of the conflict has an important influ-ence on organizational responses, makingavoidance and defiance less likely strategies.The presence of both parties within the organi-zation will make it hard to adopt avoidance re-sponses since each party will have the ability toscrutinize the other’s behavior and contest anyinappropriate conduct. In addition, the impulseto defy the contested practices will also be low,even in the presence of power differentials.Dominant groups are likely to hold enoughpower to make their views prevail, withoutneeding to waste resources in dismissing, chal-lenging, or attacking the alternative template.Less powerful groups may not be motivated todefy the contested practices. Such behavior islikely to be useless, given the power differentialbetween groups, and costly, since it may lead toan internal escalation of conflict. Internalgroups may not be willing to pay such a highprice for a low-stakes conflict focusing onmeans.

With avoidance and defiance less likely re-sponses, the actual response to conflicting insti-tutional demands is likely to be determined bythe differential power of the internal groups pro-moting the demands (Fligstein, 1991; Green-wood & Hinings, 1996; Kim et al., 2007). If thedifferent groups are equally powerful (i.e., ifthey have an equivalent ability to influence theorganization’s course of action), this balancedpower structure will enhance their capacity todiscuss and negotiate a solution acceptable toeach group and will augment the ability of eachparty to monitor the other’s behavior. We pro-pose that in such cases the impulse to find acompromise will be high, particularly in a con-flict on negotiable issues, such as means, prac-tices, or procedures. In contrast, when one groupinvolved in the conflict is much more powerfulthan the other(s), that group is likely to use thispower to ensure the imposition of its preferredtemplate. If the other party is not willing to con-


cede, the powerful party has the ability to im-pose its views through more radical manipula-tion strategies; co-optation, influence, andcontrol are indeed viable tactics when one is ina dominant position. Overall, we propose thefollowing.

Proposition 4: When facing conflictingdemands focusing on means where atleast two sides of the demands areinternally represented, organizationsare more likely to resort to compro-mise strategies when internal poweris balanced and to manipulation strat-egies when internal power is unbal-anced.

Montgomery and Oliver’s (1996) study of hos-pital responses to the AIDS epidemic providesempirical support for this prediction. The studyshowed that physicians and patients, two keyinternal constituents of hospitals who agree onthe overall purpose of medical interventions,held contradictory expectations about the ap-propriate report policies that hospitals shouldimplement. On the one hand, the belief systemassociated with patients—the primacy of indi-vidual rights—required that patients’ privacy berespected. On the other hand, doctors’ belief sys-tem—the primacy of professional preroga-tives—required that physicians be informed oftheir patients’ condition in order to do their workproperly. Recognizing that doctors are morepowerful than patients in hospitals, the studyshowed that doctors were able to manipulatethe definition of norms in such a way that hos-pitals adopted policies that favored their beliefsystem (such as treating patients who refusedtesting as if they were HIV positive). Interest-ingly, the study also pointed to the fact that inhospitals with a higher presence of HIV pa-tients—that is, in hospitals where the power dy-namic between patients and doctors was morebalanced—policies favoring the interests of in-dividual patients (such as never placing HIV testresults in patients charts) were more likely to beused, indicating that in such cases a form ofcompromise was reached, allowing the interestsof both groups to be taken into account.

Conflicts over goals. We now turn to conflict-ing demands that involve disagreement aboutthe goals an organization should pursue. By na-ture, these conflicts are more challenging fororganizational members because they threaten

their core understanding of what the organiza-tion is about. We argue that, independent of howdemands are internally represented, it will bedifficult to achieve compromise on conflictinggoals since these are not easily negotiable.Striking a balance on incompatible goals, ac-commodating them, and bargaining with insti-tutional referents to obtain concessions on theimposed goals are challenging strategies sincethey require organizational members to overtlyrecognize the incompatibility of the demands ongoals, which may, in turn, jeopardize institu-tional support. We therefore propose that orga-nizations facing such conflict are not likely toresort to compromise as a response strategy.

Furthermore, in the absence of internal repre-sentation of the demands, organizational mem-bers are victims of rather than participants inthis dispute about organizational goals. Suchsituations are frequent for organizations thatrely on a variety of external funding sources tosurvive, since different funders might hold dis-tinct views of what the organization is aboutand what it stands for. Humanitarian NGOs, forexample, are subject to competing pressuresfrom individual donors who request a focus onhumanitarian crises publicized by the media,and from institutional funders (United Nations,World Bank, etc.) who pressure the NGOs to fo-cus on more long-term and potentially less emo-tional humanitarian issues. Organizationalmembers are then caught between these com-peting external demands.

We argue that in the face of such conflict,organizations are likely to resort to avoidanceand defiance strategies. Avoidance may indeedbe viable in such situations as the mildest wayto resist institutional demands without jeopar-dizing legitimacy. By loosening institutional in-spection or by disguising nonconformity, avoid-ance allows relatively neutral organizationalmembers to escape institutional conflict at arelatively low cost. For example, some humani-tarian NGOs develop fundraising campaigns forunrestricted funds in an attempt to detach thescrutiny of individual donors from the NGOs’interventions.

Organizations may also resort to defiancestrategies when the tensions experienced by or-ganizational leaders are too high to be treatedwith avoidance. Although not partakers in thedebate, organizational leaders may sufferenough from the challenging conflict situation


to take action to address the conflict. In suchcases defiance, or the explicit contestation of atleast one demand, may be a viable strategy. Theinternational humanitarian NGO Doctors With-out Borders, recipient of the Nobel Peace Prize in1999, was made famous for its TV announce-ment, three weeks after the tsunami that hitSoutheast Asia in December of 2004, that itwould refuse any new funds restricted to post-tsunami relief because it had received enoughfunds to cover the costs of its intervention. Indoing so the organization altogether challengedand dismissed individual donors’ pressures todo more in the region.

Manipulation, with its associated tactics ofco-optation, influence, and control, requires themobilization of human and political capital andis therefore unlikely to happen. Such an attemptto rally institutional constituents to their causeis implausible when organizational membersare not particularly committed to a specific de-mand. Overall, we propose the following.

Proposition 5: When facing conflictingdemands focusing on goals, and in theabsence of internal representation ofthese demands, organizations aremore likely to resort to avoidance anddefiance than to other response strat-egies.

When one side of the competing demands isinternally championed, conflicting demands fo-cusing on goals generate a different responsepattern. Not only does conflict involve disagree-ment at the substantive level about the essenceof the organization, but it is also relayed inter-nally by organizational actors who have stakesin the dispute. We propose that in such situa-tions organizations are likely to resort to avoid-ance strategies, since the internal champions ofa demand will find it easy and comfortable tocircumvent those pressures for compliance theydisagree with. However, avoidance may not beviable over the long term, since a public diver-gence on the organizational goals may ulti-mately affect the organization’s legitimacy.More proactive strategies, such as defiance andmanipulation, may thus be mobilized. The or-ganizational members mobilized to promotecentral issues related to the organizationalgoals may be willing to go so far as to reject thecontradicting demands and manipulate exter-nal stakeholders’ views, through co-optation, in-

fluence, or controlling tactics, in order to maketheir own views prevail.

Proposition 6: When facing conflictingdemands focusing on goals whereonly one side of the demands is inter-nally represented, organizations aremore likely to resort to avoidance, de-fiance, and manipulation than toother response strategies.

The Compartamos example cited at the begin-ning of the article, describing a conflict aboutwhether or not profit generation and redistribu-tion were appropriate goals for a microfinanceorganization, provides an illustration of such asituation. Although the conflict involved exter-nal actors (experts from the microfinance com-munity originating from the finance sector orfrom the social sector), important internal stake-holders of the organization (shareholders andmanagement) clearly had a stake in the debate:they had themselves pushed hard for profits tobecome the driver of the Compartamos growthengine, aligning themselves with a “financelogic.” Under the leadership of these key stake-holders, Compartamos, after a period of avoid-ance that lasted about a year, not only defiedbut also attempted to manipulate its constituen-cies by publishing a letter to its peers, hoping toinfluence them to change their values and be-liefs about what was an appropriate goal for amicrofinance bank.

The final configuration of our model is theinternal representation of both sides of a goal-based conflict. This situation changes the intraor-ganizational dynamics in important ways. Suchtypes of conflict are troublesome for organiza-tions since they potentially challenge organiza-tions’ very essence, doing so in a way wheredifferent internal groups are mobilized to fightagainst one another’s views and motives. Wepropose that in such situations, independent ofpower differentials, moderate strategies such ascompromise and avoidance are not viable sincecompromising on goals is difficult and avoid-ance is hard to achieve given the scrutiny of theopposing party. Yet power differentials betweengroups promoting conflicting demands arelikely to dramatically influence response strat-egies since they condition the ability of thegroups involved to shape the outcome of theinternal decision-making process.


In cases where one of the internal groups in-volved in the conflict clearly dominates, thispower imbalance reduces the need to destabi-lize the opposing groups through dismissal,challenge, or attack, thus making defiance anunlikely strategy. The dominant group’schances to succeed at manipulation will behigh, since power imbalance will allow it toco-opt, influence, or control less powerful groupsto impose its views and goals. The use of ma-nipulation strategies is thus highly likely insuch situations.

However, in situations where the two internalchampions of conflicting institutional demandsare equally powerful, we propose that the highstakes involved in a conflict around goals, com-bined with the competitive commitment of inter-nal groups, are likely to lead to strong internaltensions; competing groups are likely to resort toproactive resistant strategies to reject the con-tested demands and destabilize the other groupwith the hope of achieving domination. Ulti-mately, one group might end up winning theideological battle and take control over theother through the mobilization, at the organiza-tional level, of manipulation strategies. Yet if noclear winner emerges, dramatic outcomes mayoccur at the organizational level: organizationsmay experience escalations of conflict leadingto organizational paralysis (such as long-termstrikes) or even more permanent organizationalbreakups (such as demergers, spin-offs, or or-ganizational deaths). Overall, we propose thefollowing.

Proposition 7: When facing conflictingdemands focusing on goals where atleast two sides of the demands areinternally represented, organizationsare more likely to resort to manipula-tion than to other response strategies.Yet the more balanced the internalpower structure, the more likely thatmanipulation will fail, leading to or-ganizational paralysis or breakup.

The aforementioned study of Atlanta’s Sym-phony Orchestra (Glynn, 2000) provides supportfor this proposition by describing an instance oforganizational paralysis under conditions ofconflict over goals and of internal representa-tion by two equally powerful groups. Musicians,embodying the “artistic excellence” logic oftheir profession, were in strong disagreement

with the utilitarian ideology of the managers ofthe orchestra, which subdued aesthetic objec-tives to financial constraints. These internal ten-sions were accentuated by a decision made bymanagers not to tenure musicians because of alack of finances, despite their having satisfiedstandards of musical quality. Since no party hadthe ability to control or influence the other, ten-sions climaxed in a ten-week-long strike in 1996,during which musicians fought not only to im-prove their contractual conditions but, morebroadly, “for the future of the orchestra” (2000:290).

An illustration of organizational breakup isprovided by the humanitarian NGO DoctorsWithout Borders, which went through a crisis tenyears after its creation (Vallaeys, 2004). In the1980s, as the field of humanitarian interventionwas taking shape, two main ideologies emergedabout the appropriate role of NGOs (Brauman,2002). Under the “legitimist” approach, nation-states were perceived as the only legitimate in-terveners in humanitarian crises, whereasNGOs were conceived mainly as denunciatorsof breaches in humanitarian law and advocatesof the victims of humanitarian disasters. Underthe “independentist” approach, humanitarianNGOs were viewed as the most legitimate ac-tors to take impartial action in often politicallycharged situations, thus requiring NGOs toequip themselves with the logistical means totake part in humanitarian rescues. Both theseideologies had, at the time of founding, powerfuladvocates within Doctors Without Borders’ lead-ership. As Kouchner, chair of the board and avocal advocate of the “legitimist” approach, co-vertly organized a symbolic yet highly publi-cized intervention to rescue Vietnamese refu-gees in the sea of China (in an attempt to attractmedia attention about the issue and control theorganization’s agenda), independentist mem-bers felt manipulated and subsequently over-threw him as chair. As a result of this internalcrisis, Kouchner and the other legitimists leftDoctors without Borders to create a new organi-zation, Medecins du Monde (Doctors of theWorld), which also became an important playerin the humanitarian field.

The full model summarizing the expected or-ganizational responses to different types of in-stitutional conflict is outlined in Table 3.

In summary, we propose that different types ofinstitutional conflicts challenge organizations


in different ways, leading, in turn, to specificresponse strategies. More precisely, we expectorganizations to resort to more resistant strate-gies when facing conflicting institutional de-mands related to goals than when facing con-flict related to means. Yet our model also allowsorganizations to respond differently to the sametype of institutional conflict, by virtue of specificintraorganizational dynamics. This satisfies thefundamental institutional argument that organi-zations are constrained by their environment,without assuming, as in prior models, that theyrespond exactly in the same way to the samepressures (Greenwood & Hinings, 1996).

Specifically, we propose that a key elementaffecting response mobilization is whether ornot the different sides of the conflicting de-mands are represented internally. While ourmodel suggests that a two-sided internal repre-sentation favors the mobilization of compromisestrategies when dealing with a conflict overmeans, it also suggests that, when dealing witha conflict over goals, the presence of championsof two sides of a dispute may lead an organiza-tion to favor manipulation strategies. However,if manipulation fails owing to the balancedpower of the two groups and conflict subsists,the outcome may be organizational paralysis oreven breakup. Our model thus offers a richerand potentially more relevant account of howorganizations respond to conflict in institutionalprescriptions.

An illustration of the organizational dynamicssuggested by our model is the breakup, in 2008,of the global consulting and technology servicescorporation Booz Allen Hamilton into two dis-

tinct entities: a service firm operating under thebrand Booz Allen Hamilton, serving mainly theU.S. government, and a global consulting busi-ness that adopted the name Booz & Company,serving private and public clients worldwide.Founded in 1914 by Edwin Booz as one of the firstmanagement consulting firms, Booz Allen Ham-ilton grew fast after the Second World War andbecame one of the largest and most respectedmanagement consulting firms in the world. Aspecificity of the company was its work for theU.S. military. While most large managementconsulting firms also served both governmentand business clients, Booz Allen Hamilton hadbecome, since the Second World War, an impor-tant contractor for the U.S. military and U.S. in-telligence, a line of work that grew rapidly dur-ing the 1980s and 1990s.

The company thus became immersed in twoorganizational fields imposing very different de-mands on the organization. Corporate and civilgovernment consulting contracts were expectedto be performed through short-term projects,flexible teams, and knowledge sharing acrossprojects. In contrast, military government con-tracts, particularly in the U.S. defense sector,required longer-term interventions, performedby fixed teams checked for security clearance,keeping knowledge private, and obeying nu-merous regulations. This led to conflicting insti-tutional demands about the most appropriatemeans of organizing work.

Until the late 1990s, the leadership of the com-pany, happy with the growing revenues and notparticularly committed to any side of the insti-tutional debate, was able to strike a compromise

TABLE 3A Model of Responses to Conflicting Institutional Demands

Response Determinants Likelihood of Adoption of Response Strategies

Nature ofDemands

InternalRepresentationof Demands Compromise Avoidance Defiance Manipulation

Means Absence High High Low LowSingle Low High High LowMultiple High (balanced power) Low Low High (unbalanced power)

Goals Absence Low High High LowSingle Low High High HighMultiple Low Low Low Higha

a The more balanced the power structure, the higher the likelihood of organizational paralysis or breakup.


between these antagonistic demands by orga-nizing the firm into two distinct business units.Yet as the company’s work for the U.S. govern-ment, particularly the Department of Defense,grew fast after September 2001, the conflictchanged shape, as the U.S. government busi-ness started to account for more than half of therevenue and employees of the firm. This situa-tion, coupled with the growing internationalhostility toward the United States, led to adeeper debate about the appropriate goal of thecompany: was it to be an independent globalconsulting firm serving large corporations andgovernments, or was it to serve the interests ofthe U.S. government and Department of De-fense? The conflict on means had thus turnedinto a conflict on goals.

In addition, a cadre of partners in the firm thatwas rooted in the logics of the defense fieldstarted to champion this logic against the viewsof the majority of management consulting part-ners. Progressively, both sides of the institu-tional conflict became represented in the orga-nization. From 2004 onward, the growing cadreof partners championing a “defense logic,” de-spite being in minority in terms of their numbersand ownership of the company, gained powerbecause of their control of the majority of reve-nues and staff, creating a more balanced powerstructure between the two opposing camps. Atthis point it became increasingly difficult to bal-ance institutional demands competing on goalschampioned by equally powerful internalgroups. Tensions became evident in the mis-aligned incentives and interests among part-ners of the two camps, in the perceived con-straints and hindrances on the operation of thecommercial unit, and in the lack of comfort ofmany potential international clients with thecloseness of the company to the U.S. govern-ment.1

As predicted by our model, this situation led,in 2008, to an organizational breakup, with theseparation of the two businesses into fully au-tonomous entities, enabling each new organiza-tion to better fulfill the demands imposed by itsinstitutional constituents. The U.S. governmentline of business was acquired by the CarlyleGroup, a private equity firm with deep politicalconnections to the U.S. government, thus ensur-

ing the alignment of the organizational goalswith the demands of its most powerful institu-tional constituent. The other part of the organi-zation, renamed Booz & Company, became amore traditional global management consultingfirm, serving large corporations and the civilarms of non-U.S. governments. Interestingly,this breakup happened despite the best effortsof the leadership of the company, which, as re-cently as 2006, had championed an initiativecalled “One Firm Evolution” to try to keep thefirm intact.

In summary, the conflicting institutional de-mands imposed on the organization were re-solved through the extreme response of a volun-tary organizational breakup. Quietly, a majororganizational event happened that made thestructure of the organization match more closelythe structure of the institutional landscape inwhich it was immersed. Whereas this might bean extreme example, it shows that under certainsituations, explained in our model, conflictinginstitutional demands cannot be easily resolvedbecause of the intraorganizational dynamicsthat they generate. We thus argue that institu-tional demands not only shape organizational re-sponses but, in certain situations, can shape thevery structure of the organizational landscape.

DISCUSSION

The theoretical arguments that we have ad-vanced contribute to existing literature in mul-tiple ways. Early formulations of institutionaltheory, which predicted passive organizationalcompliance to institutional demands, have beencriticized for their lack of an explicit and coher-ent theory of action (DiMaggio & Powell, 1991).Later developments (Clemens & Cook, 1999; Do-rado, 2005; Seo & Creed, 2002; Sewell, 1992; Whit-tington, 1992) have started to recognize that het-erogeneous environmental conditions actuallycreate latitude for organizations to exercise stra-tegic choice. This paper is an attempt to delin-eate more precisely the environmental dimen-sions (i.e., fragmentation and centralization), aswell as the enabling mechanism (i.e., conflict ininstitutional prescriptions), that make agencypossible within an institutional framework. Acontribution of our paper is the notion thatpower balance at the field level, generatingmoderately centralized fields, is an importantantecedent of conflicting institutional demands.1 This is as reported by informants we contacted.


More important, by integrating field andintraorganizational levels of analysis, we go be-yond the general prediction proposed by Oliver(1991) that organizations are likely to resist con-flicting institutional demands. Oliver’s view oforganizations as unitary actors that develop op-timal response strategies to exogenous institu-tional processes does not allow prediction of thetype of resistant strategies mobilized by organi-zations when facing conflicting demands. To ad-dress that gap, we have discussed how conflictinginstitutional pressures penetrate organizations,understood as “heterogeneous entities composedof functionally differentiated groups” (Green-wood et al., 1996: 1024). More precisely, we haveexplored the combined interaction of the natureof institutional demands and their internal rep-resentation. In taking these factors into account,our approach departs from the continuum of re-sistant responses proposed by Oliver and pre-dicts the actual strategies favored by organiza-tions. This approach allows us to contribute tothe understanding of the phenomenon of resis-tance to institutional pressures called for byLawrence (2008) in his review of power, institu-tions, and organizations.

In addition, our findings suggest a caveat onthe traditional use of co-optation as a mecha-nism for addressing institutional pressures. Co-optation strategies (Pfeffer, 1981; Selznick, 1949)are frequent drivers of internalization of multi-ple parties of a conflict since they involve anorganization’s recruitment (as board membersor staff members, for instance) of dissenting ex-ternal stakeholders. However, our model sug-gests that co-optation can be beneficial or det-rimental to organizations, depending on thetype of conflict it is supposed to address. Whileco-optation can be a highly effective strategy tosocialize dissenting voices into an organiza-tion’s “way of doing things,” our model points tothe danger of bringing into an organizationmembers who champion views that challengethe central organizational goals, as perceivedand enacted by the dominant organizational co-alition. In these cases co-optation strategies canhave, over the longer term, very disruptive con-sequences for organizations.

We believe that these contributions to the cur-rent predictions of institutional theory are im-portant, given the increasing prevalence of thephenomenon of conflicting institutional de-mands. While contradictions in institutional

pressures have long been acknowledged by or-ganizational scholars (Friedland & Alford, 1991;Oliver, 1991; Scott, 1987), the current evolution ofmodern societies, combined with the evolutionof modern organizations, is leading to an in-creasing occurrence of conflicting institutionaldemands (Scott & Meyer, 1991; Seo & Creed,2002). This is happening through multiple andreinforcing mechanisms.

First, the globalization of practices and cul-tures increasingly exposes organizations to thesimultaneous influence of local and global in-stitutional pressures. Local regulative, cogni-tive, and cultural influences interfere with na-tional and global trends toward homogenizationof rules, values, and practices. As the number ofinstitutional influences on organizations in-creases, the likelihood that these multiple pres-sures will conflict also increases (Friedland &Alford, 1991; Marquis & Battilana, in press). Sec-ond, we argue that field fragmentation has beenincreasing because of the wider range of spe-cialized institutions that compose modern soci-eties. In the same vein, centralization has beendecreasing because central authorities, such asthe state, owing to their inability to directly con-trol complex societies, increasingly devolve au-thority to moderately powerful players in thefield. Third, organizations increasingly adopthybrid forms that draw from and try to integratesometimes competing logics. An example is theincreasing integration of social goals by com-mercial enterprises and of commercial goals byorganizations with a social mission. Finally, atthe organizational level of analysis, the in-crease in workforce diversity, as well as inoccupational differentiation (Greenwood & Hin-ings, 1996), increases the likelihood of emer-gence of competing normative pressures in or-ganizations. In scholarly work the overallphenomenon is reflected in the recent upsurgeof empirical studies studying competing institu-tional logics (Battilana & Dorado, in press; Chen& O’Mahony, 2006; Heinze & Weber, 2008;Lounsbury, 2005, 2007; Marquis & Lounsbury,2007; Purdy & Gray, 2009; Rao et al., 2003; Reay &Hinings, 2009; Thornton, 2002).

Our paper thus provides foundational work tounderstand in a systematic way the impact onorganizations of this increasingly common phe-nomenon of conflicting institutional demands.This phenomenon is particularly prevalent infields where mission and resource dependence


patterns require the interaction of a wide varietyof stakeholders (hence inducing high levels offragmentation) and where the fields are depen-dent on a few key resource providers (henceinducing moderate levels of centralization).Such field configurations are often to be foundin industries involved in the provision of publicor social services (health, education, culture, so-cial services, etc.). The collective nature of thesegoods places their producers at the intersectionof a fragmented web of interests (direct and in-direct beneficiaries, specialized interestsgroups, professionals, funders, local and na-tional governments, regulatory agencies etc.).By virtue of their public service dimension, theseservice providers are particularly responsive toa few central players, including regulatoryagencies that grant them the right to operate,key funders who provide them with the financialresources required to carry on their mission(since end users are not always paying for thefull cost of the service), and trained profession-als who have strong norms and identities (doc-tors, educators, curators, social workers, etc.).

This does not mean that our model only ap-plies to social or public service organizations.Profit-seeking organizations have also beenshown to be subject to the competing influenceof partners, investors, shareholders, profession-als, and regulators. These organizations maythus experience, just as their social counterpartsdo, conflicting institutional demands. For exam-ple, Powell’s (1999: 44) study of the constructionof the biotechnology field in the United Statespoints to the “heterodox assortment of organiza-tions” that private biotech firms are dependenton, including universities, elite research hospi-tals, nonprofit research institutes, large multi-national drug companies, and federal regula-tory bodies (U.S. Patent and Trademark Office,Food and Drug Administration). It further high-lights the tensions emerging from the lack of aclear governance structure at the field levelaround issues of patent regulation and regula-tory drug approval. Constrained by lengthy fed-eral drug approval processes for new drugs, aswell as by evolving patent law and intellectualproperty rights, in an emergent context wherenorms and standards about what is “new”haven’t yet been agreed on, young biotech com-panies are described as struggling for survivalin the midst of multiple conflicting requirementsand standards.

The theoretical model that we have developedhere is not without limitations. Our efforts toachieve parsimony led us to outline a simplifiedrepresentation of organizational life. First, weoverlooked a potential source of conflicting de-mands related to the evolution of fields. Fields’structures and power arrangements are notstatic. They evolve with changes in regulation,with changes in culture, with the introduction ofnew players, or with external shocks. Duringthese transitions, existing field configurationsare challenged and organizations are subject toconflicting demands that result from the menaceor replacement of one set of demands by newones as the environment evolves and the orga-nizing principles in which the organization isembedded evolve in accordance. Yet in thesecases the occurrence of conflict is short-lived,since it is largely limited to the transition phase.This dynamic is well illustrated by Thornton’s(2002) study of the field of higher education pub-lishing, which shows that as the field evolvedfrom a dominant editorial logic to a dominantmarket logic, tensions emerged around a varietyof issues, such as governance structure andgrowth strategy. However, the occurrence of con-flict in institutional demands was limited to thechange phase, since the rise of the market logicultimately led to the decline of the old editoriallogic and its related demands. While we recog-nize this additional source of conflicting de-mands, we propose that under circumstances oftemporary conflict, demands may be ignored oravoided, especially in instances where an exis-tent institutional order is perceived to be tempo-rarily challenged but not seriously menaced byanother one. For this reason we decided to focusour model on enduring conflicting demands.

Second, we are aware that conflicting de-mands may embody dimensions that we havenot outlined here and that may influence thenature of organizational responses. For in-stance, in addition to the dimensions that weemphasized in our model, conflicting institu-tional demands also differ in terms of the pillaron which they rest (regulative, normative, cog-nitive), which influences how easily they can beavoided or contested (Scott, 2001). For instance,Scott (2003) argued that regulative pressures forcompliance are more prone to challenge thancognitive pressures. While this is true, we alsoargue that in conflicting situations cognitivepressures may lose their taken-for-granted char-


acter because alternative responses are seen aspossible. Overall, while we acknowledge theimportance of other factors, we have focused ourmodel on the dimensions of conflict (nature ofdemands and internal representation) that webelieve are the most important in predictinghow organizations respond and that are alsotractable in empirical research.

Future research may explore how fields shiftfrom one structural order to another. While ourmodel focuses on the impact of field structure onorganizational responses, future research couldexplore how organizational responses shape thestructuration of fields. A fragmented field mightbecome more unified over time as a result ofpressures to concentrate exerted by regulatorsor investors. Alternatively, a field might evolvefrom a moderately centralized to a centralizedstructure as the result of the collective manipu-lation strategies (such as the creation of coali-tions or professional organizations) imple-mented by field members. Understanding thedynamic process through which organizationalresponses shape organizational structure,which in turn influences subsequent responses,is an important next step in uncovering the com-plexity of institutional processes.

Additional research may explore other deter-minants of organizational responses to conflict-ing institutional demands. These determinantsinclude organizational factors such as the pro-file of organizational leaders (Ingram & Simons,1995; Oliver, 1991), the composition of the board(Alexander, 1998), and the funding sources (Al-exander, 1998). They may also include structuralfactors such as relationships with other organi-zations that favor specific responses (Westphal& Zajac, 2001) and the organization’s position inthe field (Dorado, 2005; Haveman & Rao, 1997;Sherer & Lee, 2002). In addition, cognitive factorsmay also be taken into account. As illustrated byWestphal and Zajac (2001), an organization’sprior experience with a specific type of responseincreases the likelihood that this response willbe used again in the future. Recent work hasfurther pointed to the cognitive underpinningsof the response process. George et al. (2006) ar-gued that patterns of institutional resistanceand change depend on whether decision makersview environmental shifts as potential opportu-nities for or threats to gaining legitimacy. Build-ing on this cognitive approach, it may be inter-esting to further explore “perception of conflict”

as well as “perception of the importance of con-stituents” as a determinant of strategic choice.Such an endeavor would build natural bridgesto the stakeholder theory literature (Freeman,1984; Mitchell, Agle, & Wood, 1997), which ex-plores how organizations identify, take into ac-count, and manage the conflicting claims thatvarious constituents have on them. Recent workin the strategy field (Murillo-Luna, Garces-Ayerbe, & Riverra-Torres, 2008; Sharma & Hen-riques, 2005) indeed suggests that organizationsare more likely to attend to pressures exerted bystakeholders that they perceive as more impor-tant and, in turn, to resist the demands exertedby referents that they perceive as less impor-tant.

Finally, given the increasing prevalence ofconflict in institutional demands, it would beinteresting to complement our model with anexploration of the specific organizational skillsrequired to succeed in mobilizing particularstrategies. Organizations may not be equallyskilled at managing compromise, avoidance,defiance, or manipulation. Those who are par-ticularly competent in mobilizing these strate-gies are likely to be in a better position to sur-vive and thrive in the midst of conflictinginstitutional demands (Kraatz & Block, 2008). Els-bach and Sutton (1992), for instance, showed thattwo radical social movement organizationswere able to turn the execution of actions con-flicting with the dominant social norms into op-portunities to enhance their legitimacy throughthe mobilization of complex strategies combin-ing compromise, avoidance, and manipulation.The study shows that this was achieved thanksto these organizations’ ability to understandwhat the institutional environment expectedfrom them, their aptitude to design highly legit-imate structures that they could decouple frommembers’ illegitimate actions, and their mas-tery of impression management techniques.Given the potential crisis that may result fromresponses to conflicting demands, the masteryof crisis management skills (Coombs, 2007; Pfar-rer, Decelles, Smith, & Taylor, 2008) may helporganizations to survive and thrive in the midstof institutional contradictions.

CONCLUSION

Increasingly, the fragmented and moderatelycentralized structure of institutional fields is


leading to situations where institutional worldscollide and impose conflicting demands on theorganizations that inhabit them. While priorwork has argued that organizations will adoptstrategic responses with different levels of resis-tance, this work has ignored the extent to whichconflicting demands permeate organizationsand may lead to conflicts among internalgroups. Our research goal was to address thisgap.

Much remains to be explored about the way inwhich organizations navigate complex institu-tional environments. We nevertheless hope wehave provided, with this paper, foundationalwork to understand how organizations manageconflicting institutional demands and why insome cases they are able to turn conflict into anopportunity for institutional agency and strate-gic choice, whereas in other cases institutionalconflict may lead to organizational paralysis orbreakup.

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Anne-Claire Pache ([email protected]) is assistant professor of social entrepreneurshipat ESSEC Business School and a Ph.D. candidate in organizational behavior atINSEAD. Her research lies at the intersection of organizational theory and socialentrepreneurship, with a particular emphasis on pluralistic environments and scal-ing-up processes in organizations.

Filipe Santos ([email protected]) is assistant professor of entrepreneurship,academic director of social entrepreneurship, and director of the Maag InternationalCentre for Entrepreneurship at INSEAD. He received his doctorate in organizationsand entrepreneurship from the Management Science and Engineering Department atStanford University. His research interests are new ventures, market creation, andsocial entrepreneurship.


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