«PROACTIVE ENVIRONMENTAL STRATEGIES IN SMALL BUSINESSES: RESOURCES, INSTITUTIONS AND DYNAMIC CAPABILITIES Jan Lepoutre Promotor: Prof. Dr. Aimé Heene ...»
In contrast, the business models of Bruegel, Rubens, Jordaens and Van Dyck were incompatible with obtaining a high score in the VMS. Neither of them had a mechanism in place that would return a value for their efforts in VMS, either internally (cost reduction or control perception) or externally (commercially). The owner-manager of Jordaens, for example, had a rather intuitive and gut-feel type of strategy, and generally lacked the time to consider VMS related issues in his decision-making. He considered the registration a time consuming practice that took too much effort besides his everyday traditional practice, which made it difficult for him to adopt the monitoring and requirements of VMS. As a consequence of the time requirements, he also asked his pesticide vendor for products that had quick and
“when I’m really in the busy season, then I’ll just take what I’m used to spray and if that is an orange product [indication for medium toxicity in VMS] then, well yeah…”.
In addition, he had outsourced part of his crop control to an external firm, that didn’t want to disclose what products were used for crop control. Given the time constraints and the lack of
financial compensation for green production, the efforts needed for achieving a high VMS
score were in no way beneficial to Jordaens. As a consequence, we propose:
Proposition 3a: Small businesses that have a business model that is conducive or neutral to institutional non-conformity will be more successful in institutional nonconformity than those small businesses that do not.
Proposition 3b: Small businesses that engage in institutional non-conformity in one domain of their business model will more likely have a business model that is conducive to this non-conformity when their business model is non-conforming in other domains as well.
Why are multiple non-conformity and business model conduciveness important for successful institutional non-conformity? First, one reason may be that the institutionalized practices are embedded in more than just the practice, but have interdependent effects in the entire business model. Indeed, it is part of the particular nature of a business model that its various domains are interrelated (Morris et al., 2005). As a result, the isomorphism is active not only at the level of particular practices or strategies, but also results in certain expectations that relate to the profit generation logic behind them and the particular architecture that supports it. Deviating in one domain of the business model is therefore almost impossible without also changing part of the business model of the firm. The Grameen Bank could only successfully realize its elusive objective to lend money to the poor in Bangladesh because it adopted an entirely different business model of “banking”. Similarly, Virgin Airlines could only provide cheaper airline tickets to customers by rethinking the business model of how an airline makes money.
Second, the effect of engaging in institutional non-conformity in multiple instances may make the owner-manager accustomed to resisting pressures for conformity. Instead of worrying whether non-conformity will result in a reduction of legitimacy, multiple institutional non-conformity acts as a mechanism of learning-by-doing. Each of the four successful companies seemed to be aware of their multiple non-conformity. “I’m sort of maverick in the sector”, “I always get into trouble”, “maybe they think I’m strange” was an often heard comment in the interviews with the successful companies. This even extended beyond behavior related to the firm. Magritte’s owner-manager, for example, had written a column in the weekly farmer’s union magazine, in which he came out and openly said he was gay. Within the highly traditional and conservative farmers’ environment, this reflected considerable institutional non-conformity.
Building on these explanations, we introduce the concept of “institutional immunity” as a facilitating mechanism for successful institutional non-conformity. Institutional immunity is the quality of an organization to challenge institutional pressures, as a result of its multiple exposures to institutional non-conformity or a business model which is more conducive to non-conformity than to conformity. Similar to the immunity to disease, this may or may not be the result of earlier exposures to non-conformity. Both the business model conduciveness and the multiple institutional non-conformity may make the owner-managers immune to the pressures for conformity.
7.5. Discussion We started our introduction by highlighting the growing phenomenon of small businesses resisting institutional pressures for conformity despite predictions of existing literature that this jeopardizes the legitimacy of the firm. Using an in-depth investigation of 8 small businesses in the ornamental horticulture industry in Belgium, we identified a number of factors that offer a more refined explanation of small business non-conformity. More specifically, we highlight the importance of occupying multiple roles and gaining exposure to alternative institutional logics. Doing so places the owner manager in a frame of mind that begins to recognize that there are alternative approaches through which firms in the ornamental horticulture sector could operate. But this needed to be combined with a degree of persistence resulting from owner-managers theorizing the proactive reduction of their environmental impact as part of an envisioned future. As a result, successful firms exhibited the persistence to uncompromisingly realize this aspiration by remaining flexible to the means how they did this. A persistent approach to the institutional non-conformity was integral to exercising the alternative logics presented to the owner-founder. Finally, owner-managers needed business models that were at odds with standardized business practice in multiple perspectives, and also aligned with the expectations of VMS. This finding implies that, while cognitive awareness of alternative logics and effort in the form of perseverance are pivotal owner-manager characteristics, full institutional non-conformance hinges on firm level structure and culture immune to the risks of negating existing institutions. In addition, it lays bare the formidable role that the individual owner-manager plays in this respect. Since the owner-manager not only bares the risk, but also all the responsibility for his company, he or she has the latitude to shape the business according to his or her own aspirations in return.
While a process model is beyond the scope of this paper, it is clear from the data that firms must engage in a radical strategic reorientation (Tushman & Romanelli, 1984) whereby their
business model provides the stimulant and legitimacy to follow through on the individual owner’s cognitive and personal ambitions. Together, these conditions make the “foolish” act of breaking out of the institutional structure of the industry a viable trajectory for small businesses. These findings have important implications for institutional theory, the resourcebased view of the firm and the organizations and the natural environment literature.
7.5.1. Institutional theory As mentioned before, there has been disagreement about the extent to which organizations are able to go against the very institutions that grant them legitimacy. With our findings, we contribute to the notion that, under certain conditions, organizations are able to deviate from the pressures for isomorphism in their organizational field. However, whereas empirical investigations of Oliver’s (1991) model of responsiveness to institutional processes have assumed that conformance to social pressures is an inevitable task to maintain legitimacy (Goodstein, 1994; Etherington & Richardson, 1994; Ingram & Simons, 1995; Clemens & Douglas, 2005), our study highlights that normative and coercive social pressures may run counter to even stronger cognitive pressures. As a result, organizational strategies may be acquiescent to normative pressures on one side, but defiant or avoiding on another.
Our study also sheds light on the internal histories and features that enable firms to achieve success once a strategy of institutional non-conformity is chosen or emerges. Whereas most of the literature has focused on the antecedents to institutional non-conformity (Oliver, 1991;
Seo & Creed, 2002; Greenwood et al., 2002; Greenwood & Suddaby, 2006) and its implications on organizational performance (Baum & Oliver, 1991; Haveman, 1993b; Miller & Chen, 1996; Kraatz & Zajac, 1996; D'Aunno, Succi, & Alexander, 2000; Durand, Rao, & Monin, 2007), this study adds to the more recent work that is focused on the factors that moderate and mediate the relationship between institutional non-conformity and organizational performance (Rao et al., 2005). However, our study is positioned beside an alternative stream within institutional theory that has investigated the processes of institution creation in institutional voids (Aldrich & Fiol, 1994; Maguire et al., 2004). Since the deviation from institutional logics may hold the seeds for the creation of new institutional arrangements, future work may investigate how the processes of institutional non-conformity can lead to or are akin to the processes at work in institution creation. The findings of such studies may be of particular relevance for social enterprises in developing countries.
Deviating from corrupted and illegal practices may require the development of a new institutional fabric to support the survival of the social enterprise.
7.5.2. Resource-based view of the firm The resource-based view of the firm states that organizations achieve superior performance by exploiting complex resources and capabilities that are not easily duplicated by competitors, provided that they can produce value for the organization (Wernerfelt, 1984;
Dierickx & Cool, 1989; Barney, 1991; Amit & Schoemaker, 1993). Such resources and capabilities are characterized especially by their limited availability or the difficult and ambiguous processes of acquiring them (Dierickx & Cool, 1989; Barney, 1991). Our findings have pointed to a number of such capabilities that have been previously identified as important predictors of competitive advantage. For example, absorptive capacity depends on the path-dependent acquiescence of knowledge, and is an important source of future opportunity recognition (Cohen & Levinthal, 1990; Zahra & George, 2002). The bridging of structural holes allows firms to acquire preferential access to rare and new information, resources and capabilities (Burt, 1992). Bricolage capabilities facilitate the creative recombination of available resources in the face of resource scarcity (Ward, 2004; Baker & Nelson, 2005). The resulting bootstrapping has been identified before as a major asset for the resource constraints small businesses are often confronted with (Winborg & Landstrom, 2001;
Ebben & Johnson, 2006). Although the relationship between regulatory focus and entrepreneurial success remains unclear, it has been suggested that a promotion focus aids small business owner managers in the generation of novel ideas and opportunity recognition (Brockner et al., 2004). Finally, as a result of the demonstrated path-dependency of multiple non-conformity, and the success it seems to accrue to institutional non-conformity among the viable and more than successful firms in our sample, one can imagine that small firms may also benefit from institutional immunity. Given that it is in the nature of proactive firms to stay in the uncertain and risky space ahead of the curve, firms may thus avail of the experience in dealing with this uncertainty in different arenas. The findings presented in this study not only shed further light on how each of these valuable resources can be acquired, yet may also point institution challengers towards ways to capitalize on the byproducts of their followed strategies.
7.5.3. Organizations and the natural environment Finally, our findings also have implications for the field of organizations and the natural environment. Specifically, it follows the criticism on the “evangelic” nature of much theoretical and empirical work on proactive environmental strategies (Newton & Harte, 1997) that is based on the “myth” that external stakeholder sensitivity is all pervasive and acts upon