Corporate Sustainability
Institutional pressures and isomorphism in sustainability
management control systems
University of Groningen
Faculty of Economics and Business
MSc Business Administration
Organization & Management Control
Abstract: This study investigates the relationship between institutional pressures and
isomorphism in sustainability management control systems (SMCS). Data is obtained by
means of surveys and semi-structured interviews with business unit managers. A multiple
regression analysis found mixed results for the hypothesized relationships, while the
semi-structured interviews and an additional scatter plot analysis show that coercive, mimetic and
normative pressures likely cause isomorphism in the SMCS of corporations. However, this
only yields when SMCS are implemented to an average till high extent. This research adds to
existing theories regarding institutional pressures, isomorphism, corporate sustainability, and
(sustainability) management control systems. The research findings are helpful for managers
to make decisions concerning the implementation of SMCS in their corporation
Author information
Name:
Dijkstra, E.
Study: MSc O&MC
Student Nr.: S2639998
Email: e.dijkstra.9@student.rug.nl
Supervisor: Dr. Elten, H.J.
Co-assessor: MSc. Rehman Abbasi, A.
Date:
30 January 17
Words:
14062 (incl. references)
Article information
Keywords: Corporate Sustainability,
Institutional pressures, Isomorphism,
Sustainability Management Control Systems
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1. Introduction
In the current economic world, many corporations engage in isomorphic behavior. They become similar in their structure, culture, or output as they respond to pressures from their external environment (DiMaggio & Powell, 1983; Ramanath, 2007; Deephouse, 2016). This phenomenon has become a popular object of study since the 1983 research article by DiMaggio & Powell about institutional isomorphism and collective rationality in organizational fields. DiMaggio & Powell explained that organizations engage in isomorphic behavior in hopes of being accepted by their external environment, which is known as legitimacy.
In times when it seems important for organizations to differentiate from their competitors (Porter, 1985), it is questionable whether isomorphism is positive or negative for corporations. By considering its advantages, it becomes clear that isomorphism results in increased legitimacy and resources necessary for an organization’s survival (Tolbert & Zucker, 1996). It subsequently enhances the stability and comprehensibility of organizational activities (Suchman, 1995) and thus assists the survival prospects of the organization (Meyer & Rowan, 1977). In contrast, however, legitimacy can lead to persistence, which decreases the internal coordination and control of corporations (Meyer & Rowan, 1977). Further, isomorphism can threaten the inventiveness of firms including its spontaneity, variety, and unpredictability (Ramanath, 2007). This becomes visible from the evidence that pioneer firms perform better than follower firms (Montes & Jover, 2004).
With knowledge of the main consequences of isomorphism, it seems interesting to apply the concept to one of the most prominent issues facing corporations today: sustainability. Corporate sustainability (CS) is defined as “meeting the needs of the present without compromising the ability of future generations to meet their own needs’’(Brundtland, 1987). According to Van Marrewijk (2013), CS focuses on value creation, environmental management, environmental friendly production systems, human capital management, and so forth. Important reasons for corporations to invest in CS are: competitive advantage, legitimacy, reputation, compliance, industry pressures, green-washing, and conserving resources (Schaltegger & Burritt, 2010).
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“the formal, information-based routines and procedures managers use to maintain or alter patterns in organizational activities” (Simons, 2000). Management control systems can facilitate innovation, communication, reporting, and the identification of threats and opportunities regarding CS (Arjaliès & Mundy, 2013).When CS is integrated into MCS, this is referred to as sustainability management control systems (SMCS). When CS (by means of SMCS) is fully integrated into a corporation’s foundation, they can garner increased employee satisfaction and worker safety; an improved reputation within the labor market; increased customer fidelity; higher rates of customer retention and satisfaction; growth of market share; an improved brand value and corporate image; better supplier relationships; better relations with the capital market, government, and other stakeholders; and better economic performance over time (Cresti, 2010).
Management control systems consist of both formal and informal control systems (Rohit, n.d.). Examples of formal control systems include cost accounting systems, management accounting systems, production engineering systems, human resource systems, and quality maintenance systems (BusinessDictionary, n.d.). With regard to SMCS, environmental management control systems are a fitting example. These systems consist of traditional mechanisms like budgeting, performance measurement systems, and risk management processes which are tailored for addressing environmental issues (Arjaliès & Mundy, 2013). As opposed to formal control systems, informal control systems are always unwritten and implicit, such as unwritten norms about proper behavior of managers and employees, loyalties, shared values, organizational culture and ethics, and mutual commitments among managers and employees (Agarwal, 2016). In this research article, isomorphism in formal SMCS is investigated. Informal SMCS are excluded because they are perceived as too intangible to utilize in studying isomorphism.
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of all organizations that constitute a recognized area of institutional life. Mentioned examples are key suppliers, resource and product consumers, regulatory agencies, and other organizations that produce similar services or products (Delmas & Toffel, 2004). While pressures other than coercive, mimetic, and normative (e.g., shareholders) could also force corporations to adopt SMCS, this does not cause isomorphism across multiple corporations because these other pressures are specific to one particular corporation.
When strong isomorphic pressures exist in an organizational field, corporations are dominated by rules, requirements, understandings, assumptions, beliefs, and procedures about what is perceived as appropriate or acceptable (Larrán, Herrera, & Andrades, 2016). When corporations conform to these pressures in the same (socially legitimate) way, they become isomorphic. This research article focuses on institutional isomorphism instead of competitive isomorphism. Institutional isomorphism is addressed because pressures towards homogeneity are investigated, rather than the creation of a competitive advantage (Prue, n.d.). According to Larrán et al. (2016), institutional isomorphism is related to organizations competing for political power and institutional legitimacy, while competitive isomorphism is generated by market competition.
In this research article, institutional theory is used to investigate the relationship between coercive, mimetic, and normative pressures on the one hand, and isomorphism in sustainability management control systems on the other hand. The use of institutional theory has two advantages; it considers CS as an integrated part of a corporation’s business processes (Bondy, 2009) and it presumes that a corporation’s practices is influenced by external pressures (Scott, 2016; Campbell, 2007). While institutional theory seems extremely useful in the context of this research article, its definition differs in the existing literature. Prue (2012) for instance, has claimed that institutional theory is about the influence of the institutional environment on the formation and legitimization of organizational structures and processes. Bondy (2009), in contrast, has stated that institutional theory is about legitimized patterns of social behavior that stabilize over time. Bondy further mentioned that these patterns should reduce uncertainty, provide replicability of social forms, and save resources in the organization of human activity. The divergence in existing formulations is caused by the fact that Prue defines institutional theory from a new institutional sociology perspective, while Bondy defines it from an old institutional economics perspective.
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Scapens, 2000), which is mainly about supply, demand, profit, and satisfaction (Francis, n.d.). Old institutional economics relates to organizational routines and their institutionalization in an organization (Burns & Scapens, 2000). With their institutionalization, the organizational routines become ‘taken for granted’. Finally, new institutional sociology concerns the effects of social, economic, and political institutions on accounting practices. In this research article, the focus is on new institutional sociology. This, because new institutional sociology refers to the influence of external effects (institutional pressures) on internal practices (isomorphism in SMCS).
There exist some conceptual gaps in the existing literature. First, until this decade, the combination of CS and MCS has been underresearched (Virtanen, Tuomaala, & Pentti, 2013;
Arjaliès & Mundy,
2013
). There also is a lack of research that uses an institutional perspective in investigating this notion (Campbell, 2007). Second, existing literature makes often use of secondary data (Ozdora-Aksak & Atakan-Duman, 2016) or semi-structured interviews (Bondy, 2009). These methods of data collection are accompanied by some disadvantages, such as inappropriateness of the data (Denscombe, 2007) and lack of control over data quality (Saunders, 2009). To account for these flaws in the existing literature, this research provides several methodological and empirical contributions. To begin, survey research was utilized to collect data. As such, primary data has been obtained from inside the corporations. One significant advantage of this collection method is the possibility to ask questions specific to this research topic. Besides collecting data from surveys, semi-structured interviews are held with the respondents. This provides complementary results because both methods have different advantages. This is called triangulation (Van Aken, Berends, & Van der Bij, 2012). Additionally, data was obtained from one specific developed country: the Netherlands (Yang & Rivers, 2009). This one country was chosen because there tend to be significant differences in the management and orientation of CS across different countries (Yang & Rivers, 2009). Finally, the relationship between institutional pressures and isomorphism in SMCS has not been previously investigated, hence this research adds to literature regarding institutional pressures, isomorphism, CS, and SMCS.7
The remainder of this research is structured as follows : First, the existing literature is reviewed from which the conceptual model and research hypotheses are developed. Next, the research methodology is explained. In the proceeding sections, the quantitative and qualitative results are given followed by the discussion of the results. Finally, the conclusions with their implications, limitations, and future research directions are given.
The research question is:
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2. Literature Review
This chapter reviews the existing literature with regard to corporate sustainability, institutional pressures, isomorphism and sustainability management control systems. First, some background information is given, after which the research hypothesis are described and the conceptual model is represented.
2.1 Background
Corporate Sustainability (CS) has become a popular topic in the business press and among business and political leaders in the last few decades (Buhr & Grafström, 2007). This popularity has developed in line with a growing recognition of the possibility for corporations to sustain a competitive advantage (Arjaliès & Mundy, 2013). This began when Davis (1960) tried to determine if businesses can afford to ignore social responsibilities. Davis mentioned that corporations should make decisions for reasons beyond their direct economic or technical interests. This idea lends to the possibility to limit regulations and improve the corporation’s reputation, ease of employee recruitment, and retention of the corporation (Salzman, 2005).
More recently, CS literature has primarily focused on understanding why corporations do or do not act in socially responsible ways (Rowley & Berman, 2000). According to the United Nations (as cited in Arjaliès & Mundy, 2013), corporations should invest in CS because they possess the finances, technology, and management necessary to solve sustainability issues. However, according to Cresti (2010), corporations engage in CS mainly for marketing, public relations, or green-washing purposes. Finally, Campbell (2007) mentioned that organizations engage in CS as a result of economic and institutional conditions. Besides investigating reasons for engaging in CS, another stream of literature explores the relationship between CS and financial performance (Rowley & Berman, 2000). While previous research acquired mixed results, after addressing some research flaws, Mcwilliams (2012) found that there is a neutral impact of CS engagement on financial performance.
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(Popova, 2006). To receive legitimacy and support, corporations should conform to these institutions by incorporating various elements into their internal processes, such as through their products, policies, programs, and language (Bondy, 2009).
It then becomes relevant to explore how these elements become incorporated in the internal processes of corporations. This can be explained by borrowing from old institutional economics (Burns & Scapens, 2000). Corporations conform to the rules and requirements that are perceived as acceptable or appropriate in their institutional environment. These institutional rules and requirements are then encoded into the rules and routines that corporations implement into their practices (Burns & Scapens, 2000). When these implemented rules and routines are enacted by the corporation’s actors, repeated behaviors and a reproduction of routines are the result (Burns & Scapens, 2000). In this way, the rules and requirements that are perceived as acceptable or appropriate become institutionalized within the internal processes of the corporation. With regard to CS, an effective way for corporations to encourage this institutionalization process is through SMCS.
In their research article on SMCS, Arjaliès & Mundy (2013) showed that all forty companies of the CAC40, the biggest French stock market index, have implemented a CS strategy. He further stated that their main objective is to ensure compliance with institutional pressures. When corporations are exposed to the same set of institutional pressures, they can become isomorphic. There are three types of institutional pressures that have the potential to cause isomorphism in the SMCS of corporations. These pressures cause coercive isomorphism, mimetic isomorphism, and normative isomorphism.
2.2 Coercive Isomorphism
Bondy (2009) stated that coercive isomorphism is the result of pressures that reflect the cultural expectations of society and the organizations on which the corporation depend. With regard to CS, coercive pressures stem from three sources: society, government, and organizations which have the authority to impose sanctions on another organization. These groups set specific rules and standards to which corporations should comply to gain legitimacy (Johnston, 2013).
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pressures along with the corresponding reactions from corporations: manufacturers adopt new pollution control technologies to conform to environmental regulations, nonprofit corporations maintain accounts and hire accountants in order to meet tax law requirements, and organizations employ affirmative action officers to fend off allegations of discrimination. In relation to CS, however, governmental initiatives such as the European Union CO2 emission standards, European Union green papers (Matten & Moon, 2008), European directives, and the United Nations Global Compact (Arjaliès & Mundy, 2013) are better examples of such coercive pressures. The third category of coercive pressures stems from organizations that have authority to sanction other organizations. These pressures are related to inter-organizational power, which means that the actions of one corporation could be constrained by the actions of other, more powerful units (Fein, 2016). A wholesaler that chooses to exclude a corporation’s products in their assortment because of unethical businesses, for example, is included in this category. Inter-organizational partnerships, collaboration, networks, and conflicts are stimulants of this kind of pressure.
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Within the existing literature, there are some findings regarding the relationship between coercive pressures and isomorphism. DiMaggio and Powell (1983) explained that, in general, coercive pressures result in isomorphism. Lai, Wong, & Cheng (2008) explained how coercive pressures cause isomorphism through the adoption of IT practices. Hefu Liu, Weiling Ke, KK Wei, Jibao Gu (2010) found that coercive isomorphism exists in the adoption of internet-enabled supply chain management systems. Additionally, Ramanath (2007) found that practices of nongovernmental organizations in India became similar as result of coercive pressures. Perhaps more relevant to this research, Bondy (2009) found a relationship between coercive pressures and isomorphism in CS engagement. Zhu et al. (2007) found that coercive pressures cause isomorphism through the manner in which sustainability is integrated in supply chain management. Finally, Gina (2016) found evidence of coercive isomorphism in the institutionalization of CS in Romania. By extending the above logic and relevant prior results to the context of SMCS, it is expected that also these SMCS become isomorphic across corporations as result of coercive pressures.
Hypothesis 1. The degree to which a corporation is exposed to coercive pressures has a positive effect
on isomorphism in SMCS across corporations.
2.3 Mimetic Isomorphism
Bondy (2009) stated that mimetic isomorphism is the result of organizations mimicking the practices of competitors due to uncertainties in their operating environment. This can be adequately explained from an individual perspective. When employees are new to an organization, t hey often mimic existing employees due to their uncertainty. They aim to learn the correct ways to perceive, think, feel, act, and adapt in order to gain acceptance (Schein, 1985). This operates in exactly the same manner for corporations. To quote Bondy (2009): “Most companies kept a very close eye on the content of their competitors’ [CS] codes to ensure that the commitments and wording of their own code put them in either a competitive or leadership position.” Corporations engage in mimicking behavior as a result of strong competitors, uncertainty, or both. As is the case with coercive pressures, corporations can gain legitimacy by complying with mimetic pressures (Bondy, 2009).
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determination of corporations’ organizational directions (Larrán et al., 2016). In this situation, it may seem a better option to copy a successful strategy than to have no strategy at all.
According to Larrán et al. (2016), mimicking organizations copy everything that seems successful in the industry. This can be, for instance, best practices, management fashions, sustainability reports, or flagship projects (Matten & Moon, 2008). The knowledge and experiences needed for mimicking competitors’ practices can be obtained through information interchanges and industry associations (Nelson & Gopalan, 2003). To keep track of sustainability issues, corporations can adopt sustainability performance indicators that have been successfully implemented in the SMCS of competitors. However, corporations can also start to integrate other CS aspects in their SMCS such as the implementation of sustainability criteria in their investment decisions or the collection of environmental or social information on employees. In the Netherlands, it seems more difficult to comply with mimetic pressures than with coercive pressures. While rules and regulations are clear for all corporations, competitors’ practices are used internally and are often not accessible to other corporations. In addition, complying to rules and regulations is often compulsory, whereas there is no obligation to mimic other corporations. Therefore, the effect of mimetic pressures on isomorphism could be less strong. With time, however, a large part of the successful practices of corporations become publicly known as they are published in magazines, annual reports, scientific reports, CS reports, and so on. As result, with a lapse in time, corporations are still able to mimic each other’s practices. When, for instance, a variety of other banks mimic the SMCS of a successful bank, the SMCS becomes isomorphic within the banking sector.
Within the existing literature, there are some findings with regard to the relationship between mimetic pressures and isomorphism in SMCS. DiMaggio and Powell (1983) explained that, in general, mimetic pressures result in isomorphism. Lai et al. (2008) explained how mimetic pressures cause isomorphism in the adoption of IT practices, and Liu et al. (2010) found that mimetic isomorphism does not exist in the adoption of internet-enabled supply chain management systems. Ramanath (2007) found that practices of nongovernmental organizations in India became similar as result of mimetic pressures. Bondy (2009) found a relationship between mimetic pressures and isomorphism in CS engagement, while Zhu et al. (2007) found that mimetic pressures cause isomorphism through the way that sustainability is integrated in supply chain management. Finally, Gina (2016) found evidence of mimetic isomorphism in the institutionalization of CSR in Romania. By combining the above information to the context of SMCS, it is expected that also these SMCS become isomorphic across corporations as result of mimetic pressures.
Hypothesis 2. The degree to which a corporation is exposed to mimetic pressures has a positive effect
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2.4 Normative Isomorphism
Bondy (2009) stated that normative isomorphism is the result of the professionalization of certain disciplines. Professionalization occurs through such things as standardized education, specialist degrees, and professional trade. During the process of professionalization, collective expectations become shared norms as they are transferred between corporations (Liu, et al. 2010). This all operates at the tacit level of understanding (Kondra & Hurst, 2009). In terms of CS, normative pressures can be subdivided into three groups: formal education, professional networks and customers. As is the case with coercive and mimetic pressures, corporations can gain legitimacy by conforming to normative pressures.
By looking at formal education, it becomes clear that universities and professional training institutions are important centers for the development of norms (DiMaggio and Powell 1983). Sustainability, for instance, is normalized as a compulsory aspect of business education in most industrialized countries (Matten & Moon, 2004). Besides the development of norms through formal education, institutional norms diffuse rapidly among professional networks (DiMaggio and Powell 1983). This is the case when professionals interchange and occupy similar professional roles within corporations of the same field. They take their credentials, past experiences, qualifications, and characteristics with them through different workplaces, thus contributing to the development of norms (Johnston, 2013). Finally, also customers are an important source of the development of norms. While interacting with multiple corporations, customers diffuse their ideas, norms, and values among them. One customer, for instance, may interact with several supermarkets to shop for their groceries. These supermarkets should subsequently comply to the norms of this customer to gain legitimacy.
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universities. This transferring of norms can cause isomorphism in SMCS when it results in the implementation of the same kind of SMCS across a variety of corporations, or, in this case, universities. A corporation could, for instance, integrate procedures of external sustainability communication in their SMCS on the initiative of an employee who has previously worked for other organizations in the industry or has acquired this knowledge in college. Finally, corporations within the same organizational field often compete for employees with the same educational or professional background when they try to fill a vacancy. One example is that a variety of corporations compete for sustainability officers. When these sustainability officers have more or less the same educational or professional background, they likely practice the same work values, skills, attitudes, and behaviors across multiple corporations. As result, they can implement the same kind of SMCS across a variety of corporations, by which these SMCS become isomorphic.
The existing literature provides some insights regarding the relationship between normative pressures and isomorphism. DiMaggio and Powell (1983) generally explained that normative pressures result in isomorphism, whereas Lai et al. (2008) explained that normative pressures cause isomorphism in the adoption of IT practices. Liu et al. (2010) found that normative isomorphism exists in the case of adopting internet-enabled supply chain management systems. Ramanath (2007) found that practices of nongovernmental organizations in India became similar as result of normative pressures. Bondy (2009) discovered a relationship between normative pressures and isomorphism in CS engagement, while Zhu et al. (2007) found that normative pressures cause isomorphism in how sustainability is integrated in supply chain management. Finally, Gina (2016) found no evidence of normative isomorphism in the institutionalization of CSR in Romania. In applying the aforementioned concepts to the context of SMCS, it seems evident that these SMCS can become isomorphic among corporations as result of normative pressures.
Hypothesis 3. The degree to which a corporation is exposed to normative pressures has a positive
effect on isomorphism in SMCS across corporations.
2.5 Extent of SMCS
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(Salanova, 2006); when there is unwillingness to pay for SMCS (Pondeville, Swaen, & De Rongé, 2013); or when the strategies, goals, and effects of implementing SMCS are unclear (Yuen, 2016), corporations often have no SMCS implemented even though they are exposed to institutional pressures. Furthermore, corporations can comply to institutional pressures in other ways than implementing SMCS. There are, for instance, corporations that report about CS in annual reports and have integrated CS in their strategy and culture, but not in their SMCS.
Without taking into account a moderating effect, the phenomenon of isomorphism is expected to occur simply when there is an average degree of institutiona l pressure. As mentioned above, this is wrong when there are no SMCS implemented in corporations. Additionally, if there are less aspects of CS implemented in SMCS, there is a lower chance of overlap with CS aspects in the SMCS of other corporations. As such, it is expected that the relationship between institutional pressures and isomorphism in SMCS will be less strong when there are fewer SMCS implemented. Hence, although a positive relationship is expected between institutional pressures and isomorphism in the SMCS of corporations, this relation is less apparent when there are hardly any SMCS. Because a stronger relationship is expected when there are more SMCS implemented, the moderating effect is expected to be positive for coercive, mimetic, and normative pressures.
Hypothesis 4a. A greater extent of SMCS in a corporation results in a stronger effect of coercive
pressures on isomorphism in its SMCS.
Hypothesis 4b. A greater extent of SMCS in a corporation results in a stronger effect of mimetic
pressures on isomorphism in its SMCS.
Hypothesis 4c. A greater extent of SMCS in a corporation results in a stronger effect of normative
pressures on isomorphism in its SMCS.
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Figure 1 Conceptual model H. 4a H. 4b H.4c H. 1 H. 2 H. 3 Table 1 Institutional pressuresCoercive pressure Mimetic pressure Normative pressure
Aspects Government Competitors Formal education
Society Uncertainty Professional networks
Organizations that have Customers
authority to sanction other organizations
About Rules & Requirements Practices Norms
Coercive pressures
Mimetic pressures
Normative pressures
Extent of SMCS
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3. Methodology
In this chapter, the research methodology is described. First, the study measures are presented, after which the data collection process is explained and the quality criteria are discussed.
3.1 Study Measures
Coercive pressure: This independent variable was measured by asking business unit managers to
indicate the degree of pressure from the government, other organizations that have authority to sanction on their organization, and society on a 7-point Likert scale. On this Likert scale, a score of 1 is perceived as low pressure and a score of 7 is pressure to a great extent. The items regarding pressures from other organizations and pressure from society (e.g., through expectations) were adapted from the work of Bondy (2009). Because governmental pressures (e.g., regulations, re quirements, and initiatives) are often perceived as the most influencing (Zhu et. al, 2007), this pressure was measured separately. The mean scores of the three items will form the independent variable coercive pressure. With a Cronbach’s alpha value of .710, this variable is internally consistent.
Mimetic pressure : This independent variable was measured from business unit managers indicating
the degree of pressure from uncertainty (e.g., through ambiguity, complex technologies, unclear organizational goa ls, or unclear organizational direction) and from competitors (e.g., through best practices, management fashions, or regular CS reports) on a 7-point Likert scale, where 1 represents pressure to a small extent and 7 is pressure to a great extent. The item ‘uncertainty’ was adapted from the work of Bondy (2009). Since uncertainty is often related to pressure from competitors (Bondy, 2009; Lai et al., 2008; Liu et al., 2010), competitor pressure was measured separately. The mean scores of the two items will f orm the independent variable mimetic pressures. With a Cronbach’s alpha value of .848, this variable was found to be internally consistent.
Normative pressure: This independent variable was measured by asking business unit managers to indicate the degree of pressure which occurs through professionalization. Professionalization is measured as pressure from professions (e.g., through professional standards and professional networks) and as pressures from education (e.g., through educational standards). These items were both adapted from the work of Bondy (2009). Because pressure from customers is often perceived as one of the strongest normative pressures (Zhu et al., 2007), this pressure was measured separately. The mean scores of the three items will form the independent variable normative pressures. With a Cronbach’s alpha value of .820, this variable is internally consistent.
Isomorphism in SMCS: This dependent variable was measured by asking business unit managers to
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(or organizations) outside of the respondent’s organization. In this, the SMCS points towards nine items (see section: Extent of SMCS). The definition of this item was adapted from the work of DiMaggio & Powell (1983).
Extent of SMCS: This moderator variable was measured by asking business unit managers to indicate
the extent to which SMCS are implemented within their organization. The extent of SMCS was measured by nine items: integrated sustainability objectives in planning systems, sustainability objectives linked to rewarding systems, integrated sustainability performance indicators in promotion or career advancements, comparison of results to sustainability objectives, collected environmental or social information on employees, integrated sustainability criteria in investment decisions, documented sustainability rules and procedures, a detailed description of sustainability functions, and procedures of external sustainability communication. These items were adapted from the work of Pondeville et al. (2013). The mean scores of the nine items will form the moderating variable extent of SMCS. With a Cronbach’s alpha of .885, this variable is internally consistent.
Control variables : Potential variables to control for in this research are the number of business unit
employees or the number of organizational employees. This is because larger business units or organizations often face higher institutional pressures and have more SMCS implemented (Zhu et al., 2007). However, the number of business unit employees was not significant (p=.853), and, although the number of organizational employees has a significant relationship to the extent of isomorphism in SMCS (p=.093), this relationship lost its value after implementing the moderator variable of the extent of SMCS (p=.724). Therefore, no control variables are included in this research.
3.2 Data Collection
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collect the data. As such, each student collected data from eight corporations. Visiting the respondents was important in order to avoid potential misunderstandings in the survey items (Zhu & Sarkis, 2007). The collected data was shared among the students and their supervisor. All students used a different data set consisting of thirty randomly selected respondents. Confidentially was assured by de-identifying individuals and organizations.
The participating corporations operate in a variety of industries, including agriculture, forestry, and fishing; mining; construction; manufacturing; transportation, communication, electric, gas, and sanitary services; wholesale trade; retail trade; finance, insurance, and real estate; services; public administration; and non-classifiable establishments (Kruis, Speklé, Van Elten, Widener, 2011). The respondents all occupied the position of business unit manager. Business unit managers were chosen as appropriate respondents because they possess the top position in their business unit. This means that they are the actual users of SMCS and that they are knowledgeable about their institutional environment. Further, they play a major role in making CS decisions. Only business unit managers who are responsible for a minimum of 20 full-time equivalent (FTE) units and report to higher management were included. By visiting business unit managers, data was obtained from inside the corporation. This was a notable advantage compared to other research articles, which use data from sources such as websites, annual reports, or CS reports (Ozdora-Aksak & Atakan-Duman, 2016). Another sizable advantage, in contrast to obtaining information from these sources, was the possibility to ask questions specific to this research.
The surveys were conducted in the Netherlands. Because sustainability is already incorporated to some extent in the Dutch society, it was expected that the level of CS in corporations would also be quite high compared to other less-developed countries. Another advantage of collecting data from the Netherlands is that corporations tend to be approachable and willing to help students with their research. This allowed for the data collection process to be less difficult than in countries such as China (Liu et al., 2010), Turkey (Ozdora-Aksak & Atakan-Duman, 2016), or other less developed countries. In such countries, there often is a lack of national level CS norms and regulations (Ozdora-Aksak & Atakan-Duman, 2016), and it can be difficult to obtain data by survey research (Liu et al., 2010). Finally, the geographical convenience of the researchers played a role in selecting corporations from the Netherlands.
3.3 Quality Criteria
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reliability, and validity are important quality criteria that should be met. Controllability allows others to replicate the study to make the research results controllable. To meet this quality criteria, the methodology section explains precisely how the research was executed, and the results are presented as precisely as possible. This increases the reliability and validity of the study.
Reliability is met when the results are independent of the particular characteristics of the research and therefore can be replicated in other studies (Swanborn, 1996). There are four sources of biases that can violate reliability: researcher, instrumental, respondent, and situational (Van Aken et al., 2012). To avoid researcher bias, the research results should be independent of the person who has conducted the study (Van Aken et al., 2012). For this reason, the data was collected by five researchers instead of one. Before collecting data, the researchers were instructed on how to carry out the interviews as professionally and appropriately as possible. Among others, this was in regard to the interpretation of the survey questions and the way in which an interview protocol could be fashioned. In addition, the interview part of the study was semi-structured. This provided a means of standardization, which also enhances the reliability of the research (Van Aken et al., 2012). To avoid instrumental bias, the research results should be replicable with other instruments (Van Aken et al., 2012). To address this, surveys and semi-structured interviews were used as methods of data collection. These combined methods provide complementary results because both methods have different advantages. This is called data triangulation (Van Aken et al., 2012). To combat the possibility of bias on the part of the respondents, the research results should be independent of the respondents included in the study (Van Aken et al., 2012). Consequently, corporations within the Transparency benchmark were contacted randomly. As result, business unit managers from corporations across many different industries are represented in the research sample. This filters out the effect that respondents from different corporations can have widely diverging opinions. Finally, to avoid situational bias, differences between the circumstances under which the data was collected should be avoided (Van Aken et al., 2012). To accomplish this, five researchers visited each of the respondents all on different days. This was done to ensure that the stated opinion of the respondent was not influenced by a bad morning mood or a recent negative experience (Van Aken et al., 2012).
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Table 2Construct and item wording IL VE
Coercive pressure
Society .746 .557
Government .781 .610
Other organizations that have the authority to sanction on your organization .859 .738
Average .795 .633
Construct and item wording IL VE
Mimetic pressure
Uncertainty .936 .876
Competitors .936 .876
Average .936 .876
Construct and item wording IL VE
Normative pressure
Customers .876 .767
Professions .862 .743
Education .837 .701
Average .858 .737
Construct and item wording IL VE
Extent of SMCS
Documented sustainability rules and procedures .856 .733
Environmental or social information on employees .801 .642
Detailed description of sustainability functions .778 .605
Procedures of external sustainability communication .726 .523
Integrated sustainability performance indicators in promotion/career advancements .692 .479 Integrated sustainability criteria in the investment decisions .672 .452 Integrated sustainability criteria in the planning systems .668 .446 Integrated sustainability performance indicators in compensation/rewarding systems .667 .445
Comparison of results to sustainability objectives .650 .423
Average .723 .523
IL = Item loadings
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Table 3Variance extracted between sum variables
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4. Quantitative Results
In this chapter, the quantitative results are presented. First, the descriptive statistics are described, after which the findings of a multiple regression analysis are given. From these findings, the hypothesized relationships could be confirmed or rejected.
4.1 Descriptive Statistics
This study investigates the relationship between the independent variables of coercive pressure, mimetic pressure, and normative pressure and the dependent variable of isomorphism in SMCS of corporations, which is moderated by the extent to which SMCS are implemented in the corporation. Table 5 shows the descriptive statistics of the variables within a theoretical range of 1.00-7.00. The results are based on a total of thirty respondents. To be sure that the data is normally distributed, skewness and Kurtosis were evaluated. The skewness of all variables was between -1 and 1, and the skewness was less than three times the standard error of skewness. The value of the Kurtosis was calculated at less than three times the standard error of Kurtosis. As such, the data is normally distributed (Mardia, 1970).
The mean is used to represent the center of the data distribution. The mean for the institutional pressures ranges from 3.48 for mimetic pressures to 4.87 for coercive pressures. As such, it c an be stated that corporations in general feel some level of institutional pressure to engage in CS. Within this, coercive pressures are perceived as the most influential. The span between the minimum and maximum values of the institutional pressures is quite high. This indicates that some corporations feel much more pressure than others do.
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Table 5Descriptive statistics
Variable Theoretical range Min. Max. Mean Std. Dev.
1 Coercive pressure 1.00-7.00 1.67 6.67 4.87 1.28 2 Mimetic pressure 1.00-7.00 1.00 6.50 3.48 1.57 3 Normative pressure 1.00-7.00 1.33 6.33 4.32 1.52 4 Extent of SMCS 1.00-7.00 1.00 6.44 3.75 1.32 5 Isomorphism in SMCS 1.00-7.00 1.00 7.00 3.81 1.77 Table 6 Correlation matrix Variable 1 2 3 4 5 1 Coercive pressure - 2 Mimetic pressure .470* - 3 Normative pressure .741* .509* - 4 Extent of SMCS .680* .528* .629* - 5 Isomorphism in SMCS -.101 .145 -.008 .281 - *P <.01
4.2 Multiple Regression
To investigate the relationship between the three independent variables and the dependent variable, and to investigate the interaction effects between the institutional pressures and the extent of SMCS, multiple regression was used. To test for interaction effects, all variables are mean-centered. This is recommended by Aiken and West (1991) to avoid multicollinearity issues. After mean-centering, the largest variance inflation factor was 4.652, which is below the threshold of 10 (Kline, 1998). As such, there are no multicollinearity issues in the mean-centered regression models. Table 7 shows the results of the multiple regression analyses. Model 1 contains the independent variables of coercive pressure, mimetic pressure, and normative pressure and the moderator variable of the extent of SMCS. The R-squared of Model 1 is .25. Model 2 adds the interaction effect between the institutional pre ssures and the extent of SMCS. In this way, the moderating effect of the extent of SMCS with respect to the institutional pressures can be evaluated. The R-squared of Model 2 is .60, which yields an R-squared change of .35; this is significant (p <.10). This means that Model 2 is a significant improvement of Model 1, which was expected because of the addition of the interaction effects.
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stated that when coercive pressures increase, isomorphism in SMCS decreases. Because a positive relationship was expected, Hypothesis 1 is rejected. The effect of mimetic pressures and normative pressures on isomorphism in SMCS is not significant. As such, there is no empirical support for Hypothesis 2 and Hypothesis 3. Although it is no formal hypothesis, the influence of the extent of SMCS on isomorphism is significant in Model 1 (b = .81, p <.05). The moderating effect of the extent of SMCS with respect to coercive pressures is not significant, thus rejecting Hypothesis 4a. Next, the results show evidence for an interaction effect between mimetic pressure and the extent of SMCS. However, in contrast to Hypothesis 4b, this interaction effect is negative (b = -.37, p <.10), which also rejects Hypothesis 4b. Finally, there is support for Hypothesis 4c, which states that the effect of normative pressures on isomorphism in SMCS is stronger when the extent of SMCS in the corporation is higher (b=.55 and p <.05).
Table 7 Moderation
Model 1 Model 2 Hyp.
Step and variables B SE B SE
Intercept 3.79*** (.38) 3.18*** (.36) Main effects Coercive pressure -.75* (.43) -.27 (.44) H.1 Mimetic pressure .12 (.26) .24 (.23) H.2 Normative pressure -.06 (.33) -.09 (.30) H.3 Extent of SMCS .81** (.35) .57* (.30) Interaction effect
Coercive pressure x Extent of SMCS .33 (.26) H.4a
Mimetic pressure x Extent of SMCS -.37* (.21) H.4b
Normative pressure x Extent of SMCS .55** (.25) H.4c
R Square .25 .60
Δ R Square .25 .35***
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5. Qualitative Results
In this chapter the qualitative results are presented. This results give insight into the nature of the hypothesized relationships. The qualitative results consist mainly of quotations from semi-structured interviews with business unit managers.
5.1 Coercive Isomorphism
The quantitative results show a direct significant negative relationship between coercive pressures and isomorphism. Additionally, it does not show a significant interaction effect between coercive pressures and the extent of SMCS in corporations. In contrast, however, during the semi-structured interviews, business unit managers explained that coercive pressures can be positively related to isomorphism in their SMCS.
Much respondents indicated that they felt some level of coercive pressures. Governmental and societal pressures are perceived as the largest coercive pressures that influence corporations. The important role of the government was emphasized by a business unit manager from a manufacturing company: “A lot of issues I don’t mind, except legislation issues. I don’t want to worry about that.” In addition, a business unit manager of another corporation stated that the corporation complies with agreements made with the local authorities about pollution limits. This manager said, “If we exceed the limits, our operating license will be withdrawn. As such, it is really important to comply to [the stated limits].”
Furthermore, the role of both government and society was explained by a business unit manager from one of the largest manufacturing corporations in the Netherlands: “We must comply to 179 rules and regulations. We have an environmental permit based on the processes of the corporation. Without a permit, the firm will be closed.” The manager continued, “Big corporations that operate worldwide within a society that looks over their shoulders are vulnerable to negative information and will do the best they can [regarding corporate sustainability].” The role of society was also explained by two other business unit managers. One said, “If society mentions that your product is not safe or not sustainable enough, then your business is done,” while the other said, “No one wants to have negative publicity, and definitely not towards their competitors.”
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The notion that these pressures influence the corporations’ SMCS was also explained: “Governmental issues are translated into multiple criteria. These are integrated into indexes which are reported. Indexes for energy, water, and particular substances are reported.” Another business unit manager explained: “We have a control system which measures, for instance, the number of VEs [measure of pollution]. This gives us progressive insight. If this measure exceeds the stated norms, we carry out a root-cause analysis to prevent occurrences in the future.” He continued, “This is about the same in the whole milk-processing industry.” This last citation gives an indication of isomorphism within SMCS and was partly confirmed by a business unit manager from another industry: “To answer your question, I think that these pressures have a homogenizing effect, but corporations also want to distinguish themselves, which makes it a little bit divergent again.”
5.2 Mimetic Isomorphism
The quantitative results show no direct significant relationship between mimetic pressures and isomorphism. However, it gives support for a negative interaction effect between mimetic pressures and the extent of SMCS in corporations. During the semi-structured interviews, opposing explanations are given regarding this relationship.
Most corporations in the data sample are market leaders in their industry. In general, leader firms mimic other corporations to a lesser extent than follower firms likely do. As the business unit manager from an agriculture company stated, “We are quite trendsetting and are not guided by competitors.” However, he would understand if other companies mimic his corporation. “If I was a small business in this industry, I would look to the big guys. What works and what does not? I would do things differently, but when it works for the big corporation, it probably works for small companies too.” A business unit manager of a supermarket chain stated in addition: “Naturally, companies look to their environment, and if someone does something smart, it will be mimicked….Supermarkets especially look to each other for the demand of chicken and pork meat.” Finally, the business unit manager of a service company noted that “last year, an external agency investigated the extent of sustainable investments within insurance companies. They found that some companies ran behind with regard to sustainability. Subsequently, these companies changed their policy.”
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[key performance indicators] of one bank and the others are more or less the same.” Finally, another manager stated: “We do not have sustainability integrated in KPIs or something. As such, we are not able to compare this to competitors.” The first manager indicated heterogeneity instead of isomorphism, the second indicated isomorphism, and the third implied that it is impossible to compare SMCS with competitors because there are no SMCS.
5.3 Normative Isomorphism
The quantitative results show no significant direct relationship between normative pressures and isomorphism. However, it gives support for a positive interaction effect between normative pressures and the extent of SMCS in corporations. During the semi-structured interviews, business unit managers explained that customers can influence the phenomenon of isomorphism in the SMCS of corporations, while professional networks and formal education only play a minor role.
With regard to normative pressures, the customer is perceived as an important source of diffusing norms. One business unit manager explained: “Customers want to buy milk from a sustainable factory and not from a chemical plant. This because sustainability is a hot topic these days.” Another manager mentioned, “the customer as such does not have much influence. However, when they are united it is different. ‘Zwarte Piet’ [a controversial Dutch tradition with racial implications] is a good example of this.”
In contrast to pressures from customers, professional networks seem to play a minor role in diffusing norms across corporations. One reason for this in the agriculture industry is that employees do not often rotate among corporations. One manager said, “This would be like transferring from Ajax to Feyenoord [perceived as impossible because of great rivalry]. But that is typical to this industry.” Also the supermarket manager indicated low pressure from professional networks: “I worked for three supermarkets and see much difference between their employees.”
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6. Discussion
In this chapter, the research findings are discussed. Explanations for the contradicting quantitative and qualitative findings are given and an additional analysis is carried out by using the fit lines of scatter plots.
6.1 Coercive Isomorphism
From the interviews with business unit managers, it appears that coercive pressures have a positive influence on isomorphism in the SMCS of corporations. This is in accordance with the stated hypotheses. The results of the multiple regression also show a direct significant relationship between coercive pressures and isomorphism in the SMCS of corporations. However, this relationship is negative as opposed to the interviews and expectations. As such, based on the regression analysis, coercive pressures result in heterogeneity instead of homogeneity (isomorphism) in the SMCS of corporations.
A possible explanation for this negative relationship is that institutional pressures can be transformed when they pass the boundaries of the organization. This because they are filtered and interpreted differently as result of the unique history and culture of the corporation (Levy & Rothenberg, 2002). Another explanation could be that the corporations in this research sample do often operate in multiple organizational fields and therefore are also exposed to institutional pressures from multiple fields. Corporations become heterogeneous instead of isomorphic by complying to the different pressures of multiple organizational fields (Delmas and Toffel, 2004). Additionally, according to D’Aunno (2000), it is possible that corporations comply with institutional pressures from other organizational fields. A corporation that produces a ‘clean product’ (e.g., the cycling industry) may comply to the more stringent rules and regulations that are common in the chemical industry, for instance to avoid the risk of breaking the law or merely for promotion purposes. Because corporations comply to the laws and regulations that are common in other organizational fields, they become heterogeneous instead of isomorphic compared to corporations in their own organizational field.
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median). A scatter plot is provided with a fit line added for both groups. Coercive pressure is labeled on the X-axis and isomorphism on the Y-axis. The fit lines are depicted in Figure 2. Although a two-way ANOVA test was perceived as more appropriate in this situation, the dataset is too small for using this method.
Figure 2 shows us two effects. The first effect is that the group with a low extent of SMCS becomes less isomorphic when coercive pressure rises. This is in line with the findings of the multiple regression and is depicted by the blue line in the scatter plot. The second effect, in contrast, is that when corporations have many SMCS implemented, isomorphism rises when coercive pressure rises. This is in line
with the reported interviews and is depicted by the red line in the scatter plot. The first effect is likely caused by an incorrect interpretation of the phenomenon of isomorphism.
In the research sample, there are corporations that indicated the extent of SMCS as a 1 (the lowest score) but still gave an indication for the extent of isomorphism (even a score of 6 was given). This is impossible because there cannot be isomorphism in SMCS when there are no SMCS. Assumedly, these corporations indicated isomorphism in SMCS with a 6 because they expect that other corporations in their organizational field also do not implement SMCS. In this way, there is isomorphism in the extent of SMCS but not in the form of SMCS. Because isomorphism refers to the SMCS becoming similar instead of the extent of SMCS, the first effect is caused by an incorrect interpretation of the isomorphism phenomenon. The second effect, however, shows the real effect of isomorphism. When coercive pressure rises and there is a high extent of SMCS implemented in the corporation, the SMCS become isomorphic as result of these pressures. This occurs because corporations within the same organizational field comply to the same institutional pressures in the same way.
To show only the real effect, the corporations with a low extent of SMCS should be filtered from the regression analysis, but the sample size is too small to gather significant results in this manner. Therefore, although it does not give significant results, the scatter plot has more value. As the red line
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indicates, the effect between coercive pressure and isomorphism is positive when there are more SMCS implemented. This is in agreement with the reported quotes from the interviews. In addition, and as opposed to the results from multiple regression, there also seems to be an interaction effect between coercive pressures and the extent of SMCS. This, because the negative relationship between coercive pressures and isomorphism in SMCS becomes positive when there is a medium till high extent of SMCS. Because Figure 2 shows that the means crosses over each other in different situations, the interaction effect is typified as a cross-over interaction (Grace-Martin, 2015). As such, the relationship between coercive pressures and isomorphism in SMCS differs when the extent of SMCS differs (The Analysis Factor, 2014).
6.2 Mimetic Isomorphism
From the interviews with business unit managers, there are only weak indications for mimetic isomorphism. Additionally, the results of the multiple regression show no direct significant relationship between mimetic pressures and isomorphism in the SMCS of corporations. This is in contrast to the stated hypotheses. However, also this relationship consists of both, an incorrect interpretation effect and a real effect. It is possible that the multiple regression shows no significant direct relationship because these effects cancel each other out. However, one could argue that the regression analysis still showed a direct significant relationship for the coercive pressures. Therefore, it is worthwhile to show other possible reasons for the absence of a significant relationship between mimetic pressures and isomorphism in the SMCS of corporations. First, Hoffman (2001) found that corporations do not always simply react to institutional pressures. While it is often obligatory to comply to coercive (governmental) pressures, it is not obligatory to comply to mimetic pressures. It could be, for instance, that corporations feel some level of mimetic pressure but still do not implement SMCS. They can react to these pressures by engaging in CS in other ways than just implementing SMCS, or there could be no reaction at all, for instance because the corporation lacks resources to implement SMCS. Second, as shown in the interviews, corporations could copy everything that seems successful in the industry, but adapt this to their own preferences. While mimicking best practices results in isomorphism, the adaptation to their own preferences or unique culture leads to heterogeneity; these effects cancel out each other. Finally, the research sample consist largely of corporations that are market leaders in their industries. Market leaders are often perceived as trendsetting instead of trend-following firms and trendsetting firms are generally less involved in mimetic behavior (Montes & Jover, 2004).
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to a high extent. Because there is no direct relationship between mimetic pressure and isomorphism in SMCS, the only possible conclusion from this finding is that any relationship (positive or negative) becomes less strong when there are more SMCS implemented. However, these results lost value because they were impacted by the wrong interpretation effect.
Because of this, there is also a scatter plot produced for the relationship between mimetic pressures and isomorphism in the SMCS of corporations. The fit lines are depicted in Figure
3. Similar to the plot for coercive pressures, this plot also shows both the wrong interpretation effect and the real effect. It is visible that there seems to be a positive relationship between mimetic pressures and isomorphism in SMCS when there is a high extent of SMCS implemented. However, this relationship is less strong (a less steep slope) than was the case with coercive pressure. This is in accordance with the stated interviews. As was the case with coercive pressures, there is also a cross-over interaction effect visible for mimetic pressures. As such, the relationship between mimetic pressures and isomorphism in SMCS differs when the extent of SMCS differs (The Analysis Factor, 2014).
6.3 Normative Isomorphism
From the interviews with business unit managers, there are some indications for normative pressures causing isomorphism in SMCS. This mainly holds for pressure from customers and less for pressure from professional networks and formal education. The results of the multiple re gression in addition show no direct significant relationship between normative pressures and isomorphism in the SMCS of corporations. This could be partly caused by the wrong interpretation effect. However, as indicated by the business unit managers, it could also be caused by the low influence from professional networks and formal education. In addition to the non-significant direct relationship, the regression analysis shows support for a positive interaction effect between normative pressure and the exte nt of SMCS. As such, the non-significant effect of normative pressure on isomorphism in SMCS is significantly
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higher when there are SMCS implemented to a high extent. Because there is no direct relationship between normative pressure and isomorphism in SMCS, the only conclusion is that any relationship (positive or negative) becomes stronger when there are more SMCS implemented. However, these results lost value because they were impacted by the wrong interpretation effect.
For these reasons, there is also a scatter plot for normative
pressures
produced. The fit lines are depicted in Figure 4. There is a positive relationship visible between normative
pressures and isomorphism in SMCS when there is a high extent of SMCS implemented. There also is a cross-over interaction effect visible. As such, the relationship between normative pressures and isomorphism in SMCS differs when the extent of SMCS differs (The Analysis Factor, 2014).
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7. Conclusion
This article makes use of survey research to investigate the relationships between various institutional pressures and isomorphism in the SMCS of corporations. Besides a multiple regression analysis and an additional scatter plot analysis, semi-structured interviews with business unit managers are used to get insight in the nature of these relationships. As such, this research sought to determine an answer to the following research question:
What is the effect of institutional pressures on isomorphism in the sustainability management control systems of corporations?
The quantitative results show significant support for a negative relationship between coercive pressure and isomorphism in SMCS, a negative interaction effect between mimetic pressures and the extent of SMCS implemented in a corporation, and a positive interaction effect between normative pressures and the extent of SMCS. Unfortunately, these results were affected by an incorrect interpretation of the isomorphism phenomenon. As such, the quantitative analysis provides mixed results. Howeve r, the semi-structured interviews and an additional analysis wherein scatter plots are used, gives still valuable insight in the nature of the hypothesized relationships. It seems from this that coercive, mimetic, and normative pressures all cause isomorphism in the SMCS of corporations when there are SMCS implemented to an average till high extent. The coercive pressures seems to have the largest effect on isomorphism in the SMCS of corporations, while the effect for mimetic pressures is less.
This research adds to existing literature by combining corporate sustainability and management control systems and by investigating this from an institutional perspective. In this way, a unique contribution is made to literature regarding institutional pressures, isomorphism, corporate sustainability, and (sustainability) management control systems. Additionally , the research findings are helpful for managers to make decisions regarding the implementation of SMCS. After reading this research article, managers become aware of the fact that their SMCS become isomorphic as result of institutional pressures (by an average till high extent of SMCS). As such, managers can make decisions to conform to or distinguish from the SMCS that are implemented by other corporations in their institutional field.
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