Multiple Institutional Logics and Heterigenity of Orga Responses PDF

The Multiplicity of Institutional Logics and the Heterogeneity of Organizational Responses
Author(s): Royston Greenwood, Amalia Magán Díaz, Stan Xiao Li and José Céspedes
Lorente
Source: Organization Science, Vol. 21, No. 2 (March-April 2010), pp. 521-539
Published by: INFORMS
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Organization Science infjT
Vol. 21, No. 2, March-April 2010, pp. 521-539 DOil0.1287/orsc.l090.0453
issn 1047-70391 eissn 1526-5455 1101210210521 ?2010 INFORMS
The Multiplicity of Institutional Logics and the

Heterogeneity of Organizational Responses
Royston Greenwood
School of Business, University of Alberta, Edmonton, Alberta T6G 2R6, Canada,
royston. greenwood @ ualberta. ca
Amalia Mag?n Diaz

Universidad de Almeria, 04120 Almeria, Spain, amagan@ual.es
Stan Xiao Li
Schulich School of Business, York University, Toronto, Ontario M3J 1P3, Canada,
sxli@schulich.yorku.ca
Jos? C?spedes Lorente

Universidad de Almeria, 04120 Almeria, Spain, jcespede@ual.es
This paper
differentshows that ways.
though patterned organizations inregional
We show how both market settings
state logics face
and family logicscomplex institutional contexts to which they respond in
impact on organizational
responses to an overarching market logic. Regional logics are particularly potent when the activities of firms, especially
of large firms, are concentrated in regions whose governments champion regional distinctiveness and where the regional
activities of the firm are significant. Family logics affect the decision to downsize, especially in smaller firms. This paper
advances institutional theory by showing the influences of nonmarket institutions on market behavior, contributes to the
growing recognition of community influences, and highlights the importance of historical context.
Keywords: institutional logics/models of action; community

History : Published online in Articles in Advance August 31, 2009.
Institutional logics provide the "master principles of are structured by a "dominant logic" that elicits an iso
society" and guide social action. They are taken-for morphic response.
granted resilient social prescriptions that enable actors to The focus on a dominant logic is surprising because
make sense of their situation by providing "assumptions most studies claim to be progeny of Friedland and
and values, usually implicit, about how to interpret orga Alford (1991) for whom organizational fields are always
nizational reality, what constitutes appropriate behavior, subject to multiple logics. Moreover, attention to how
and how to succeed" (Thornton 2004, p. 70). Organi nonmarket institutions and logics might influence eco
zational forms and managerial practices are manifesta nomic transactions has been particularly missing (for an
tions of, and legitimated by, institutional logics. Thus, to exception, see Lounsbury 2007).1 We know relatively lit
understand how and why organizations exhibit similarity tle about the influence of institutions such as the family,
and variation in their use of such forms and practices it is religion, and, perhaps especially, the state, on contem
necessary to trace the relationship between organizations porary organizations. This paper speaks to these omis
and the logics that constitute their institutional context. sions. We make three contributions. First, we provide an
The link between logics and practices is well early confirmation of the Friedland and Alford (1991)
established (e.g., Lounsbury 2007; Thornton 2002, thesis by showing how two nonmarket logics?those of
2004). It is also established that logics are histori the state and of the family?impact on organizational
cally contingent and that organizational fields are usu responses to an overarching market logic. We identify
ally characterized by multiple, often conflicting logics for which categories of organizations these logics are
(e.g., D'Aunno et al. 1991, Hoffman .1999, Reay and compelling. In doing so, we make a second contribu
Hinings 2005, Washington 2004). Consequently, organi tion by speaking to the important renewed interest in
zational responses to their contexts are unlikely to be the role of geographical communities (e.g., Guthrie et al.
uniform. Yet, we know relatively little about how and 2008, Lounsbury 2007, Marquis et al. 2007, Marquis and
why organizations respond to multiple logics. Instead, Lounsbury 2007, Romanelli and Khessina 2005). We
as Lounsbury (2007) recently noted, most attention has show that community pressures are not uniform in their
been given to how organizational fields and industries influence: organizations whose activities are regionally
521
Greenwood et al.: Multiplicity of Institutional Logics and Heterogeneity of Organizational Responses
522 Organization Science 21(2), pp. 521-539, ? 2010 INFORMS
concentrated, highly visible (e.g., large), and regionally each of which has a central logic?-both material prac
significant are especially affected. tices and symbols that comprise its ongoing principles
Our third contribution arises from the research con and that are available to individuals and organizations
text, which is set in Spain. Spain's history reflects an to elaborate." The main institutional orders, according to
ongoing tension between competing logics of the state, Thornton (2004, p. 12), are "the market, the corporation,
one highly centralist and one premised on Spain's cul the professions, the family, the religions, and the state."
turally distinctive regions. Spain has also been signifi Previous work has focused on validating two essen
cantly shaped by its Catholic tradition and its emphasis tial propositions. The first proposition is that practices
on paternalistic family values. We describe the influence are, indeed, shaped by logics. Studies have linked logics
of these traditions on Spanish manufacturing firms, as with a wide range of practices, including executive suc
indicated by their willingness to downsize their labor cession and compensation (Thornton and Ocasio 1999,
force. Our empirical setting thus speaks to Scott's (2005, Zajac and Westphal 2004), career structures (Stovel
p. 478) lament that: "An embarrassingly large proportion and Savage 2006), organizational forms (Haveman and
of our theoretical conceptions and empirical findings has Rao 1997), social responsibility (Lounsbury 2007),
been constructed by U.S. scholars based on data col technological entrepreneurship (Sine and David 2003),
lected from U.S. organizations." Our setting shows the professionalization (Lounsbury 2002), and educational
importance of history for any understanding of the rela pedagogy (Lounsbury and Pollack 2001). The sec
tionship between organizations and institutions. ond proposition is that logics and their manifestations
This paper is in three sections. The next section are historically contingent. Westphal and Zajac (1994)
provides the theoretical context, describes the empiri traced the substitution of an "agency" for a "steward
cal setting, and establishes a set of hypotheses. Then, ship" logic of CEO behavior, the former prevalent until
we describe the data, the analytical procedures used, and 1980 and the latter thereafter. Thornton (2002, 2004)
present our results. The final section raises implications analyzed how a "market logic" displaced the "editorial
both for theory and subsequent research. logic" in the U.S. higher education publishing industry,
precipitating a repositioning of managerial attention
and organizational strategies. Haveman and Rao (1997)
Theoretical Context examined how California thrifts changed organizational
Friedland and Alford (1991) define institutional logics forms following recomposition of the underlying "theory
as: "...symbolic systems, ways of ordering reality, and of moral sentiments." Scott et al. (2000) tracked changes
thereby rendering experience of time and space mean in field-level governance as changes in logics occurred
ingful" (1991, p. 243). Thornton and Ocasio (1999, in the U.S. health care industry.
p. 804) follow suit, defining logics as "the formal and Building on this work, interest has turned to a cen
informal rules of action, interaction, and interpretation tral implication of the Friedland and Alford (1991) and
that guide and constrain decision makers... ." Thorn Thornton (2002, 2004) framework, which is that the
ton (2004, p. 2) refers to logics as "the axial principles influence of any of the central institutions may be felt
of organization and action based on cultural discourses across industries and fields, although their relative influ
and material practices prevalent in different institutional ence within any particular setting will likely vary. For
or societal sectors." In short, logics underpin the appro example, the cultural sector has become affected by log
priateness of organizational practices in given settings ics of the market as well as by that of the professions
and at particular historical moments. Failure to use prac (Oakes et al. 1998). Audit and law firms have long
tices legitimated by an extant logic can have adverse reconciled market and professional pressures and, more
consequences. Zuckerman (1999), for example, found recently, family pressures (Greenwood and Suddaby
that analysts were less likely to cover or recommend 2006). Owen-Smith and Powell (2004) have shown that
the stocks of companies that did not fit neatly within an innovation within regions is affected by both market log
industry category with the result that those stocks traded ics (expressed through alliances) and the professional
with illegitimacy discounts. Zajac and Westphal (2004) norms of publicly funded universities. Thornton's (2004)
observed that using an unfashionable rationale for a cor "editorial logic" in the U.S. publishing industry com
porate practice produced adverse share price reactions. bined family (or private) ownership with professional
For Friedland and Alford (1991), logics are hierar definitions of legitimate conduct.
chical in form. Organizational fields and industries may These studies confirm that less prevalent logics might
have their own logics but these are nested within the have only a localized or weak influence, but in any field
"central institutions of the contemporary capitalist West" or industry, practices prescribed by different logics will
(Friedland and Alford 1991, p. 232). Thornton (2004, be in play. That is, organizations confront institutional
p. 12), in the most developed application of the nested complexity. Yet, this line of research remains underde
hierarchy framework, states "Western society is com veloped. In the economic sphere, for example, we need
prised of multiple institutional orders or societal sectors, to understand the influence of institutions other than "the
Organization Science 21(2), pp. 521-539, ?2010 INFORMS 523
market," such as the role of family and religion on eco citizens and established the principle that all males had
nomic behavior. We especially need to observe how log the duty and the right to work.
ics of the state shape such behaviors, because the role Labor legislation under Franco was not solely repres
of these logics, though widely assumed to be significant, sive. It was also paternalistic (Escobar 1995). In sup
has rarely been explicated (for an exception, see Marquis port of family stability, married women were forbidden
and Lounsbury 2007). The absence of attention to the by Ley de Relamentaciones de Trabajo to work without
influence of the state is "surely because much organiza authorization from their husbands (Toharia et al. 1998)
tional and economic scholarship comes from the United and the access of women to some professions was cir
States, where a belief in laissez-faire obscures the role of cumscribed by law (e.g., auditing; see Carrera et al.
the state in markets" (Dobbin and Dowd 1997, p. 501). 2001). Family bonuses were distributed to employees
Moreover, the relative stability of state logics acts to based on the size of their family. Of particular interest is
conceal them. As becomes clear from our setting, it is that job security for males was established as a cardinal
by placing organizational behaviors in an appropriate principle and downsizing was virtually prohibited. The
historical context that the role of state logics becomes state "aimed for full employment by maintaining rigid
apparent and the meaning of their effects interpr?table. rules to govern labor market entry and exit" (Aguilera
A logic of the state does not refer to specific poli 2005, p. 199).
cies or regulations. Our use of the term is closer to During the late 1950s and early 1960s, state control
Dobbin and Dowd's (1997) idea of "policy regimes," of prices was moderated and strikes (but not unions)
which refers to the basic orientation of the state in were legalized in an effort to encourage foreign capi
securing social and political order. Two key dimensions, tal and make Spanish industry more competitive. There
both explored here, are the relative tolerance shown was, too, a loosening of labor markets through a sys
toward political representation and plurality of expres tem of collective bargaining based on works councils
sion (Polsby 1963); and the extent to which state powers (Escobar 1995). Despite these changes, Spanish soci
and authority are centrally concentrated or devolved to ety remained highly regulated, ".. .particularly covering
subnational levels (Marquis and Lounsbury 2007). We individual rights in areas such as employment termi
will suggest that a decentralized politically tolerant logic nation and job classification, (which) caused increasing
of the state is a prerequisite of community influence. problems for employers in the later years of the dic
We examine institutional complexity in Spain. We tatorship and in the post-Francoist period as employers
observe variation in the willingness of manufacturing sought greater flexibility at work and in the labor mar
firms to take advantage of legislation that legitimated ket" (Martinez 1992, p. 488).
workforce downsizing as a response to market exigen After almost four decades of this authoritarian yet
cies. Our argument is that this variation stems from two paternalistic regime, Spain established democratic insti
tutions, including political parties and trade unions. The
nonmarket institutions: the state, and the family, notably
because of its link with the Catholic Church. Our con most significant change was adoption of a constitution
cern is with the decade of the 1990s, and we examine that enshrined the rights of civilians to political repre
sentation and freedom of expression. The Constitution
how logics of the state and the family temper the logic
of the market. also recognized Spain's 17 historical regions. Article 2
specifically guarantees "the autonomy of the nationali
Institutional Complexity in Spain. The Spanish Civil ties and regions that compose" Spain. The Constitution
War (1936-1939) resulted in victory for the Nacionales thus ushered in a decentralist logic of the state.
led by General Francisco Franco. This highly conserva The initial priority following the death of Franco was
tive coalition of interests saw itself as rescuing Span consolidation of the democratic system, which delayed
ish civilization from social disorder by reestablishing the the introduction of industrial legislation (Aguilera 2005,
state as a single autocratic entity that would express tradi K?hler 1999, Lamas 1993). Eventually, however, neolib
tional Catholic values throughout its social and economic eral economic and monetary reforms were proposed as
policies (Abell?n and Oskam 1989, Judt 2005). Central a prelude to joining the European Community in 1986
to these values was recognition of the "family" as "the and the European Monetary Fund in 1989. These neolib
prime unit of society... endowed with inalienable rights" eral initiatives, which included legislation to disman
(Gir?n de Velasco 1951, p. 78). Civil marriages were tle employment guarantees, met with bitter resistance
banned, divorces declared illegal, adultery, abortions, and and precipitated several years of widespread labor unrest
contraception were made criminal offences, and Catholic (Alonso and Blanco 1999). Two general strikes were
religious education was made compulsory. In this auto called, one in December 1988 and the other in 1994,
cratic system, labor relations had few of the character as unions that were reestablished after Franco's death,
istics of liberal democracies (Martinez 1992, p. 484). sought to preserve the "established model."
Unions were illegal and strikes a treasonable offence. The The aim of the strike... is a question of principle: it
1938 Labor Charter codified the obligations of state and is a call to fight to preserve the established model of
524 Organization Science 21(2), pp. 521-539, ?2010 INFORMS
industrial relations, which the government has decided charter that fell only modestly short of recognizing it as
to modify.... The deregulation of the labor market a separate nation. Similar charters prepared for Spain's
questions... the model of industrial relations for which other regions prompted The Economist (2006, p. 45)
the working class has struggled over the last century, and to refer to Spain as "the most devolved political sys
which many of us thought irreversible. (El Pais 1994, p. 5)
tem in Europe outside Belgium." Importantly, regional
The 1994 strike was the final attempt by organized identification became "an integral aspect of the transi
labor to defend the principle of job security insti tion to democracy itself" because it was "unpolluted by
tutionalized under Franco. The strike failed. Neolib authoritarian association" (Judt 2005, p. 702). That is,
eral economic principles were incorporated into Span regional identification became symbolically associated
ish law and by the mid-1990s, the regulatory controls with rejection of the autocratic state logic (Flynn 2001).
of the Franco era had been systematically dismantled The place of the Catholic Church and the emphasis on
(Alonso and Blanco 1999, Lope and de Al?s-Moner the family were similarly contested in the decades after
1999, Rodriguez-Pinero and Bravo-Ferrer 2001). Man Franco though in less dramatic fashion. Under Franco,
agers now had authority to adjust their workforces with the Church was heavily subsidized and even though
out incurring prohibitively high redundancy costs. the Concordat of 1976 envisaged gradual removal of
The above account illustrates the ongoing tension state subsidies, they remained into the 1990s. Today,
between two historical approaches to the role of the Spain is still a Catholic country even though the state
state. The first, the highly centralist logic, was epito itself is constitutionally secular. The 1978 Constitu
mized by the Franco regime. According to this logic, all tion confirmed the right of Spanish citizens to religious
authority and state power should converge on one polit freedom, but the Catholic Church remains influential
ical centre, the nation-state. There should be no alter and holds a resolute commitment to the family as
native loci of power or authority. Thus, under Franco, a core societal institution. One consequence is that
there was a single police force, no local unions and Spain provides support to families beyond that found in
very narrowly circumscribed municipal and provincial most other European countries (Meil Landwerlin 1995).
governments. Four of Friedland and Alford (1991) and Israely (2008) refers to Spain as "a paragon of progres
Thornton's (2002, 2004) central institutions?the state, sive family law." The enduring if changing influence
market, religion,, and family?reinforced each other and of the Church is illustrated by the disruptive demon
dominated all sectors of society (Graham 2005). More strations in May 2008, when more than 150,000 peo
over, this version of the centralist logic was intolerant ple demonstrated against the government's proposed
of political opposition. Allegiances below the level of abortion reforms. In one sense, the Catholic Church
the state, especially sentiments favoring regional inter is "Spain's biggest social movement" (The Economist
ests, were treated as antithetical to social order and 2006), and most Spanish people still maintain a strong
coercively punished (although never eradicated, notably commitment to the traditional values of family obliga
in Basque country where the Euskadi Ta Askatasuna tion and denial of self-interest (Alberdi 1999).
(ETA) openly adopted terrorist tactics). The state was Our contention is that Spanish firms in the 1990s
the nation. The second approach to the state cele would not be immune to the flowering of regional enthu
brates the importance of regional communities, which siasm enabled by the newly authorized decentralist logic
are particularly pronounced in Spain. Four regional of the state. We also anticipate the enduring importance
languages in addition to Spanish?Euskera (spoken in of family, entwined with the teachings of the Catholic
Basque country), Gallego (Galicia), Catalan (Catalonia), Church. Thus, although all firms had legal authority to
and Valenciano (Valencia)?express the heterogeneity of respond to market forces by adjusting their workforces,
"Spanish" culture and explain the strong and recurrent the extent to which particular firms would do so would
demands for regional autonomy (Lopez Guerra 1989, be qualified by their relationship to these two rconmarket
Muro and Quiroga 2005, N?nez Seijas 2001). As Judt logics.
(2005, p. 520) noted, the present Constitution:
Hypotheses
... acknowledged the ancient fact of linguistic variety
and regional sentiment within Spain's hitherto ultra Logic of the Market. Although our primary concern is
centralized state.... Within four years Spain was to be to explore institutional complexity arising from the influ
divided into seventeen self-administering regions, each ence of nonmarket logics, we establish a baseline hypoth
with its own flag and capital city. Not just Catalans esis that economic behavior (in our case, downsizing)
and Basques, but Galicians, Andalusians, Canaries,
is shaped by the market logic. Downsizing is often por
Valencians, Navarrese, and many others were to be rec
trayed as a deliberate response to market forces (Budros
ognized as distinct and separate.
2002, DeWitt 1993) even though empirical evidence sug
The high water mark of the decentralized logic of the gests that the link between organizational performance
state occurred in 2006 when Catalonia was granted a and downsizing is not straightforward (Cascio 2002,
Nutt 2004, Trevor and Nyberg 2008). Treating down each to the social and cultural histories of New York
sizing as a strategy for economic correction means and Boston.
that poorer performing organizations are expected to be The same ideas inform the behavior of Spanish man
more receptive to emerging possibilities for performance ufacturing firms, although we interpret them against the
improvement, such as (in our case) the right of Spanish historical context outlined earlier. As noted, the region in
firms to downsize without penalty. High-performing Spain is an important symbolic entity and networks link
organizations, in contrast, are less likely to change, partly ing Spanish business leaders with local elites are well
because change is not perceived as necessary and partly documented (e.g., Cabrera and Rey 2002, Sanchez Recio
because they are typically risk averse (Gr?ve 2003). and Tacon Fernandez 2003). Companies are chided by
Moreover, leaders in high-performing organizations fall the media if they pursue policies that adversely affect the
victim to "competency traps" (Levitt and March 1988) region. We propose that organizations whpse activities
and unduly believe that current practices will deliver are regionally concentrated, rather than dispersed across
future success. Applying these arguments to the Spanish regions, will be the targeted recipients of such pressures.
setting suggests the following. We also anticipate that regionally concentrated firms will
be receptive to these pressures because they are involved
Hypothesis 1 (HI). Poor-performing Spanish firms in the face-to-face relationships that "promote the social
are more likely than high-performing firms to practice
negotiation of shared understandings" (Romanelli and
downsizing.
Khessina 2005, p. 347). A specific example of this gen
Logic of the Decentralized State. To understand how eral thesis would be the response of firms to the freedom
regional identification might influence the behavior of fully acquired after the 1994 general strike to downsize
their workforce.
firms, we draw on recent studies of community isomor
phism. Freeman and Audia (2005) observe that the con
Hypothesis 2A (H2A). Firms whose branches are
cept of community in organization theory has several
concentrated in particular regions are less likely to
meanings, defined by whether firms are spatially con
downsize than are firms whose branches are dispersed
tiguous and whether they are interdependent. These two
across regions.
dimensions produce four meanings of community. Our
interest is with one of these meanings, Freeman and But not all regions will be equally motivated to pres
Audia's (2005) "residential communities," where firms sure firms to compromise their economic decisions. On
are located in a defined geographical space and through the contrary, where regional identity is strong, pressures
their interdependence have developed a social identity. on regionally concentrated firms will be especially high.
Molotch et al. (2000, p. 791) were early observers of Regional sentiment varies because it is the accumula
residential communities, noting how cities and regions tion of "a complex web of sedimented practices... in a
can develop "overarching attributes" that make them regionally and historically constructed space" (Narotzky
"durably distinct." In today's terms, regions evolve 2000, p. 13). Despite this complexity, useful summa
"identities" as decisions and investments early in a city's rizing signals can be observed at the political level
history channel and enable later decisions and opportuni because political parties reflect regional sentiments, and
ties. Marquis (2003), Marquis et al. (2007), and Marquis because their policies and spending patterns reveal com
and Battilana (2009) have elaborated the social mech munity priorities. In the Spanish setting, we anticipate
anisms, such as shared memberships in social clubs, strong regional pressures in regions governed by a party
by which these "identities" are formed and, impor committed to a form of "regional-nationalism" (Velasco
tantly, sustained. Although not using the term, Soren 2000). For example, Catalonia, widely recognized as
son et al. (2006) and Sorenson and Audia (2000) have having strong regional sentiments, is governed by the
also detailed how social networks reproduce regional CiU, a federation of the Converg?ncia Democr?tica
identities. de Catalunya and its smaller counterpart, the Unio
Once evolved, identities have consequences. Com Democr?tica de Catalunya. The CiU openly appeals to
munity identities result in pressures on resident firms. voters by presenting itself as a "Catalan nationalist"
Galaskiewicz (1979, 1985, 1991) was an early recorder party. Other "regional-national" parties (e.g., Navarra)
of such community norms, demonstrating how corpo champion their distinctiveness from other regions rather
rate philanthropic practices vary systematically across than from the federal state. But all regional-national par
regions. Sabel (1993) reported how the state of Penn ties pursue "civic boosterism" (Romanelli and Khessina
sylvania encouraged steel firms "to act in more socially 2005, p. 345). We also anticipate strong regional pres
responsible ways toward their workers and toward the sure where the regional government invests heavily in
communities, within which they operated" (cited in industrial development. High levels of such spending
Campbell 2007, p. 960). More recently, Lounsbury indicate a regional stance that goes beyond the rhetoric
(2007) compared two types of mutual funds and traced of civic boosterism to purposeful commitment.
Hypothesis 2B (H2B). Firms whose branches are Robinson (2001) found that large Japanese firms were
concentrated in regions governed by ((regional-national" reluctant to downsize and did so later than less visible
parties are less likely to downsize than firms in regions smaller firms because large firms were perceived both
governed by nonregional/national parties. by the media and by themselves as exemplifying values
incorporated in the practice of permanent employment.
Hypothesis 2C (H2C). Firms whose branches are
Larger firms, moreover, are likely to be members of
concentrated in regions with high regional government
regional elites, and thus not only recipients of commu
spending on industrial development are less likely to
nity pressures but active participants in their construc
downsize than firms whose branches are concentrated
tion. In addition, established relationships with suppliers
in regions with low regional government spending on
and distributors cushion larger firms, making them able
industrial development.
to survive with less than optimal workforces (Aldrich
The effects proposed in H2B and H2C will reinforce and Auster 1986).
one another. A government's rhetoric on regional distinc A contrary view, summarised by Budros (1997), is
tiveness will amplify pressure on firms to preserve local that larger organizations are more likely to downsize
employment and the pressure will be especially potent if because they are prone to "top-heavy bureaucracy." And,
the regional government "walks the talk" through high more positively, because they have the ability and pre
industrial development spending. science to reduce their workforce in anticipation of wors
ening markets. Evidence for this view, however, is mixed.
Hypothesis 2D (H2D). The tendency against down
sizing, exhibited by firms whose branches are concen Budros (1997) found that large firms are more likely
trated in regions governed by regional-national parties,
to downsize. Similarly, Filatotchev et al. (2002, p. 299)
is amplified when those regions also have high regional found a "positive but insignificant coefficient" between
spending on industrial development. size and downsizing. On the other hand, Vicente-Lorente
and Su?rez-Gonz?lez (2007) and Chadwick et al. (2004)
The argument of the above hypotheses is that regional found no such association.
pressures will vary according to the extent of regional These inconsistent results indicate that the relationship
sentiments and their political expression. But those between size and downsizing is complex, justifying our
regional pressures will be targeted. That is, they will be interest in exploring further the influence of normative
focused on some but not all issues.
regional pressures. We propose that, because larger firms
It is accepted within organization theory that "not in the Spanish context are highly visible, they will be an
all events are attended equally" (Hoffman and Ocasio especial target of regional pressures not to downsize.
2001). On the contrary, there is "competition for atten
tion" (Ocasio 1997). Hoffman and Ocasio (2001) were Hypothesis 2F (H2F). The tendency for firms con
concerned with how and why industries are attentive to centrated in regions governed by ''regional-national"
particular issues, whereas our concern is with the collec parties to be less likely to downsize is more pronounced
tive attention of a region. But the Hoffman and Ocasio for larger firms than smaller firms.
(2001) model is suggestive. It implies that issues that Hypothesis 2G (H2G). The tendency for firms con
capture attention are those that are contested because centrated in regions with high regional government
of their consequences for different interests. Corpo spending on industrial development to be less likely
rate downsizing in Spain meets this criterion, as evi to downsize is more pronounced for larger firms than
denced by the two general strikes referred to earlier. smaller firms.
Hoffman and Ocasio (2001) also suggest that when
ever an issue involves the core technology of an indus Logic of the Family. The importance of family and the
try, firms within that industry will be more attentive to idea that family firms behave differently has been a rel
it. It follows that industries consequential to the social atively late observation within organization theory (Litz
and economic vitality of a region will be monitored 1997), even though almost 45% of Western European
by the regional elite and that organizations implicated firms are family controlled (Faccio and Lang 2002).
with those industries will become especially pressured Family firms are particularly noticeable in continental
to favor the region's interests. Europe where they are in the majority in all but six
countries. Yet, the role played by family firms and how
Hypothesis 2E (H2E). Regionally concentrated firms
far they represent a distinct approach to business "has
in industries that provide high employment are less likely
to downsize. largely escaped serious comparative historical analysis"
(James 2006, p. 2). James's study is especially relevant
Following Marquis (2003) and Ahmadjian and for our purposes because it shows the close association
Robinson (2001), we further propose that the targeting between the family and the Catholic Church in non
of regional pressures will be calibrated by an organiza Anglo-Saxon settings and the widespread adoption of
tion's visibility, as indicated by its size. Ahmadjian and a "paternalistic strategy" that seeks to minimize labor
grievances by developing "a strong internal sense of et al. (2006) observed that the motivation of family
solidarity" (James 2006, p. 145). firms to develop "quasifamily" relationships with wider
Ingram and Lifschitz's (2006) study of family firms audiences, including employees, declines with size. One
in the Scottish shipbuilding industry in the late 19th interpretation of these observations is that the profession
and early 20th century also documents how family alization of management brings with it expressions of
firms behave differently to nonfamily firms both in the support for practices at odds with the social norms of
longevity of the goals that they pursue and the salience family. A different but complementary explanation is that
of trust in their business arrangements. In their study, professional managers are less able to practice the type of
social relationships enabled collusion against customers relationships second nature to family firms (Ingram and
and the labor market. Contrary to James's account, Lifschitz 2006). Our expectation, therefore, is that family
however, Ingram and Lifschitz (2006) show that in values become overwhelmed as firms grow.
the Anglo-Saxon context "relationship-based capitalism"
Hypothesis 3B (H3B). The tendency for family
did not easily survive because of the inherent tension
managed firms not to downsize is less pronounced in
between capitalism based on family relationships and
large firms.
the logic of shareholder capitalism, a story confirmed
and elaborated for the United Kingdom as a whole An interesting question is whether the logics of
by Franks et al. (2005). In non-Anglo-Saxon contexts, family and region, when they occur together, amplify
however, the influence of family often remains. Using each other's effects because of their common theme of
French data, Mueller and Philippon (2006) comment, "In social responsibility and their antipathy to the more indi
today's world, family firms rarely provide the kind of vidualized implications of the neoliberal market logic.
generous welfare programs they used to provide in the Instances of family firms generously supporting their
age of welfare paternalism. Yet there is evidence... that communities are not uncommon, especially where they
today's family firms (still) practice a 'mild version' of enjoy close relationships locally (Landes 2006). We
welfare paternalism" (Mueller and Philippon 2006, p. 9). anticipate that family firms embedded in active regional
The "mild version" includes a commitment to employ networks will show amplified commitment to regional
ment security. interests for two reasons. First, regional-national govern
But the idea that family-managed firms behave dif ments in Spain often highlight family firms as symbolic
ferently toward their workforces is not fully established. exemplars of regional vitality and distinctiveness. Fur
Fiss and Zajac's (2004) study of German firms found ther, the often historically close relations between family
inconclusive results on whether family norms survive firms and regional governments reinforce the perspec
beyond the first generation. Morck and Yeung (2004) tive of family as stewards of their workforce. Second,
and Fogel (2006) put forward a jaundiced view of fam regional governmental spending on industrial develop
ily firms, arguing that they are narrowly self-interested. ment often favors family firms because they are per
Dyer and Whetten (2006, p. 797), in contrast, suggest ceived as more receptive to governmental policies.
"family firms are more likely to be socially responsible
Hypothesis 3C (H3C). The tendency of family
actors than are firms without family involvement." Social
managed firms not to downsize is more pronounced in
responsibility, in Dyer and Whetten's (2006) work,
regions governed by regional-national parties.
specifically includes avoidance of workforce reductions.
Because of the significance of the institution of family Hypothesis 3D (H3D). The tendency of family
in Spain, we predict that family-managed firms are moti managed firms not to downsize is more pronounced in
vated by values different to those influencing non-family regions with high government spending on industrial
firms. Moreover, during the Franco decades, the institu development.
tion of family was specifically connected with job secu
rity, amplifying the possibility that, today, family norms
Methods
will produce a paternalistic approach to management.
Data. Our data are drawn from a Spanish database
Hypothesis 3A (H3A). Family-managed firms are
"Encuesta sobre estrategias empresariales" (Survey on
less likely to downsize than nonfamily-managed firms.
Business Strategies). The data was assembled by the
The challenges confronting family firms as they grow Fundacion Empresa Publica (Public Firm Foundation,
are well documented, especially the need to "profession hereafter FEP) through its Economics Research Pro
alize" senior levels of management. One consequence is gram (Programa de Investigaciones Economicas). The
that family values become less dominant as professional ESEE surveyed firms with at least 10 employees in the
managers articulate more "business-like" practices. For Spanish manufacturing sector between 1994 and 2000.
example, de Kok et al. (2006) found that family firms That is, our data set commences immediately follow
were less likely to use professional human resource prac ing the failed general strike of 1994. ESEE exhaustively
tices until they reached a certain size. Similarly, Karra surveyed firms with more than 200 workers. Firms with
Table 1 Sample Statistics The results were broadly consistent. Firms t

Variable 1994 1995 1996 1997 1998 1999 2000 of business in year t + 1 were excluded
culation of Downsizing in year t + 1 bec
No. of firms surveyed 1,869 1,876 1,703 1,716 1,920 1,776 1,754
No. of firms that 1,721 1,693 1,584 1,596 1,764 1,631 1,634 merged firms downsize for reasons be
or
participated of this paper. To avoid causal ambiguit
in the survey dent variable was measured in year t + 1
Survey response rate 92.1 90.3 93.0 93.0 91.9 91.8 93.1 pendent and control variables were calcu
t, (t = 1994,1995,..., 1999) except for
tor Average earnings before interests an
between 10 and 200 employees were selected by a strat
Growth and Above Subsector Average
ified sampling method, a usual procedure for large-scale
were constructed by using information
surveys (Lehtonen and Pahkinen 2004). Each year, all
and t (see below).
new firms with more than 200 employees and a ran
dom selection of 5% of all new firms with employees Analysis Model. Because our data set
between 10 and 200 were added to the survey. ESEE structure with firms repeatedly measured t
also paid attention to attrition across years. For exam ferent years, we used random effects pr
ple, if a firm answered the survey in 1994 and 1995 and controlled for the fixed effects of indu
but refused to participate in 1996, this firm was sur years, and time trend. To control for th
veyed again in 1997-2000. Table 1 tabulates the sample of industry sectors, we created a set of d
size, response, and attrition rates across years. A high a firm's largest business was in a partic
response rate and the sampling method indicate that the of the manufacturing sector, the subsect
sample is representative of the referent population. coded as one, otherwise zero. Using NAC
the classification scheme commonly adop
Dependent Variable. Our dependent variable is the
the database assigned only one of the 18 s
dummy variable denoted as Downsizing. To construct
to each firm: (1) iron (excluding iron al
this variable, we calculated the ratio Changet+l = (No. of
eral products (excluding metallic produc
Employees t+l?No. of Employ ee s t)/(No. ofEmployees t),
cal products, (4) metallic products, (5) ag
where No. of Employeest+l (No. of Employeest) is the
industrial machines, (6) office machines
number of permanent employees (i.e., all employees
ing machines, and other relevant machin
except temporary workers) in year t + 1 (year t). Con
materials and accessories, (8) automobi
sistent with previous studies (Ahmadjian and Robinson
motors, (9) other transportation materia
2001, Cascio et al. 1997), when Changet+l was larger
prepared, and tinned foods, (11) alimentar
than 0.05, a firm was regarded as practicing downsiz
tobaccos, (12) beverages, (13) textiles a
ing and Downsizing was coded as one (otherwise zero).
leather, fur, and footwear, (15) wood
Figure 1 uses three cutoff points to graphically present
niture, (16) paper, paper articles, and pr
the downsizing activities in the Spanish manufacturing
ber and plastic products, and (18) other
sector during 1995-2000. The top curve displays the
products. To control for the fixed effect
number of firms that reduced permanent employees by
at least 2% and the lower two curves show the num included year dummies into all our an
trol for the possible change of the dow
ber of firms that reduced by 5% and 10%, respectively. over time, we included one variable, deno
All three curves display a similar pattern. We conducted
Capitalization.2 This variable indicates th
sensitivity tests to examine whether our results varied if
capitalization (consumer price index (CPI
we changed the cutoff point from 0.05 to 0.10 and 0.02.
all stocks traded on the Stock Exchange
the last trading day of year t?
Figure 1 Number of Downsizings Across Years in the Spanish
Manufacturing Sector Independent Variables. Two dummy va
700 Subsector Average EBIT Growth and Abo
Average Sales Growth, were used to iden
600
formance. When the percentage growth of
I 500 in EBIT (sales) between years t ? 1 an
c 400 the average of the sub-manufacturing s
-? 300' the focal firm belonged, Above Subsecto
Growth (Above Subsector Average Sale
d 200 coded as 1 and otherwise as 0.
100 We measured regional dispersion by
index, X^Li Pk^n(l/Pk)> where pk was th
1995 1996 1997 1998 1999 2000
branches of the focal firm in the fcth
regions in Spain. Regional Concentration was reversely therefore, we constructed a set of dummy variables for
coded from the regional dispersion measure. A firm's each decade after the Spanish Civil War.4 For example,
regional concentration score is the difference between Firm Birth in 1990s was coded as 1 if the focal firm
the maximum of all firms' regional dispersion scores and was founded in 1990s (and coded as 0 otherwise).
the given firm's regional dispersion score. The higher The excluded group comprises the firms founded before
this regional concentration score, the fewer regions 1940s. Firm Size was used to control for the firm
where the given firm's branches were situated. attribute of size. We used several controls to remove the
To test H2B, H2C, and H2E, we constructed indepen possible effects of corporate-level strategies. Diversified
dent variables by the following equations, respectively: firms may experience more fluctuations in firm head
counts because these firms may adopt corporate-level
Regional-National Government strategies, such as divestiture and entry/exit of market
17 places. The entropy measure was used:
= (pk Regional _National_Partyk), ( 1 ) 5
k=\
Diversification = Y^Pk ln(VPk)> (4)
k=\
Regional Government Spending on Industrial
17 where pk was the percentage of sales of the focal firm
Development ? ^2 (Pk Spendingk), (2) in the kih (k = 1, 2,..., 5) main markets in which the
k=i firm operated. The ESEE survey identifies a firm's five
main markets, defined by product line, client/customer,
Regional Salience of Manufacturing Sector
and geographical market. To further control for the pos
17
sible effect of diversification, we used No. of Branches
= ^ (pk Employment_Ratek), (3) to indicate the number of business branches of the focal
k=\
firm. The second corporate-level strategy removed is
where pk was the percentage of branches of the focal imitation among firms. A focal firm may imitate other
firm in the ?th (k = 1, 2,..., 17) geographical regions firms, especially when imitated firms are large and prof
in Spain. Regional_National_Partyk is coded as 1 when itable (e.g., Haunschild and Miner 1997). We used No.
the region k was governed by a regional-national party of Large Firm Downsizing s to indicate the number of the
(otherwise coded as 0). Spendingk is the percentage of largest firms that experienced downsizing in year t. We
region fc's regional government budget spent in industrial also used No. of Profitable Firm Downsizings to indicate
development. Employment_Ratek is the employment rate the number of downsizings in year t by high-performing
of the manufacturing sector in region k. We used the firms. Consistent with previous studies (e.g., Haunschild
interaction between Regional Government Spending on and Miner 1997), high-performing firms were defined as
Industrial Development and Regional-National Govern the five firms with the highest EBIT in the same manu
ment to test H2D, the interaction between Regional Gov facturing subsector as the focal firm according to NACE
ernment Spending on Industrial Development and Firm CLIO R44. We applied two controls to indicate a given
Size to test H2G, and the interaction between Regional firm's own downsizing track record: No. of Previous
National Government and Firm Size to test H2F. The Downsizings was used to record the number of previous
variable Firm Size measured the logarithm of the focal downsizings of the focal firm before or in year t ? 1; and
firm's total assets. Time Lapsed Since Last Downsizing to indicate the time
A dummy independent variable, Family-Managed span between the most recent downsizing and year t.
Firm, indicates whether owners and their families were Innovation intensity within a firm shows the potential for
active in managing the focal firm. This variable was the firm to deploy more machines and reduce reliance
on human resources because of process or product inno
coded as one when the owner (and his family) worked in
the top management team and zero otherwise. Hypothe
vations. R&D Expenses measures the logarithm of R&D
investment.
ses 3B, 3C, and 3D were operationalized by the
A firm's downsizing behavior may also be triggered or
following interaction terms: Family-Managed Firm x
constrained by the firm's dependence on resources from
Firm Size, Family-Managed Firm x Regional Govern various stakeholders.5 Several controls were used to
ment Spending on Industrial Development, and Family
remove possible resource dependences, and thus isolate
Managed Firm x Regional-National Government.
To reduce the bivariate correlations between inter the institutional effects of interest in the paper. A focal
firm's financial structure influences its reliance on finan
action terms and their components, we centered all the
cial institutions. EBIT indicates the focal firm's capa
component terms before the constructions of the inter
bility of generating revenues and its bargaining power
action terms (Aiken and West 1991).
with loan providers. Debt Ratio, the ratio between total
Control Variables. Firms founded in the same decade debts and total assets, was used to indicate the possibil
may behave similarly because of imprinting effects; ity that an indebted firm tends to sell assets to reduce
its reliance on loan providers. Firms are also subjected includes the independent variables associated with the
to the pressure from suppliers and customers. Market logic of family.
Share, indicates market power, and is the ratio of the In Model 4, both Above Subsector Average EBIT
focal firm's sales and the total sales for all firms in the Growth and Above Subsector Average Sales Growth have
focal firm's largest subsector. Firms with a high market significant and negative coefficient (at least p < 0.05).
share tend to have high bargaining power relative to sup Firms with above subsector EBIT growth and/or above
pliers and customers. We used three variables to control subsector sales growth are less likely to downsize. This
for the focal firm's dependence on its employees. Union result provides support for HI.
ization indicates the focal firm's constraints imposed by
The coefficient of Regional Concentration is nega
unionization:
tive and significant (p < 0.05), consistent with H2A.
17 We also find support for H2B, as the coefficient of
Unionization = ^ (pk Unionization_Rate^), (5) Regional-National Government is negative and signif
k=i
icant (p < 0.05). Regional Government Spending on
Industrial
where pk was the percentage of branches of the focal Development has only a marginally signifi
cant
firm in the fcth (k = 1,2, ...,17) regions in Spain. coefficient and thus provides limited support for
H2C. The interaction term, Regional Government Spend
Unionization_Ratek is the percentage of workforce
ing on Industrial Development x Regional-National Gov
unionized in region k. And Labor Utilization per
Employee records the average working hours of each ernment, has a negative and significant coefficient (p <
employee per year. A high number of hours might indi 0.05), supporting H2D. Regional Salience of Manu
facturing
cate that the focal firm is under pressure to hire more Sector has a negative and marginal coeffi
people to appease its employees. cient (p < 0.05), consistent with H2E. The interaction
term
We used four control variables to remove the potential Regional-National Government x Firm Size, has
impact of ownership structure. We measured Govern a negative and significant coefficient (p < 0.05) and
ment Shares by the percentage of shares owned by the is consistent with H2F. The coefficient of the interac
Spanish government. Firms controlled by different levelstion term, Regional Government Spending on Industrial
Development x Firm Size, is not significant, indicating
of Spanish governments may resist downsizing because
of noneconomic considerations, such as the preserva no support for H2G.
tion of local employment. Foreign Shares indicates theThe coefficient of Family-Managed Firm is negatively
percentage of shares controlled by non-Spanish resi
significant (p < 0.001), supporting H3A. The interac
dents. Foreign owners may be influenced by foreign
tion term, Family-Managed Firm x Firm Size has a pos
logics that are beyond the scope of our study. Listeditive and significant coefficient (p < 0.001), as predicted
Firm is a dummy variable that indicates public ownerin H3B. However, neither of the two interaction terms,
ship. It was coded as one when the firm was traded Family-Managed
on Firm x Regional Government Spending
a stock exchange and otherwise coded as zero. Listed on Industrial Development and Family-Managed Firm x
firms' downsizing announcements are under the scrutiny
Regional-National Government, are significant, indicat
of investors and concerns about stock price fluctuation
ing no support for H3C and H3D.
may dampen or enhance a publicly listed firm's down
sizing decisions. Member Firm is coded as one when the
focal firm was a member firm of a holding company or Discussion
a and Conclusion
conglomerate and otherwise as zero. Member Firm was Our starting point was that organizations face institu
used to pick up effects that were common to all firmstional complexity but that we have only modest under
with a corporate parent.
standing of how organizations respond. Our particular
concern has been with the influence of two nonmar
Results ket logics?the state and the family?upon the behavior
Table 2 provides descriptive statistics and bivariable cor of corporate organizations. We have shown that poorer
relations among our variables and shows no indication performing organizations downsize more readily than
of multicollinearity. The highest correlation between two more successful firms, indicating the significance of the
variables is 0.72, indicating a shared variance of about market logic. But we also proposed and found that a
0.50. The variance inflation factor (VIF) analysis further logic of the state that allows the expression of regional
shows that the largest VIF index is lower than nine. interests tempers the market logic. We explored the types
Table 3 reports our results. Model 1 is the baseline of regions where these pressures would be especially
model containing all control variables. Model 2 includes strong and the types of organizations that would be par
the independent variables associated with the market ticularly targeted and responsive. We found that firms
logic. Model 3 adds the independent variables for the affected by regional pressures are those whose activi
logic of a decentralized state. The last model, Model 4, ties are regionally concentrated, that are highly visible,
Mean S.D. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
3035Debt
Member Ratio Firm
0.55 0.26
0.23 0.44
0.03 -0.05
-0.05 0.08 0.040.01
0.07 0.05 -0.21
-0.01 0.030.02 0.04
-0.02-0.03 0.050.01
0.01 -0 34 Listed Firm 0.03 0.17 -0.03 -0.01 0.00 -0.13 -0.02 0.07 -0.03 0.02 -0.03 0.09 -0.08 -0.02 -0.01 -0.03 -0.09 -0.09
29 Unionization
24 No. of Branches 1.21 0.86 0.16-0.71
0.01 0.04 -0.02 0.040.00
0.010.01
0.020.03
-0.01-0.04
-0.04-0.03
-0.570.04
0.50-0.11
0.28-0.07
-0.170.03
-0.07-0.01
0.12-0.08
-0.04-0.10
-0.01 -0.09 -0.01 0.05 0.00
23 Diversification 0.49 31
0.44Market
-0.05 Share
0.02 0.01 0.02
-0.03 0.050.04
0.03 -0.04 0.03
-0.03 0.04
0.10 -0.29
0.00 0.02
-0.06 0.00-0.03
0.00 0.00 0.03
0.02 0.00
-0.09 0.02
-0.06 -0.16 -0.10 19 Firm Birth in 1950s 0.06 024 -0.01 0.00 -0.02 -0.05 0.04 -0.01 0.00 0.02 -0.05 -0.01 -0.07 -0.02 -0.01 0.02 -0.14 -0.16 37 R&D Expenses (log) 3.55 5.03 -0.10 0.08 0.06 -0.18 0.10 0.01 -0.06 0.12 -0.05 0.06 -0.22 0.00 0.04 -0.03 -0.18 -0.18
Birth in 1940s 0.04 0.19 0.00-0.03

0.03 0.04 -0.09-0.35
0.05 0.01
-0.02-0.01
0.01 0.02
0.02 0.01
0.00 -0.01
0.02 -0.07 -0.0
18 Firm Birth in 1960s 0.13 0.33 -0.01 0.03 -0.01 -0.04 0.10 -0.06 -0.04 0.10 -0.02 0.00 -0.12 0.00 -0.01 0.00 -0.21 -0.24 33 Foreign Shares (%) 14.88 34.08 -0.06 0.09 0.02 -0.13 0.10 -0.04 -0.04 0.09 0.04 -0.02 -0.29 -0.09 -0.04 0.00 -0.13 -0.16
??/7"(1/10,000)b 57.58 220.07 0.08 0.06 0.00 -0.14

h in 1980s 0.29 0.45 0.02 0.00 0.01 0.09 -0.05 -0.01 0.04 -0.05 0.05 -0.03 0.12 0.03 0.
17 Firm Birth in 1970s 0.18 0.39 -0.04 -0.01 -0.05 -0.01 -0.05 0.04320.01 Government
0.01 -0.07 Shares (%) 1.52
0.05 -0.02 0.05 11.06
21 Firm Size (log) (centered)3 0.01 2.09 -0.13 0.07 0.07 -0.29 0.07 0.08 -0.09 0.06 -0.11 0.11 -0.34 0.04 0.02 0.00 -0.28 -0.25
25 No. of Large Firm Downsizing 0.73 0.96 0.04 0.13 0.03 -0.05 27 No. of Previous-0.07
0.03 -0.03
Downsizings 0.68 0.79 0.07 -0.03 -0.050.05
-0.02-0.26
0.00 -0.08 -0.03 0.12 -0.09 0.04 0.0.01
0.02 0.02
00 0.06 0.01 -0.05 -0.01 -0.01 0.0-0.12
-0.30-0.17 -0.04 0.05 0.01 -0.04 -0.09 0.07 -0.09 -0.05 0.02 -0.03 0.01
0.00 0.01 -0.07 -0.05 0.01 0.00 0.00 -0.01
irth in 1990s 0.24 0.43 0.03 -0.03 0,02 0.08 -0.07 0.05 0.02 -0.07 0.02 -0.05 0.11 -0.05 -0.0
7
28 Time Lapsed
26 No. of Profitable Since Last Downsizing
Firm Downsizing 1.08 0.05
0.84 0.95 0.01 0.0238-0.02
1.35 0.05 Market
-0.03 -0.08Capitalization
-0.03 0.04
0.07-0.02 2,238.61
0.02-0.05
-0.090.09 793.07
0.01-0.05 0.01
0.010.04
-0.02 0.01
-0.01 -0.10
0.01 -0.01
0.03-0.02
-0.03 0.03
-0.03 0.00
0.04 -0.10
-0.06 0.10
-0.01-0.01 0.08 -0.02 0.02 -0.0 36 Labor Utilization per Employee 1,782.86 43.02 0.03 -0.04 -0.02 0.09 -0.03 -0.05 0.00 -0.13 0.04 -0.02 0.15 0.00 -0.01 0.03 0.07 0.08
14 Family-Managed Firm x Regional Government -0.01 0.56 0.00 0.00 0.01 0.01 -0.07 0.16 -0.10 -0.06 0.12 -0.24 0.06 0.08 -0.44
12 Family-Managed Firm x Firm Size -0.36 0.98 0.04 0.02 0.06 0.08 0.01 0.02 -0.05 -0.01 -0.01 -0.05 0.03
1113Family-Managed
Family-ManagedFirm
Firm(centered)*
x Regional-National -0.01-0.05
0.08 0.50 -0.03 0.22 0.01
0.000.12
-0.01-0.03
0.00-0.02
-0.020.00
0.13-0.03
-0.070.01
-0.13 0.09 -0.34 0.12 -0.01 0.07
-0.01
10 Reg. Gov. Spending on Industrial 0.18 2.30 0.01 0.01 0.00 -0.05 -0.07 0.21 -0.05 0.00 -0.42
9 Regional-National Government x Firm Size 0.07 0.84 -0.01 -0.03 0.02 0.08 0.06 -0.08 0.05 0.02
8 Regional Salience of Manufacturing Sector 0.23 0.06 -0.06 -0.03 -0.01 0.05 0.54 -0.14 -0.34
6 Regional Government Spending on 0.07 1.12 0.00 0.02 -0.01 -0.02 -0.44
7 Regional Government Spending on Industrial -0.21 0.38 0.02 0.01 -0.02 -0.07 -0.53 -0.25
5 Regional-National Government (centered) 0.00 0.43 -0.05 0.00 0.02 0.04
3 Above Subsector Average Sales Growth 0.55 0.50 -0.06 0.20

2 Above Subsector Average
4 Regional EBIT Growth
Concentration 0.42 0.49
(centered) -0.05-0.02 -0.05 0.01
0.00 0.20
Table 2 Descriptive Statistics and Bivariate Correlations
Industrial Development (centered)3

Dev. x Regional-Nat. Gov.
Spending on Industrial Development
"\ Downsizing 0.18 0.39 Development x Firm Size
Government
Variable
3
?2 S
i u? o
<!*
I
?
2
^
I d I
aThe means of some centered variables deviated slightly from zero. This was caused by the listwise exclusion of observations with missing information about variables other than these ? ?
es (log) 0.08 0.16

pitalization 0.01 0.09
0.03 0.14
0.01 0.60
0.03 0.29
0.06 0.22
0.03 0.17
0.01 -0.06 -0.06 -0.15
0.00 -0.07 -0.13 0.34
-0.090.42
-0.01
0.0
Variable 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37
Member 34Firm 0.05

Listed Firm0.17
0.00 0.09 0.120.030.59
0.03 0.12 0.270.25
0.24 0.08 0.18-0.01
0.08 0.12 -0.02
-0.01-0.03
-0.03 -0.09 -0.06
-0.05 0.04 -0.060.05
0.27 36 Labor Utilization per -0.01 -0.04 -0.02 -0.06 -0.25 -0.13 -0.07 -0.05 0.09 0.08 0.04 0.03 -0.09 0.03 -0.14 -0.16 -0.19 -0.03 -0.2 ? <?
Foreign Shares (%) 0.05 0.20 0.08 0.06 0.47 0.28

31 Market 0.13
Share 0.04 0.07 0.070.06 -0.04
0.02 0.47 0.72 0.15 0.27 -0.04 -0.08
-0.02 -0.01 -0.09 -0.09 -0.01-0.05
-0.06 -0.01 -0.06 0.25 -0.04
3032Debt
Government
Ratio -0.10
Shares
-0.05 (%)
-0.11
-0.01
-0.04
-0.02
-0.12
-0.02
-0.11
0.02
0.02
0.19
-0.06
0.05-0.06
0.04-0.04
0.20 0.08
-0.040.04
-0.030.02
-0.04 -0.01 0.07 0.01 0.17
29 Unionization 0.00 -0.05 -0.01 0.01 0.05 0.00 0.08 0.03 -0.01 0.01 0.05 0.03
28 Time Lapsed Since Last -0.01 -0.03 -0.02 -0.01 -0.12 -0.06 -0.07 -0.04 -0.04 -0.06 0.58
Notes. All component terms for interactions were centered before the constructions of the interactions. ? S
-,g
27 No. of Previous Downsizings -0.08 -0.02 0.00 0.02 -0.16 -0.05 -0.09 -0.03 -0.01 0.00
26 No. of Profitable Firm 0.02 -0.03 -0.03 0.00 -0.05 0.00 -0.03 0.04 0.22
24 No. of Branches -0.02 0.08 0.04 0.08 0.30 0.33 0.04 II 25 No. of Large Firm Downsizing -0.02 -0.02 -0.02 0.03 -0.03 0.02 -0.02 0.08
23 Diversification 0.03 0.06 0.09 0.01 0.27 0.10
22 E?/7~(1/10,000)b 0.02 0.05 0.04 0.06 0.42

bThe variable was rescaled for ease of presentation. g ^
21 F//77? S/ze (log) (centered)3 0.10 0.21 0.14 0.16
20 F//777 e/rfn in 1940s -0.09 -0.07 -0.05

19 Firm Birth in 1950s -0.12-0.10
18 Firm Birth in 1960s -0.18
Table 2 (cont'd.) Downsizing Downsizing
centered, variables.
Employee
Table 3 Panel Data Analysis of Spanish Firm Downsizing, 1994-2000

Variable Model 1 Model 2 Model 3 Model 4
Logic of market
H1 : Above Subsector Average EBIT Growth -0.12 -0.11 -0.12 '
(0.05)* (0.05)* (0.05)*
H1: Above Subsector Average Sales Growth -0.14 -0.14 -0.15
(0.05)*' (0.05)** (0.05)**
Logic of decentralized state
H2A: Regional Concentration (centered) -0.40 -0.40
(0.16)* (0.17)*
H2B: Regional-National Government (centered) -0.30 -0.33
(0.12)* (0.13)**
H2C: Regional Government Spending on Industrial Development -5.45 -6.71
(1/100) (3.80) (3.88)+
H2D: Regional Government Spending On Industrial Development x -0.26 -0.30
Regional-National Government (0.13)* (0.13)*
H2E: Regional Salience of Manufacturing Sector -0.89 -0.83
(0.46)* (0.46)+
H2F: Regional-National Government x Firm Size (1/100) -5.89 -7.36
(3.25)+ (3.48)*
H2G: Regional Government Spending on Industrial Development x 0.85 1.17
Firm Size (1/100) (1.11) (1.15)
Logic of family
H3A: Family-Managed Firm (centered) -0.28
(0.06)***
H3B: Family-Managed Firm x Firm Size (1/100) 8.35
(2.44)***
H3C: Family-Managed Firm x Regional-National Government -0.14
(0.13)
H3D: Family-Managed Firm x Regional Government Spending on -1.02
Industrial Development ( 1 /100) (4.73)
Intercept -0.32 -0.10 0.56 0.34
(0.96) (0.96) (0.98) (0.98)
Corporate-level attribute and strategy controls
Firm Birth in 1990s -0.11 -0.10 -0.15 -0.14
(0.11) (0.11) (0.11) (0.11)
Firm Birth in 1980s -0.13 -0.12 -0.16 -0.17
(0.11) (0.11) (0.11) (0.11)
Firm Birth in 1970s -0.15 -0.15 -0.20 -0.21
(0.11) (0.11) (0.11)+ (0.11)+
Firm Birth in 1960s (1/100) -1.78 -1.73 -3.34 -5.43
(11.13) (11.17) (11.34) (11.38)
Firm Birth in 1950s (1/100) 0.50 0.17 -3.09 -3.39
(13.07) (13.11) (13.29) (13.33)
Firm Birth in 1940s (1/100) 6.04 6.36 3.56 3.46
(14.97) (15.04) (15.28) (15.34)
Firm Size (log) (centered) -0.11 -0.11 -0.12 -0.14
(0.02)*' (0.02)*= (0.02)*** (0.02)***
Diversification (1/100) -2.46 -2.72 -0.14 1.38
(5.41) (5.42) (5.47)' (5.50)
No. of Branches (1/100) 4.63 4.21 -2.04 -1.69
(2.85) (2.86) (4-01) (4.02)
No. of Large Firm Downsizing (1/1,000) 7.55 7.50 9.80 9.23
(35.95) (36.04) (36.18) (36.37)
No. of Profitable Firm Downsizing (1/100) -3.20 -3.11 -3.06 -3.35
(2.91) (2.92) (2.93) (2.95)
Table 3 (cont'd.)
Variable Model 1 Model 2 Model 3 Model 4
No. of Previous Downsizings (1/100) 5.76 5.62 5.00 5.06

(3.41)+ (3.42)+ (3.45) (3.48)
Time Lapsed Since Last Downsizing (1/100) 1.14 1.32 1.70 2.08
(2.08) (2.09) (2.10) (2.11)
R&D Expenses (log) (1/1,000) -8.10 -8.03 -8.29 -7.21
(6.10) (6.11) (6.17) (6.19)
Resource dependence controls
Debt Ratio 0.17 0.18 0.18 0.22
(0.10)+ (0.10)+ (0.10)+ (0.10)*
EBIT( 1/100,000,000) 1.03 1.44 1.00 1.38
(1.49) (1.50) (1.53) (1.53)
Market Share 0.15 0.14 0.25 0.32
(0.74) (0.73) (0.74) (0.74)
Unionization 0.48 0.39 -0.16 -0.21
(0.54) (0.54) (0.70) (0.71)
Labor Utilization per Employee (1/10,000) -3.64 -3.97 -5.94 -4.46
(5.24) (5.26) (5.31) (5.33)
Ownership controls
Government Shares (%) (1/1,000) -0.84 -1.01 -1.58 -1.64
(2.48) (2.48) (2.51) (2.51)
Foreign Shares (%) (1/10,000) -7.24 -7.73 -5.56 -6.76
(9.66) (9.70) (9.84) (9.91)
Listed Firm -0.11 -0.13 -0.16 -0.16
(0.16) (0.16) (0.16) (0.16)
Member Firm 0.15 0.15 0.14 0.12
(0.08)* (0.08)* (0.08)+ (0.08)
Fixed effects and time trend controls
Market Capitalization (1/100,000) -2.40 -4.32 -3.98 -5.34
(3.57) (3.62) (3.66) ' (3.70)
Subsector dummies Entered Entered Entered Entered
Year dummies Entered Entered Entered Entered
<ru 9.12E-04 9.12E-04 9.12E-04 9.12E-04
9 8.32E-07 8.32E-07 8.32E-07 8.32E-07
Wald *2(d.f.) 148.70 (44) 164.21 (46) 185.89 (53) 227.45 (57)
Log likelihood -2,069.65 -2,061.02 -2,046.84 -2,024.44
Notes. Tests are twotailed, and standard errors are in parentheses. Some variables are rescaled for ease of presentation. Number of
observations is 4,495 and number of groups is 933.
+p<0.10; *p<0.05; **p<0.01; ***p < 0.001.
and that are significant employers. These results pro Populations of organizations may be heavily influenced
vide compelling evidence that this particular nonmar by an overarching market logic, but treating an organi
ket logic has an influence, and that it is selective. We zational field or industry as insulated from the values
also examined whether family-managed firms would be of other higher order institutions provides an incomplete
more committed to providing job security. Our hypothe picture. Moreover, organizations vary in their receptivity
sis was supported, indicating that family-managed firms to nonmarket logics, resulting in a range of organiza
are influenced by norms that temper the play of the mar tional responses. It follows that we should map the full
ket logic. But this effect is muted in larger family firms. array of logics playing on organizations, and anticipate
Contrary to expectation, family-managed firms are not and identify differences in how they respond. Doing so
especially influenced by regional pressures, indicating increases the chances that we can capture the complex
that the effects of the two nonmarket institutional logics ity of the relationship between institutions, logics, and
are independent of each other. organizations.
So what do these results mean more broadly? We Our second contribution has been to suggest the sig
derive three theoretical insights. The first is confirmation nificant role of state logics in enabling community-level
that organizations face complex institutional contexts to effects. It is not unimportant that community processes
which they respond in different though patterned ways. identified in previous work are from studies undertaken
in the United States. Our study implies that such pro The historical lens, then, focused through the state
cesses might be contingent on an enabling state logic logic, enables a more nuanced interpretation of events
and that community processes may be less evident in and relationships. Previous studies of community iso
more centralized and/or intolerant settings. Further, the morphism implicitly assumed that community pressures
salience of community processes may be historically are historically and culturally neutral. Nor is there any
contingent, dependent on the symbolic significance of suggestion in those studies that such pressures rise or
regional autonomy and the extent to which regional iden fall. Where liberal principles are highly institutionalized,
tity is associated with particular corporate actions. In our as in the U.S., regional pressures may have less force
case, the severity of an earlier centralist regime's force and less symbolic appeal, and thus their historical con
ful suppression of regional sentiments amplified those tingency may be less visible. Our study demonstrates
sentiments once the centralist logic was overthrown. that the intensity of community pressures, the form that
Our study adds to understanding of community pro they take, and the receptivity of particular organizations
cesses in two other ways. First, we have observed are contingent on history.
community effects on a more significant organizational Speaking to institutional theory more broadly, the cur
decision than previously examined. Decisions on down rently dominant emphasis on the concept of organiza
sizing are more critical than decisions on philanthropy tional field may have resulted in institutional processes
and social responsibility (the focus of previous studies), being considered too narrowly. The concept of field
because they are to do with the generation of organiza has proven a useful concept (and will undoubtedly con
tional profitability. Corporate philanthropy, in contrast, tinue to do so) and is an appropriate level of anal
involves the distribution of profits. Our study, there ysis for explaining a range of phenomena, not least
fore, has extended the scope of previous work by show the occurrence of institutional persistence and change
ing that community processes are more profound and and the emergence and decline of new organizational
extensive than previously envisaged. Second, we have forms and practices. Paradoxically, however, the con
specified which organizations are receptive to regional cept may have become too abstract, and thus divorced
processes, whereas earlier work focused on mechanisms from the sociopolitical community and, especially, the
of diffusion. logic of the state within which institutional and organi
Our third theoretical contribution points to the impor zational activities occur. Analytical abstraction, intended
tance of an appropriate historical and cultural lens. to better capture contextual influences, has resulted in
Lecours (2001) makes the case that Spanish regionalism a relative blindness to how communities (regions) and
has its origins in the Reconquista when Christian princi their interaction with state logics affect organizations.
palities sought to regain territories taken by the Moors. The relationship between communities and organiza
This struggle lasted from the Battle of Covadonga in tions, informed through an ideology of the state, was
722 until 1492 when Granada was retaken. For Lecours, integral to early institutional work (e.g., Selznick 1949),
"The roots of many contemporary regional identities in but that focus has largely disappeared. A return to the
Spain are several centuries old" (2001, p. 216). While traditional emphasis on community would be timely.
not advocating that future institutional work necessarily In making this call for ^incorporation of local com
take such a long temporal perspective, it is important that munity into institutional analysis and for fuller and more
an appropriate historical lineage be provided. The strong explicit attention to nonmarket logics, we are running
association reported here between the concentration of counter to, and thus complementing, the recent trajec
a firm's activities and its reluctance to downsize in the tory within much institutional theorizing that focuses on
face of high regional sentiment becomes understand ever higher levels of analysis. Recent work has shifted
able only when it is appreciated that regional identifica attention to overarching logics that transcend national
tion is symbolically associated in Spain with rejection boundaries (e.g., Djelic and Quack 2003). Scott (2005,
of a state logic imposed following an earlier and bit p. 474) has applauded this attention to higher order insti
ter civil war. This symbolic identification of regional tutional processes because "today's organizations are
ism with an antiauthoritarian perspective makes sense to more open to non-local events and ideas." Our argument,
the observer only in juxtaposition to the repressive and in contrast, is that the richness of local processes may
lengthy Franco regime. Similarly, the present association have been significantly underestimated. The difference
between family firms and job security is understandable in emphasis between the level of analysis adopted here
in the Spanish setting when it is appreciated that, previ and that of much other work may be, of course, a func
ously, job security had been highly institutionalized by a tion of our empirical setting, and until further work is
regime that pervasively linked job security with family. conducted in different settings, the theoretical extensions
Moreover, the relevance of family in Spain is at least put forward in this paper will remain suggestive rather
partly a function of the Catholic Church, which, again, than definitive, although to us they are appealing in their
defines the context. possibilities.
Future Research. We offer three suggestions for fur market logic, it would make sense to engage in compara
ther research. First, more attention should be given tive work so that the scope conditions of these influences
to whether overarching logics reinforce or contradict may be determined and theoretically explicated.
each other and to how far logics prevalent within any Conclusion. The notion of institutional logics is an
given sector are tolerant of logics arising from other
important conceptual advance within institutional anal
institutions or historical eras. Research should also give
ysis and has already delivered interesting theoretical
attention to the compliance mechanisms by which ascen
insights. But much remains to be done. We have built on
dant logics are reproduced and enforced and to how the idea that organizations experience institutional com
far those mechanisms allow or restrict the expression of
plexity by examining the influence of logics arising from
alternative practices. The Spanish case refers to coer the institutions of state and family (and indirectly, of
cive mechanisms but compliance might be sought in religion). Although our arguments are presented as rel
other ways, such as the use of normative mechanisms
evant to a wider set of organizations and contexts, our
in sectors where the institution of religion is paramount. case has a specific cultural setting and we have raised
If we are to properly understand the relationship between the need for comparative, historically grounded research,
institutions, logics, and organizations, we need to take arguing that by being attentive to cultural and historical
seriously the Friedland and Alford/Thornton thesis that contexts, we would increase our chances of understand
multiple logics constitute the higher order societal con ing the consequences of institutional complexity. The
text within which organizations function; and we need aim of this paper has been to provide a constructive start
to recognize that the responses of organizations are a in this direction.
function not only of the degree of "institutional contra
diction" (Friedland and Alford 1991, p. 256), but, also, Acknowledgments
of the enforcement mechanisms in place. Stan Xiao Li acknowledges the financial support of a grant
Second, we need to better understand the influence awarded by the Social Sciences and Humanities Research
of regional/community embeddedness. We need to know Council of Canada. This research was partially funded by
much more about Narotzky's (2000, p. 13) "sedimented Spanish MCYT and FEDER Grant SEJ2005-09029/ECON.
practices" and about how community identities form.
Doing so would complement the emphasis of recent Endnotes
work on mechanisms by which norms and expectations lrThe role of nonmarket logics, of course, was central to the
foundational work of Max Weber.
are learned and diffused. However, we should be mind
2We thank one reviewer for suggesting this time trend variable.
ful that not all geographic regions will have distinct
3 In our sample, a branch of a firm is nested within the firm and
and enduring identities. Observers often cite cities or also nested within the region in which the branch is situated.
regions such as Oxford or Vienna or Berlin as illustra Hierarchical linear modeling (HLM) regards the branch as
tive of community identities, but do all cities and regions cross-classified, and the cross-classified random effects model
have such distinct identities? Probably not, and future in HLM is applicable for this type of data (Raudenbush and
research could usefully analyze the forces that generate Bryk 2002). We did not choose HLM because we do not have
coherent and distinct identities and their consequences. data on the number of employees at the branch level. We
On a different note, we have sought to uncover acknowledge the potential generalizability limitation, because
the responses of different categories of organizations our analysis pertains to the downsizing behavior of firms, not
that of their branches.
to institutional complexity. What we have not done,
4We thank the associate editor and one reviewer for their sug
and that would complement our focus, is examine how
gestion of this set of dummy variables.
individual organizations process that complexity. We 5We thank one thoughtful reviewer for the suggestion of pos
have not looked inside the organization. Consequently, sible impacts stemming from resource dependence.
we have only touched on how individual organiza
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The Multiplicity of Institutional Logics and the Heterogeneity of Organizational Responses

The Multiplicity of Institutional Logics and the

Amalia Mag?n Diaz

Jos? C?spedes Lorente

Keywords: institutional logics/models of action; community

Table 1 Sample Statistics The results were broadly consistent. Firms t

Birth in 1940s 0.04 0.19 0.00-0.03

??/7"(1/10,000)b 57.58 220.07 0.08 0.06 0.00 -0.14

5 Regional-National Government (centered) 0.00 0.43 -0.05 0.00 0.02 0.04

3 Above Subsector Average Sales Growth 0.55 0.50 -0.06 0.20

Industrial Development (centered)3

es (log) 0.08 0.16

Member 34Firm 0.05

Foreign Shares (%) 0.05 0.20 0.08 0.06 0.47 0.28

23 Diversification 0.03 0.06 0.09 0.01 0.27 0.10

22 E?/7~(1/10,000)b 0.02 0.05 0.04 0.06 0.42

21 F//77? S/ze (log) (centered)3 0.10 0.21 0.14 0.16

20 F//777 e/rfn in 1940s -0.09 -0.07 -0.05

Table 2 (cont'd.) Downsizing Downsizing

Table 3 Panel Data Analysis of Spanish Firm Downsizing, 1994-2000

No. of Previous Downsizings (1/100) 5.76 5.62 5.00 5.06

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