Institutional Entrepreneurship in Mature Fields: The Big Five Accounting Firms

Author(s): Royston Greenwood and Roy Suddaby

Source: The Academy of Management Journal, Vol. 49, No. 1 (Feb., 2006), pp. 27-48
Published by: Academy of Management
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?
Academy ofManagement Journal
2006, Vol. 49, No. 1, 27-48.

INSTITUTIONAL ENTREPRENEURSHIP INMATURE FIELDS:

THE BIG FIVE ACCOUNTING FIRMS
ROYSTON GREENWOOD
ROY SUDDABY
University of Alberta

This study examines change initiated from the center ofmature organizational fields.
As such, it addresses the paradox of embedded agency?that is, the paradox of how
actors enact changes to the context by which they, as actors, are shaped. The change
examined is the introduction of a new organizational form. Combining network loca
tion theory and dialectical theory, we identify four dynamics that form a process
model of elite institutional entrepreneurship.

theory initially focused upon

Institutional ex Multidisciplinary practices are firms that combine
plaining how institutionalized structures of mean several professions, typically accounting and consult
ing affect organizational processes. Attention was ing, and, sometimes, law. The new form was pio
given to the conforming behavior of organizations, neered and championed by elite accounting firms
the adoption of a limited range of socially approved (Greenwood, Suddaby, & Hinings, 2002) and was vig
organizational templates, and the resilience of in orously contested (Covaleski, Dirsmith, & Rittenberg,
stitutional prescriptions (Tolbert & Zucker, 1996; 2003). As such, it is an example of institutional en
Scott, 2001). More recently, institutional entrepre trepreneurship that runs counter to prevailing theory
neurship and change have become the phenome because change was initiated from the center of an
non of interest (Dacin, Goldstein, & Scott, 2002).
organizational field. Moreover, given that the field is
The notion of change, however, "poses a problem highly institutionalized, the case is an exemplar of
for institutional theorists, most of whom view in embedded The motivation for our current
agency.
stitutions as the source of stability and order" work was to use themulitdisciplinary practice case to
(Scott, 2001: 181). If, as institutional theory asserts, answer the following question: Why and under what
behavior is substantially shaped by taken-for circumstances are embedded elites enabled and mo
granted institutional prescriptions, how can actors tivated to act as institutional entrepreneurs in highly
envision and enact changes to the contexts in institutionalizedcontexts?
which are embedded? Seo and Creed (2002:
they Using qualitative procedures, we explored the
226) referred to this as the "paradox of embedded circumstances that prompt elite firms to promote
agency." A central challenge for institutional the
change. Contrary to extant theory, according to
ory, therefore, is to show how and why actors which the network
centrality of elites embeds them
shaped by (i.e., embedded within) institutional
within prevailing logics of action and dulls them to
structures become motivated and enabled to pro
the possibilities of change, we show how such a
mote change in those structures.
network location can sharpen awareness of alterna
We examine the introduction of a new organiza
tives. We find that elite, central organizations are
tional form?the multidisciplinary practice (MDP)? more likely to come into contact with contradictory
within the field of professional business services.
logics because they bridge organizational fields.
Further, they become immune to coercive and nor
The research described here is supported by the Social mative processes because their market activities
Sciences and Humanities Research Council of Canada. expand beyond the jurisdiction of field-level regu
This paper benefited from conversations with JoelBaum, lations. These processes, which we label boundary
who cut a Gordian knot;Woody Powell, who questioned
bridging and boundary misalignment, expose cen
an and Sara who
interesting assumption; Rynes, pro tral actors to field-level
"contradictions" (Seo &
vided insightful comments on early drafts. Eva Boxen and lower their embeddedness. When
Creed, 2002)
baum, Julie Battilana, and Flora Stormer provided direct
low embeddedness is combined with a motivation
yet constructive comments in the inimitable way of doc
toral students. Tom Lee and three reviewers
to change, central actors become institutional
anonymous
provided extraordinary critical feedback. Patience and entrepreneurs.
careful assistance were provided by Michelle MacLean This study contributes to institutional theory by
and Alisha Hurley. expanding understanding of institutional change. It

27

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 28 Academy ofManagemen t Journal February

is a rare account of institutional entrepreneurship rand,2003; Thornton, 2004). A mature field has
by elite actors in a mature setting. Previous studies stable, routinized interactions between participants
have focused more on institutional entrepreneur who have a strong mutual awareness of which or
ship arising from actors on the fringes or outside an ganizations occupy given fields and which do not
organizational field, and usually in less mature (Scott, 1994, 2001). Organizational forms converge
contexts (e.g., Maguire, Hardy, & Lawrence, 2004). around
isomorphically increasingly taken-for-granted
how location within an
Further, by emphasizing templates (DiMaggio & Powell, 1983).
organizational field is associated with exposure to One consequence of field maturity is increasing
institutional contradictions, our study combines stratification as elite firms become distinguished by
previously separate theoretical perspectives to give & Zuckerman,
reputation (e.g., Phillips 2001;
an explanation of motivated, endogenous change. Podolny, 1993; Stuart, 1988) and scale (e.g., Mal
In doing so, the study addresses a resonant theme erba & Orsenigo, 1996). Abbott (1988), for example,
within institutional and organizational theory, described how dominant establish
professions ju
showing how actors become motivated and enabled risdictions surrounded less pow
by subordinate,
to impose change upon institutions by which they erful professions. DiMaggio (1983) referred to a
are constrained.
"dominance hierarchy" within organizational
We present our study in four sections. The next fields. Mensal (1960), Eisenstadt (1968), and
section elaborates our theoretical orientation, es
Shils (1975) the imagery of central and
suggested
tablishing the central proposition in the extant lit
peripheral organizations as a useful way of cap
erature. We then describe our research procedures.
turing these hierarchical relations. The notion of
A subsequent section presents the case study, iden
center and periphery embraces both the capacity
tifies four dynamics, and sequences them into a
of central actors within a social structure to es
process theory of elite institutional entrepreneur tablish and sustain an institutional logic favor
ship. Our concluding section points to further
able to their interests, and the relative embedded
research.
ness of elites and nonelites. As their centrality
increases, actors increasingly treat institutional
THEORETICAL ORIENTATION logics and the social behaviors encoded within
them as taken-for-granted and hegemonic. Here,
Institutional theory, as initially formulated, sug
we use the adjectives "elite" and "central"
gests that behaviors are patterned and reproduced
because social norms become interchangeably.
taken-for-granted.
Institutional logics and structures are never fro
Following Meyer and Rowan (1977), considerable
zen. Even in highly mature fields,
research confirmed this "corrective" stability is tran
(DiMaggio,
sitory (Hoffman, 1999). In recent work, therefore,
1988: 5) to the then-prevailing assumption that or
are a scholars have sought to identify the locus and pro
ganizational interests pursued in calculated
cesses of institutional change. Initially, most atten
and rational manner. It is now widely acknowl
occurs tion was given to exogenous "jolts" (Meyer, 1982)
edged that organizational behavior within a
"smacking into stable institutional arrangements
web of socially constructed, taken-for-granted pre
and causing indeterminacy" (Clemens & Cook,
scriptions of appropriate conduct (Scott, 2001).
Attention has turned to understanding how indi 1999: 447). Jolts take the form of social upheaval,
viduals and organizations wittingly change the in technological disruptions, competitive disconti
stitutions inwhich they are embedded (Dacin et al., nuities, and regulatory change (e.g., Davis, Diek
work focuses mann, & 1994; Fox-Wolfgramm, Boal, &
2002). Much of this upon the organi Tinsley,
zation field, "the least familiar, yet the level ofmost Hunt, 1998; Garud, Jain, & Kumaraswamy, 2002:
Kraatz & Moore, 2002; Lounsbury, 2002; Ruef &
significance to institutional theory" (Scott, 2001:
83; see also Mazza & Pedersen, Scott, 1998; Scott, Mendel, & Pollack, forthcoming;
2004). Organiza
tional fields are clusters of organizations and occu Zucker, 1988). These events precipitate the entry of
new players into an field (Thornton,
pations whose boundaries, identities, and interac organizational
tions are defined and stabilized by shared 2002; Thornton & Ocasio, 1999), support the ascen
dance of existing actors (Scott, Reuf, Mendel, &
institutional logics (Scott, 2001). Institutional log
ics are taken-for-granted, resilient social prescrip Caronna, 2000), and change the intellectual climate
tions, sometimes encoded in laws, specifying the of ideas (Davis et al., 1994). Their effect is to disturb
boundaries of a field, its rules of membership, and field-level consensus by raising awareness of extant
the role identities and appropriate organizational and alternative logics,enabling the possibility of
forms of its constituent communities (Friedland & change. Less fully explored are endogenous sources
Alford, 1991; Lawrence, 1999; Rao, Monin, & Du of deliberate change, defined as "institutional en

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 2006 Greenwood and Suddaby 29

trepreneurship" (DiMaggio, 1988), raising the par aligned with current practices. Thus, although in
adox of embedded agency. stitutional entrepreneurship may emerge any
where, it is generally thought more likely to emerge
from less embedded organizations at the periphery
Institutional Entrepreneurship and the Paradox
of a field.
of Embedded Agency
Low embeddedness combined with
high "inter
Institutional entrepreneurs are organized actors est dissatisfaction" explains why actors might be
who envision new institutions as a means
of ad motivated to consider change, but it does not ex
vancing interests they value highly yet that are plain the circumstances that precipitate them to do
suppressed by extant logics (DiMaggio, 1988). In so. Seo and Creed (2002), drawing upon dialectical
stitutional entrepreneurs, thus, are interest-driven, theory (Benson, 1977; see also Clemens & Cook,
aware, and calculative. Expressed in this way, the 1999), pointed to the possible role of latent "con
notion of institutional entrepreneurship runs tradictions" within organizational fields. They
against the taken-for-granted thesis of institutional identified four contradictions: gaps between the
theory. As Scott noted: "In highly institutionalized levels of performance arising from conformity to
systems endogenous change seems almost to con existing institutional prescriptions and from alter
tradict the meaning of institution" (2001: 187). Ac native opportunities in the marketplace (the "effi
counts of institutional entrepreneurship, in other ciency contradiction"); inability of a field to adapt
words, confront "the paradox of embedded agency" to exogenous jolts because of "locked-in" patterns
(Clemens & Cook, 1999; Seo & Creed, 2002; Sewell, of behavior and thought (the "nonadaptability con
1992). That is, any theory of institutional entrepre tradiction"); inconsistencies between values deeply
neurship must explain how, and which, embedded held yetmutually inconsistent (the "interinstitutional
actors are able to envision, then impose, alternative incompatibility" contradiction); and divergence of
futures (Boxenbaum & Battilana, 2004; Holm, 1995; the interests of those privileged and those disadvan
Seo & Creed, 2002). An actor's relative embedded taged by existing logics (the "misaligned interests
ness we define as indicated by awareness of alter contradiction"). According to Seo and Creed, field
natives, openness to alternatives, and a motivation level contradictions set the stage for "praxis,"
to change. An embedded actor, by this definition, is whereby actors move "from unreflective participa
neither motivated to change, nor aware of or open tion in institutional reproduction to imaginative cri
to alternatives. tique of existing arrangements to practical action for
As yet, the paradox of embedded action has not change" (2002: 231). The idea of contradictions pro
been fully resolved, but neoinstitutionalists have vides two insights: it highlights change as flowing
drawn clues from two different literatures. Network from contradictions endogenous to organizational
location theory separates central and peripheral or fields, implying that, contrary to DiMaggio and Pow
ganizational players and identifies the latter as the ell (1983), fields are unlikely to evolve toward equi
more likely to disengage from institutionalized librium; second, it suggests change will occur where
practices, for three reasons. First, they are less con contradictions are most acute, such as where incom
nected to other from whom norms values conflict or where actors are
organizations, patible
are learned, and thus are less aware of institutional disadvantaged.
expectations (Davis, 1991; Galaskiewicz & Wasser The proposition from the existing literature,
man, 1989; Gr?ve, 1998; Kraatz, 1998; Westphal, then, is that new ideas occur at the margins of a
Gulati, & Shortell, 1997). Second, they are less field because it is there that organizations are less
aware of institutional expectations because of their embedded, less privileged, and more exposed to
weak connection to field-level processes (North, institutional contradictions. Organizations at the
1990; Zucker, 1988). Third, they are often disad field's center, in contrast, are more informed, con
vantaged by prevailing arrangements and stand to tinually socialized, better advantaged, and thus
benefit from change (D'Aunno, Succi, & Alexander, more embedded and resistant to change. Several
2000; Ingram, 1998; Kraatz & Zajac, 1996; Leblebici, studies support this basic proposition (e.g., Kraatz
Salancik, Copay, & King, 1991). Resource-rich cen & Moore, 2002; Haveman & Rao, 1997; Hirsch,
tral players, in contrast, are embedded within their 1986; Leblebici et al., 1991; Palmer & Barber, 2001).
institutional contexts. They often fail to see beyond Moreover, the proposition is consistent with obser
prevailing "recipes" (Porac & Thomas, 1990), are vations reached by application of other theoretical
heavily exposed to normative processes (DiMaggio perspectives. Tushman and Anderson (1986) noted
& Powell, 1983), frequently have significant com that incumbent industry leaders rarely introduce
mitments to existing technologies (Tushman & competence-destroying technologies. Porac and
Anderson, 1986), and have interests that are Thomas (1990) reported the "cognitive blindness" of

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 30 Academy ofManagement Journal February

older organizations. March (1991) asserted that estab ventional bureaucracy" (2001: 1135). Rao and
lished firms "exploit" current knowledge, whereas Singh defined organizational forms as "novel re
new firms "explore" to gain new knowledge. combinations of core organizational features in
Nevertheless, the proposition that change more volving goals, authority relations (including organ
likely originates from the periphery of a field is not ization structures and governance arrangements),
absolute. Central organizations do, sometimes, act technologies, and client markets" (2001: 244).
as institutional entrepreneurs (e.g., see Greenwood Neoinstitutionalists, whom we follow here, regard
et al., 2002; Phillips & Zuckerman, 2001; Sherer & forms as "incarnations of beliefs and values" (Have
Lee, 2002). These instances, though not typical, are man & Rao, 1997: 1611; see also D'Aunno et al.,
especially interesting because they exemplify em 2000; Kraatz & Zajac, 1996). That is, an organiza
bedded agency. It is these instances of action that tional form is an archetypal configuration of struc
need to be understood if we are to resolve the tures and practices given coherence by underlying
paradox of embeddedagency. values regarded as appropriate within an institu
Importantly, although the concept of institu tional context (Greenwood & Hinings, 1996).
tional entrepreneurship evokes the image of a sin Animportant clue that a new form is emerging is
itmay not (as contestation over its
gle organization acting innovatively, legitimacy. Kraatz and Zajac
in the case we will describe), be an act of a single (1996) described the open hostility directed at U.S.
organization. This way of thinking possibly comes liberal arts colleges that introduced vocational pro
from how the term is used in the entrepreneurship grams. Similarly, abandonment by U.S. law firms of
literature, where it has a strong association with the traditional Cravath model of career manage
individual agency. But at the field level, we sug ment became "a major news event" (Sherer & Lee,
gest, a rather different imagery is needed. Different 2002: 106). The organizational form that we exam
components of a new practice can first appear in in this study triggered conflict between
ined two
different organizations. Further, it is well estab professions and drew the opposition of regula
lished that firms mimic exemplary others, espe tory agencies of the state both in Canada and the
cially those with whom they have systemic ties United States.
(Davis, 1991; Westphal et al., 1997). For this reason,
it is likely that eliteswill share responsibility for
METHODS
initiating institutional entrepreneurship.
Rationale

Organizational Form This study emerged from ongoing research dur

The example of entrepreneurship examined here ing which we became aware that a new organiza
tional form, the multidisciplinary practice (MDP),
is the emergence of a new organizational form, was emerging and that the very largest global ac
which is the example provided by DiMaggio (1988).
forms enable diverse approaches to counting firms, known as the "Big Five" (Arthur
Organizational Deloitte Touche Ernst &
Andersen, Tohmatsu,
societal and economic problems (Rao & Singh, were its
Young, KPMG, PricewaterhouseCoopers),1
1999, 2001) and reflect configurations of privilege
initiators. However, while we understood that
and influence (Perrow, 2002). Not surprisingly, In
change had originated at the center rather than the
gram (1998) suggested that the emergence of a new
form has resounding institutional periphery of a highly institutionalized field, we did
organizational not understand the conditions that established the
implications and is a particularly meaningful ex
motive and capacity for change. As such, the mul
ample of entrepreneurship. But understanding the
tidisciplinary practice provided an opportunity to
emergence of new forms is not without difficulty. extend existing theory by examining a significant
Forms may take decades to fully evolve (Rao, 1998;
instance of embedded action.
Ruef & Scott, 1998). They are often assembled from
Our research design was a type of "naturalistic
the components of existing forms and/or emerge
transitional it diffi inquiry" inwhich inductive logic was used to obtain
through arrangements, making
cult to distinguish new from ancestor forms (Camp insights (Garud et al., 2002; Lincoln & Guba, 1985).

bell, 1997). Further, there is no agreement on how

organizational form should be defined (Lewin, 1
The Big Five emerged out of the Big Six, following
Long, & Carroll, 1999). the 1996 merger of Price Waterhouse and Coopers &
Ingram defined form as "the combination of an The Six evolved from the
Lybrand. Big Big Eight, when,
organizational structure and an organizational in 1989, Peat Marwick Thorne merged with Main Hurd
strategy" (1996: 85). Child and McGrath, more sim man to formKPMG, and Arthur Young and Thorne, Ernst
ply, referred to new forms as "alternatives to con Whinney merged to formErnst & Young.

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 2006 Greenwood and Suddaby 31

Use of qualitative procedures was appropriate, for British Columbia, 1 in the Law Society ofUpper
three reasons. First, the changes observed in the field Canada (Ontario), and 1 in the Canadian Bar Asso
of professional business services constituted a com ciation. Informants occupied senior positions or
plex social setting in which causal dynamics had specific responsibility formonitoring multidis
were not immediately apparent and the motiva Interviews were semistructured
ciplinary practice.
tions of actors were obscure (Elsbach & Kramer, and focused upon the relationship between the Big
2003). Second, the analysis involved historical Five and the accounting and the in
profession
processes. Such dynamic events are best ana volvement of regulators in the multidisciplinary
lyzed through use of inductive techniques by a
practice debate. As specific example, we asked
which event sequences are clarified and overlap
regulators they learned of Ernst & Young's
how
ping causal forces disentangled (Lee, 1999). Fi of a law firm and whether the way in
a acquisition
nally, primary motivation for this study was
which they gained this information was typical of
"theory elaboration" (Lee, Mitchell, & Sabylinski,
their relationship with the Big Five.
1999), a process in which one contrasts preexist All between one and one and a
interviews were
ing understandings with observed events in an
half hours in length, were recorded (where permit
effort to extend existing theory. Our study is thus
an instrumental case ted), and transcribed. A sample of interviews in
study (Stake, 1994). We so as to minimize
volved two researchers inter
drew upon two sources of data: interviews and
viewer bias. We consulted the texts of 45
archival materials.
interviews conducted between 1986 and 1995 for
contextual information as well as for specific in
Sources of Data the initial growth and elaboration
sights regarding
We followed Ruef and Scott (1998) in defining of the multidisciplinary practice. These earlier in
our field geographically, terviews were with a representative sample of part
collecting most of our data
within the jurisdiction of the Canadian Institute of ners in the then Big Eight/Six firms. It was this
Chartered Accountants (CICA). Once the new or project that yielded the traditional organizational

ganizational form was extended to include legal form and the emerging multidisciplinary practice
services, however, the debate provided an oppor form (see below).
tunity to verify our emerging interpretation by an Archival data. Five categories of archival infor
alyzing responses in the United States. Inclusion of mation were consulted. We reviewed the annual
these later events constituted a "sequential exten
reports of the CICA and the ICAA, in reverse chro
sion" of the case (Stake, 1994).
nology from 2002 to 1977, in order to trace the first
Informants. Two categories of actors were in indication ofmultidisciplinary activity by accoun
terviewed: senior partners in three of the Big Five tants. We conducted a similar review of annual
firms (A, B, and C) and in the Ernst & Young law
reports and documents that discussed themultidis
firm; and senior executives in the professions of activities of law or firms pre
ciplinary accounting
law and accounting. We interviewed 11, 12, and
pared for the law societies of Alberta and Ontario.
13 partners in the Big Five, and 3 in the law firm.
We had access to background papers at the provin
All respondents participated in strategic deci
cial level that were not publicly available. These
sions of their firms and were knowledgeable more private materials allowed us to validate and
about their firms' approach to multidisciplinary
elaborate public statements. They confirmed the
practice. The majority of respondents had been
with their firms for over 20 years. We did not chronology of events, gave details not available
from interviews, and provided textual accounts of
conduct interviews in the remaining Big Five
debates and discussions. There was a striking cor
firms but had done so in earlier projects. There
was respondence between public and private sources
nothing to indicate that the attitudes and
of these firms were different or would (as was also found by Covaleski and colleagues
practices
become different from those reexamined here. [2003]). We reviewed documents and press releases
Interviews were semistructured and focused produced by the Big Five, including a prominent
the structures and processes of the firms, report they jointly commissioned (Trebilcock &
upon
how these were changing, and why. Csorgo, 1999). We reviewed lists of training courses
We conducted 23 interviews with regulatory per provided by the ICAA and transcripts of promo
sonnel: 6 in the Institute of Chartered Accountants tional videos. Finally, we consulted the transcripts
of Alberta (ICAA), 4 in the CICA, 2 in the Institute of publicinquiries held by the U.S. Securities and
of Chartered Accountants of Ontario (ICAO), 6 in Exchange Commission (SEC). The SEC hearings,
the Law Society of Alberta, 3 in the Law Society of held between August 16 and September 21, 2000,

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 32 Academy ofManagement Journal February

yielded transcripts from over 90 witnesses. These Once an set of phrases and justificatory
initial
archival data comprised written submissions and narratives had prepared, we reviewed
been them
transcripts of oral testimony and cross-examinations. carefully, referring frequently to the original tran
scripts. Analysis at this point was an exercise in
latent analysis, inwhich a researcher interprets the
Data Collection and Analysis
data using what he/she knows about a subject and
Data collection
occurred in four phases. From the context within which the data are gathered
late 1994 to 1995, we considered materials already (Berg, 2004). Through several iterations between
collected. In the second phase, from 1996 to 1997, the raw data, the summaries, and theory, we gen
we approached regulatory agencies for archival ma erated four core dynamics: The first, which we
terials and began interviewing their personnel. In subsequently termed adverse performance, was a
this same phase, we collected indicators of the fi slowdown in demand for audit services that chal
nancial performance of accounting firms,which we lenged the Big Five's ability to sustain recent
updated throughout the study. In phase 3,1997-99, growth rates and raised a tension (contradiction)
we conducted interviews in the Big Five, including between conformity to existing conventions and
lawyers in the Ernst & Young law firm, and further the option of searching for alternative opportuni
interviews in the regulatory agencies. During this ties. The second, later termed boundary bridging,
phase, we began analyzing the collected data. Fol was the importance of the Big Five's
unique access
lowing Miles and Huberman (1994), we arranged to an international corporate clientele whose press
the data into a condensed, chronological account, ing for extended services raised interinstitutional
coding each data segment according to its source. incompatibilities. The third, later termed boundary
Data retained the original wording. For was a
segments misalignment, discrepancy between the scale
each segment we indicated whether it related to of operations of the Big Five and the jurisdiction of
embeddedness (coded "E") or performance (coded regulatory agencies, which spotlighted the inflexi
"P"). This analysis provided a condensed but bility of regulatory boundaries. And the fourth and
"thick" description of events, arranged according to final core dynamic we identified was the discrep
our two "sensitizing" (Strauss & Corbin, 1994: 277) ancy in resources between the Big Five and regula
concepts. Once the chronological account was es tory agencies, which we later termed resource
we
tablished, arranged the data for each of the asymmetry. In generating these dynamics, we re
primary actors (regulators in law and accounting; corded any ambiguities in the data. Thus, the Big
partners in the Big Five firms), using the following Five pointed to economic factors and pressure from
"generative" (Strauss & Corbin, 1994: 274) ques clients as influencing the shift toward multidisci
tions as a schema: Why were the Big Five firms plinary practice, yet these firms were apparently
motivated to change? From where did the particu performing well. Similarly, they were somewhat
lar change (the idea of multidisciplinary practice) disdainful of their profession, yet remained and
arise? What was the role of the regulators? How was participated within it.
the multidisciplinary practice debate framed as a As the research progressed, we sought to verify
problem? Underlying these questions is an attempt the emerging dynamics by using supplemental data
to capture the justificatory accounts of different sources, especially noninterview data (Jick, 1979).
actors engaged in the multidisciplinary practice For example, having identified the problematic re
debate. lationship between the Big Five and the accounting
The lead author then conducted a "manifest anal profession, we used three noninterview indicators
ysis" (Berg, 2004) of the condensed accounts, first to assess the relationship: whether each Big Five
identifying phrases commonly used by regulators firm's training was provided in-house or by the
and/or professionals in the Big Five. For example, profession; how far their activities were monitored
references to the size and scale of the Big Five by the profession so as to ensure compliance with
firms, to their resources, to pressure from their cli professional standards; and their participation in
ents, and to the mature audit industry were made the profession's committees. Supplementary data
frequently. Then, the lead author, using his knowl of this kind were collected only after we had dis
edge of the industry and profession, identified jus cerned the emerging themes from interview and
tificatory narratives. For example, almost all infor archival materials. Table 1 summarizes the multi
mants from the Big Five offered client demand as ple sources of data by which the four dynamics
an explanation justifying the decision to provide were identified and subsequently verified and pro
legal services; and the issue of size was often asso vides illustrative data segments.
ciated with the profession's difficulty in monitor In the final phase of data analysis, conducted in
ing professional standards. 2000-01, we took advantage of the SEC transcripts

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2006 Greenwood and Suddaby 33

TABLE 1
Summary of Core Dynamics and Data Sources with Illustrations

Dynamics Data Sources Illustrations

Performance
vs. conformity Interviews with
Efficiency Big Five "We watch each other all the time. It is critical to be in the elite group.
That gets you to the table. One of the reasons for the mega-mergers is
that no one wants to fall into the second-tier."
Published statistics Revenue growth.
SEC transcripts No evidence.

Boundary bridging
Institutional contradictions Interviews with Big Five "In order to serve our global clients, we had to be able to offer a full

range of services. They were making that very clear."

Statistics on audit assets audited; number of clients with $ billion assets
Percentage
SEC transcripts
with Big Five "It wasn't because our predecessors were geniuses and said 'we need
more revenue.' It's because our clients said, 'Fix that problem.'"

Boundary alignment
Lack of adaptability Interviewswith Big Five "When I started in the firm, the action was in the local office and

profits were divided there. Now we are a global firm moving to a

global profitpool. This has caused problems forthe (profession)

which is still organized on a basis with some national
provincial
coordination."

Training records Percentage in-house

Statistics on firm size Number of countries; number of professionals
Committee membership on committees
Percentage membership profession's

Resource asymmetry Interviews with Big Five "The association our office
reviews To us, it's Mickey
periodically.
Mouse. Our standards are so much
higher than their requirements
that we don't really worry. Imean, we care: the review matters. But
when we really sweat is when our national office reviews
us . .. they're the ones that matter."
Interviews with regulators "There are fewer presidents from the Big Five. Filling that or similar
is less acknowledged
roles within the firm as something that is
important to do. There are individual exceptions, but by and large
we don't get the same commitment as before."

Membership statistics Percentage of profession employed by Big Five

SEC transcripts "If the accountants failed to get their way by lobbying Congress or by

using the influence campaign contributions, they were ready to sue

us. Arthur Andersen hired David Boies, the lawyer who fashioned
the government's antitrust case against Microsoft . . . their
Corp legal
strategy was to challenge the SEC's authority to dictate to accounting
firms whom they can and cannot do business with."

to further examine the emergent dynamics. At this speculative. This exclusion resulted in 135 text
stage, our purpose was more verificatory than ex segments. We then coded these segments according
ploratory, conforming to the "basic analytic cycle" to the core themes previously identified.
ofmoving from inductive to deductive as our inter We found confirmatory evidence of our dynam
pretations crystallized (Miles & Huberman, 1994: ics (i.e., multiple instances of our key constructs),
438). Specifically, we wanted to see whether our but with two qualifications. First, the informants
dynamics were represented in a very public and from the Big Five did not refer to their own perfor
somewhat hostile forum. The second author read mance difficulties, but to that of the profession,
through the transcripts and, using computer-as making the case that the long-term viability of the
sisted textual analysis software (NUD*IST), ex profession required movement toward multidisci
tracted all passages that presented justificatory ac plinary practice. For example, Stephen Butler, CEO
counts for multidisciplinary practices. Excluded of KPMG, in testimonyat the 2000 SEC Public
from the data set, as a result of this analysis, was Hearings on Auditor Independence inWashington,
the testimony of academics, consumer groups, and DC, pointed to the problem of recruiting and retain
other actors whose testimony was second-hand or ing the brightest minds:

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 34 Academy ofManagement Journal February

I spend more time than I like to admit in the Silicon CASE ANALYSIS
Valley and other places like that trying to convince
This section describes, first, the chronology of
my brightest professionals to staywith KPMG rather
than jump to a new economy company rich with the case study, outlining the shift toward the new
stock options. If this rule (restrictingmultidisci organizational form. Then, we elaborate each of the
four dynamics. Finally, we sequence the dynamics
plinary practices) were in place, Imay as well not
even begin those discussions. The best and brightest into a process model of entrepreneurship.
minds . . would
. view firms as a
auditing stagnant

professional environment. And, candidly, I don't

know how I'd argue with them, because I know I Research Setting
won't work in that environment.
Our setting, the field of professional business
in Canada,
services consisted of firms providing
We codedthis data segment as support for per advice to corporations and governments on busi
formance as a motivating factor and for the contra ness matters. Several professions are active within
diction between conformity to traditional practices the field, including accounting, which was our pri
and a chance to seize novel opportunities for im mary focus, and law and management consulting.
proved performance. The field is thus segmented by professions that
Second, there were no textual references to claim jurisdiction over the authoritative provision

boundary misalignment leading to nonadaptability. of advice underpinned by particular, abstract bod

This is not surprising, however, given the forum. ies of knowledge. The accounting profession claims
One would not expect Big Five informants to admit the exclusive right to provide services involving
in public that these firms were too large to be con the interpretation of financial data. The legal pro
trolled by existing regulatory structures. However, fession claims authority over the interpretation of
Arthur Levitt, then chairman of the SEC, later ac statutes. Until recently, the boundaries between the
and law in this field were
knowledged (in his 2002 book) that the agency's accounting professions
resources had not adapted to the scale and com relatively though the two professions
settled. Even

of its tasks. He admitted that the SEC overlapped in the provision of tax services, poten
plexity tial conflicts were contained amica
backed down because of threats by the Big Five traditionally
bly, until the emergence of multidisciplinary prac
firms to use their influence in Congress to cut fund
tices (DiPiazza, 1999).
ing to the agency: has a clearly defined elite center?
Accounting
Such an outcome would hurt not just the auditor
the Big Five?delineated by their size, revenues,
clients, and reputation. By the end of the 1990s, the
independence roles. Itwould also impact the SEC's
ability to take on any new
projects
or carry out its Big Five each employed over three and a half times
the number of accountants in the next largest firms
day-to-day responsibilities to police the stock and
bond markets, oversee the mutual fund industry, and audited almost 75 percent of the world's
and monitor thousands of public company filings. 25,000 largest companies (CIFAR, 1995). Not sur
The possibility of a drawn-out legal challenge also prisingly, they enjoyed an elite reputation (e.g.,
gave me pause. (Levitt, 2002: 133) Public Accounting Desk Book, 1996: Ch. 4). Fur
thermore, they saw themselves as a distinct group,
met regularly, and acted together in their lobbying
Itwould be incorrect to represent the process of
efforts before governments. They constantly moni
data collection and analysis as neatly ordered and
tored and mimicked each other. The Big Five col
designed in advance of fieldwork. On the contrary,
lectively pioneered multidisciplinary practices
because events were unfolding, we adopted an op and, when these practices came under attack, itwas
our procedures
portunistic approach. Nevertheless, the Big Five who leapt to their defence.
are consistent with criteria recommended for estab Until the 1990s, the dominant institutional logic
lishing data "trustworthiness" (Lincoln & Guba, within the field prescribed an organizational form
1985: 301): both authors had "prolonged engage referred to as the Cravath Sherer &
variously (e.g.,
ment" with the research site both before the present or "P2" form
Lee, 2002) (e.g., Greenwood, Hinings,
we
project and during real-time data collection; & Brown, 1990). This organizational form down
sources of the SEC
"triangulated" data; hearings plays use of formal hierarchy and emphasizes col
were a form of "stepwise replication"; and we used controls, such as teams, committees, and
l?gial
"member checks," verbally presenting our emerg taskforces. Full-time management is disdained. In
ing framework on separate occasions to two regu stead, professionals (i.e., accountants in accounting
lators and two senior partners. firms, lawyers in law firms) are elected tomanage

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 2006 Greenwood and 35
Suddaby

rial positions, often for limited terms. Human re mittees (ABA, 2000). Regulators of securities ex
source practices emphasize technical competence, in both Canada and the United States, also
changes,
especially for promotion to the rank of partner. reacted against the multidisciplinary practice but
Compensation is often based on seniority (in the focused upon the conflict of interest in providing
lockstep system) so as to promote collegiality and both consulting and audit services to the same cli
to avoid giving undue emphasis to commercial cri ent. The SEC was especially alarmed, perceiving
teria. Formal marketing is nonexistent and re the multidisciplinary practice as threatening the
as Formal knowledge man
garded unprofessional. integrity of the capital market system (Levitt, 2000).
agement systems are not used. The organization is In July 2000, the SEC announced its intention of
arranged around services delivered by a single pro severely curtailing the multidisciplinary aspira
fession. Underlying these practices are values that tions of the large accounting firms.
stress the professional craft, highlighting objectiv The Big Five responded aggressively. Three firms
ity, service, integrity, and standards. threatened to sue the SEC. The SEC's chairman,
In the 1980s and 1990s, a new organizational Arthur Levitt, came under intense pressure from
form emerged: multidisciplinary practice (Powell, politicians and lobbyists tominimize the impact of
Brock, & Hinings, 1999). Its emergence occurred in any proposed rules (Levitt, 2002: 241) and to delay
two phases. The early phase, beginning in the mid action until the next presidential election, when, it
1980s and extending to 1997, was characterized by was anticipated, Levitt would be replaced.
Initially,
a progressive extension in the services the SEC bowed under the pressure from the Big
provided by
the largest accounting firms, first into forensic ac Five. However, the collapse of Enron and the de
counting and litigation support, and then into ex mise ofArthur Andersen raised questions about the
panded management consulting services. New per independence of auditors in multidisciplinary
sonnel with nontraditional skill sets were hired to practices. It provoked such an outcry amongst pol
provide these services, altering the demographic iticians previously supportiveof the Big Five that
character of the workforces in the Big Five. The legislation (the Sarbanes-Oxley Act) was enacted,
emerging organizational form emphasized the which ended the Big Five's version of themultidis
cross-selling of services. Opportunities for growth ciplinary practice.
were pursued
through deliberate and explicit mar So why did the Big Five introduce a new organ
keting. Human resource practices, including pro izational form, especially one that engendered a
motion to partner, emphasized the importance of a
regulatory backlash and strong negative reaction
commercial acumen. Management structures be from neighboring professions? We suggest it was
came more formalized. Formal the combination of four dynamics: adverse
knowledge-manage perfor
ment systems were introduced. Underlying these mance, boundary bridging, boundary misalign
structures were the values of commerce, individual ment, and resource asymmetries. Underlying these
accountability for performance, and the importance dynamics is the trade-off or tension between mar
of servicing large corporate clients. Table 2 summa ket discipline and the need for social legitimacy.
rizes both the traditional and multidisciplinary Where market forces become more pronounced, it
practice forms. is not surprising that institutional forces may be
Initially, the new form was not challenged, nei come less salient. A natural
starting point, there
ther within the profession nor by government reg fore, is to examine performance considerations.
ulators. In 1997, however, the second phase ofmul
tidisciplinary practice evolution began, when Ernst Adverse Performance
& Young established a "captive" law firm in To
ronto, an event soon followed by announcements The annual reports of the profession show that
that U.S. law firms were targets for acquisition for the accounting profession as a whole the end of
(American Bar Association [ABA], 2000). For the the 1980s and the early 1990s was a period of
first time, multidisciplinary practices had breached tightening competition. But until 1991 the Big Five
the boundaries of a highly institutionalized profes were experiencing revenue growth.
double-digit
sion and blatantly challenged the prevailing insti Table 3 presents a comparison of the financial per
tutional logic, which prescribed that professional formance of the Big Five in Canada and other ac
services be provided by firms dominated by one counting firms. Both Tables 3a and 3b show that
profession. The consequence was a strong regula the Big Five firms benefited more than smaller
tory response. The CBA, soon followed by the ABA, firms. Long after the emergence of the multidisci
quickly announced formal inquiries into multidis plinary practice, the Big Five's market share was
ciplinary practices. By 1999, all but four U.S. state rising (see Table 3a). Annual changes in revenues
bar associations had established investigatory com reveal a similar pattern; prior to 1996, the growth of

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 36 Academy ofManagement Journal February

TABLE 2
Comparison of Cravath-Style Organizational Form with Multidisciplinary Practice

Elements Traditional Cravath-Style Form Multidisciplinary Practice

Provision of narrow of services Provision and cross-selling of a diversified

Strategy range
range of services

Clients vary in size Focus on large, especially clients

global
Professionals are generalists Expertise in specific industries
Professionals specialize by function and

industry

Division of labor based on services Division of labor based on service line

Management (e.g., audit,
on the local on
tax) focused office and industry, focused
national/international scale
Coordination primarily achieved via committees Coordination achieved by formal
hierarchy supplemented by project
teams

Few, if any, or full-time Specialized and full-time management

specialized
management positions positions
involvement in strategic Authoritative decision style
High partnership
decisions
Consensus decision style Formal client management systems

Advertising prohibited; emphasis upon personal Formal marketing ("branding")

Marketing
networks
No Professional marketers used
specialists

Human resource Unitary (one profession) workforce Diverse (multiprofession) workforce

management
technical as criterion upon commercial acumen as
Emphasis upon expertise Emphasis
for promotion and compensation criterion for promotion and

compensation
No human resource Professional human resource management
management specialists
specialists
Decentralized profit pool Centralized (global) profitpool
Weak for performance Accountability linked to compensation
accountability

Knowledge Informal networks Formal, centralized knowledge

management management systems

values Professional services as a craft Professional services as a business

Underlying
consensus, and professional Accountability for performance
Collegiality,
autonomy
is to serve Primary mission is to serve very
Primary mission clients, but large
"objectivity" is critical clients

the Big Five was superior to that of the next 25 Five and to their own historical results. There were
firms in all but two years (see Table 3b). Thus, the no references to the performance of smaller firms.
idea that pressure for change ismore likely to come We heard concerns in all three firms over whether
from disadvantaged organizations is not borne out market share was being lost to other Big Five firms.
here. There was nothing unique to the market sit As one senior partner in firm A stated: "We watch
uation of the Big Five suggesting that itwould be each other all the time. It is critical to be in the elite
they, rather than peripheral firms, who would seek group. That gets you to the table. One of the reasons
for themegamergers is that no one wants to fall into
change, nor any indication of the direction that
change might take. the second tier." We also found that each of the Big
Nevertheless, the Big Five were concerned in the Five was very aware that historical growth rates
late 1980s over their ability to sustain their histor could not be sustained by focusing upon audit ser
ical performance. Our interviews with leaders in all vices. Furthermore, faltering growth rates were
three firms made it clear that they assessed their seen as directly threatening not only partners' in
relative to other members of the Big comes, but also the ability to retain and hire the
performance

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 2006 Greenwood and Suddaby 37

TABLE 3
Performance of the Big Five in Canada Compared to the Industry, 1989-2000a

(3a)Market Share

Firm 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

Big Five 70 n.a. 70 72 75 75 75 76 79 78 78 79 79

Next 25 30 n.a. 30 28 25 25 25 24 21 22 22 21 21

(3b) Change inRevenues

Firm 1987b 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

Big Five 14.3% 13.1% 12.2% 13.0% 4.6% 2.1% (0.1)% 4.5% 4.3% 9.8% 15.6% 9.4% 9.3%c
Next 25 12.6% n.a. 11.0% (2.7)% (7.2)% 3.2% (2.5)% (8.1)% (6.1)% 17.1% 3.8% 12.4% 12.2%
a
Source: The Bottom Line. Market share was measured as proportion of revenues.
b
Figures for 1987 are for the top 25 firms.
c
Ernst & Young is excluded.

very best professionals, who were being lured by association, which repeatedly proclaimed it was
the dot.com boom. Thus, the economic interests of the 'duty' of the profession to respond to clients by
the Big Five were an evident motivating dynamic, broadening the services offered."
indicating an increasing contradiction between An important factor, in other words, explaining
conformity to the traditional institutional logic of why itwas theBig Five (and not other firms)that
exclusively providing accounting and services initiatedchange, was their almost exclusive inter
adoption of a new logic that emphasized opportu action with the very largest international clients.
nities for providing multidisciplinary services. Through their virtual monopoly of audit engage
ments?by 1992 they audited 96 percent of the
assets of the largest companies worldwide (CIFAR,
Boundary Bridging access to the
1995)?the Big Five enjoyed unique
Performance concerns may (as in our case) cause world's most clients and
powerful corporate
dissatisfaction with existing
arrangements, but to through them learned of nascent consulting oppor
attribute the behavior of the Big Five solely to "the tunities that offered a solution to their falling rev
raw importance of (Covaleski et al., 2003: enue growth, opportunities not
money" readily apparent to
333) would be to offer an incomplete and mislead other firms. Even second-tier accounting firms had
ing storyline. Our interviews thus probed where very limited exposure to these opportunities.
the idea arose for the provision of consulting ser Laventhal & Horvath, the largest of the second-tier
vices. The clear response
was that
consulting op firms, had only three audit clients with sales over
portunities emerged from relationships with large $1 billion in this period. By 2000, 40 percent of the
clients. Growth in international trade and extensive consultancy work performed by the Big Five was
merger and acquisition activity during the 1980s for their own audit clients {Public Accounting Re
and 1990s resulted in complex, transnational cor port, 2000).
porations confronted by novel managerial and or The picture, then, is of the Big Five benefiting
ganizational challenges. Senior partners in all three from superior access to new opportunities that they
firms reported that demand for consulting advice gained because of their structural position within
came from their large corporate clients and that the the organizational field. Their position exposed
demand intensified in the early 1990s. These inter them to incompatible logics and these incompati
view responses were confirmed by testimony given bilities, in turn, prompted reflection. This observa
in the SEC hearings, where each of the Big Five tion raises an aspect of network location insuffi
defended multidisciplinary practices as a response ciently embraced within institutional theory.
to client demands (SEC, 2000). The CEO of Arthur Institutionalists tend to view networks as con
Andersen was very clear: "It wasn't because our straints, as vehicles by which norms are diffused,
were geniuses and said, we need more
predecessors resulting in convergence around common prac
revenue. It's because our client said, 'Fix that prob tices. But a different theme within network theory
lem. And we think that's in the public interest.' The frames networks as opportunity structures. Accord
same theme runs through the annual reports of the
ing to Burt (2000), a critical feature of an organiza

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 38 Academy ofManagement Journal February

tion's network position is its relationship to "struc The CICA, responsible for development of uni
tural holes," or social spaces between organizational form standards of practice and the overall develop
clusters. Organizations within a cluster are densely ment of the accounting profession in Canada, was
tied to one another but loosely connected to others founded in the first decade of the 20th century
(Baum & Ingram, 2002; Baum, Shipilov, & Rowley, (McKenzie-Brown & Phillips, 2000). Provincial as
2003; Gulati & Gargiulo, 1999). Further, organizations sociations, such as the Institute of Chartered Ac
within a network cluster develop shared norms and countants of Alberta (ICAA), responsible for licens
conventions (Uzzi, 1997). Organizations bridging ing, certification, training, inspection, and discipline,
structural holes (in our study, the Big Five), more were also established in the early 20th century.
readily become aware of alternative conventions. A Hence, the infrastructure of the profession was put in
similar idea is provided by Boxenbaum and Battilana
place before the international growth of the largest
(2004), who noted that actors moving between fields firms. In effect, regulatory boundaries reflected the
"transpose" ideas (see also Sewell, 1992). In effect, a of the
early phase accounting profession's history.
network position that bridges fields lessens institu these boundaries were aligned with polit
Moreover,
tional embeddedness by exposing actors to interinsti ical boundaries(i.e., the provinces,2 making them
tutional incompatibilities, increasing their awareness less, rather than more, flexible, because the authority
of alternatives.
of the profession (e.g., the right to license and disci
pline) was encoded in the laws of multiple

Boundary Misalignment jurisdictions.

By the 1990s, the static regulatory structures of
In order to service transnational clients, the Big
the field were inappropriate for the expanding
Five became transnational in scope. In 1985, the
scale and sophistication of its larger players. The
largest number of countries covered by an account
profession could no longer meet the training re
ing firm was 97, by Coopers & Lybrand. Ten years
in 152 countries. This com quirements of its elite firms nor effectively monitor
later, KPMG operated their activities (a point elaborated below). The Big
bination of expanding scale, geographical complex
Five firms had outgrown their institutional moor
ity, and technical sophistication increasingly ren
ings. Misalignment of regulatory and market
dered unworkable organizational structures and
boundaries is an example of Seo and Creed's (2002)
processes focused upon local jurisdictions and col
nonadaptability contradiction?that is, the inabil
l?gial arrangements. New structures and processes
became necessary. For example, the heightened in ity of a prevailing institutional logic (in this case,
ac one centered upon local jurisdictions) to change
tricacy of their clients' operations prompted
in particular industries despite fundamental shifts in circumstances.
counting firms to specialize
and to structure themselves on a worldwide basis Oliver's (1991) crucial reminder that the influ
scale of audit assignments ence of institutionalized upon
along industry lines. The practices depends
led to client management teams that transcended their continual reinforcement is, we believe, cor
national boundaries (Rose & Hinings, 1999). Formal rect, but our case illustrates that even where the
routines of reinforcement field-level
knowledge management systems were constructed, continue,
intended to transmit experience across global firms change may still occur if actors become distant and
thus immune from institutional effects. The
(e.g., Sarvary, 1999). Profit pools, from which part po
ners' incomes were drawn, moved from local of tency of institutional processes, in other words,
fices or national firms to the regional (e.g., North whether normative or coercive, is a function not
America) or international firms, reinforcing the pri simply of their recurring strength but also of the
macy of the global dimension. These changes in receptivity of recipients, which can change. Eco
structure, work processes, and compensation prac nomic and institutional forces, unfolding over
tices, which occurred in all of the elite firms during time, can result in contradictions between techni
1986-95, lifted the center of gravity away from the cal-market boundaries and institutional-regulatory
local office to the international firm. But?and this boundaries. of boundaries, more
Misalignment
is a key point?the regulatory structures of the pro over, is more likely to affect elite than peripheral
fession remained geographically fixed at the pro organizations because these organizations reach the
vincial level, creating misalignment between the scale and to our fourth
necessary scope produce
evolving organizational form of the Big Five firms, in resources.
dynamic, asymmetries
as they became isomorphic with their international
clients, and the stable and much more localized

jurisdiction of the profession established almost a

2
are states.
century earlier. Canada's provinces the equivalent of U.S.

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 2006 Greenwood and Suddaby 39

Resource Asymmetries not only by the asymmetry in technical capability,

but also by asymmetries in political and financial
Institutional theory suggests that normative
resources. In Canada, as of 2001, the Big Five com
and/or coercive processes sustain prevailing logics
prised approximately 22 percent of the accounting
by exercising a centripetal effect, especially upon
profession (excluding retired members) and em
organizations embedded at the center of a field
ployed 55 percent of accountants working in ac
(Mazza & Pedersen, 2004: 883). Such pressures to
counting firms. Inevitably, this scale of member
conform were op?rant, and partners in the Big Five
were sensitive to their membership in the account ship is an important political resource should the
Big Five wish to exercise influence within the pro
ing profession. Respondents in the three firms re
fession. On issues such as the multidisciplinary
ferred to "our profession," to wishing to remain
practice, the accounting profession followed the
"members of the profession," and to "the impor
Big Five firms, not the other way round. For exam
tance of upholding the integrity of the profession."
ple, Ernst & Young's ambivalent stance toward the
Further, the Big Five actively sought legitimacy for
profession is indicated by its decision not to advise
multidisciplinary practices by participating in de
the professional association of its intention to ac
bates within the profession (Covaleski et al., 2003;
quire a law firm. One managing partner boldly stat
Greenwood et al., 2002). For accountants in the Big
ed: "They're [the association] not driving the pro
Five, in other words, itmattered that their actions cess. It would be crass to say they are irrelevant.
be approved by the profession.
But I think that ifyou found us heading down a
So why did institutional pressures not hold elite
particular road for business reasons, we would not
accounting firms to the prevailing logic? In ad let the association get in the way. Really, the asso
dressing this question, we distinguish between in ciation has to follow." An executive of the profes
stitutions as formal rules conveyed and enforced sional association the strength of the
acknowledged
through coercive processes, and institutions as in elite firms: "We used to think of the . . . [Big Six]. ..
ternalized cognitive schemes diffused through nor as ours. Not any more. We're our rela
rethinking
mative socialization. Both forms of institutional
tionship with them."
pressure, we found, were undermined by resource Both the accounting and legal professions were
asymmetries between regulators and the Big Five. cautious of the financial strength of the Big Five.
Coercive processes. Provincial associations re Asked the Ernst &
they would
whether challenge
view the quality of audit work performed by their decision to a law one
Young acquire firm, response
members and are responsible for enforcing confor from the law profession was pragmatic:
mity to institutionalized practices. But according to
one managing reviews [We] could not afford lengthy litigation with a Big
partner, "The association Five firm.We simply do not have the resources and
our office periodically. To us, it's Mickey Mouse.
... itwould be a disaster. There was a similar situ
Our standards are so much higher than their re
ation a few years back where we had a dispute with
quirements that we don't really worry. Imean, we a big accounting firm and the cost forcedus to settle it.
care: the review matters. But when we really sweat
is when our national office reviews us . . . A more dramatic
example is provided by the Big
they're
the ones that matter." The disparity between the Five's aggressive response to the SEC's attempts to
the advent ofmultidisciplinary practices. The
importance of in-house and external reviews be stop
came further apparent as we traced how inspec general counsel of the SEC summarized the re
tions were conducted. The provincial association sources available to the Big Five:
could inspect any audit file but only for work con From the outset we were threatened with litiga
ducted at the provincial level. That is, even where tion ... at one point the Big Five accounting firms
a file involved a national or international client, the that opposed the rulemaking had retained much of
association would review work performed within the heart and brains of what turned out to be the
the province but had no access to files located Bush election dispute legal team and the Gore elec
its tion dispute legal team. Our would-be opponents
elsewhere, limiting monitoring capability. Fur
ther, the complexity of the audit methodologies the spoke openly about attacking any final rules through
Five used was the legislative action as well. (Becker, 2001: see also
Big usually beyond experience of
Levitt, 2002)
those conducting reviews. As themanagingpartner
of a local office reported, "Two practitioners came
Negotiations between the Big Five and the SEC
in last year from small or medium-sized firms and resulted in the latter relenting on its original posi
"
all they did was go 'Wow!' tion, until the Enron collapse dramatically tilted
The ability of the professional association to reg the debate.
ulate the Big Five firms was severely constrained The ability of the Big Five to obstruct or even

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 40 Academy ofManagement Journal February

reverse coercive pressures was aided by their will [oftheassociation] from theBig Five. Filling thator
ingness to act collectively. The small number of similar roles is less acknowledged within the firm
organizations involved enabled regular interactions as something that is important to do. There are
and a strong sense of common interest. The Big individual exceptions, but by and large we don't
Five's senior partners perceived themselves and get the same commitment as before." Therefore, we
were reported in themedia as being an elite sharing looked at how far the elite firms were represented
a common reputation. Their clients had similar on the Board of Governors of the CICA and on the
corporate interests, drawing the Big Five together Council of the ICAA. The picture is not clear-cut.
as they sought to protect those interests. In Canada, At the provincial level, until 1994 elite firms typi
people from the Big Five met monthly to review cally occupied upward of 40 percent of the posi
their relationships with regulators and the profes tions on the ICAA Council; thereafter the figure was
sion. An exchange between the SEC and a promi closer to 30 percent. The pattern at the federal level
nent lawyer (Eisenhofer, 2000) involved in a series is more uneven, with participation varying from
of lawsuits illustrates the Big Five acting together: year to year from 30 to 54 percent (in 1988). After
1995, however, representation in two years was
Mr. Eisenhofer: I think they [theBig Five] are some below 20 percent. Overall, these participation rates
what protective of each other.
indicatedthe Big Five remained part of the govern
Commissioner Hunt: You mean they are reluctant, ing forces of the profession, but there was a sugges
for example, to testify against one another in tion of a decline in the last decade of the period we
litigation. examined.

Mr. Eisenhofer: I believe it'smore than reluctant.

The picture may obscure an underly
statistical
ing process of disengagement, reflected in the sta
Commissioner Hunt: Do they ever? tus of those involved. As the above quote indicates,
Mr. Eisenhofer: Not that I am aware of. members of the Big Five active in the profession
were frequently not themost senior members of the
Normative processes. A crucial means by which firms. One reason was the influence of the multi
norms and expectations are conveyed is through disciplinary practice, especially its emphasis upon
training programs. Training in the Big Five, how revenue generation and the new system of linking
ever, was provided in-house, meaning that their compensation to individual performance. As a
professionals were exposed to the firms' values, not partner in firm B bluntly pointed out, "The old
those of the profession. Attendance lists for courses system guaranteed a minimum income standard for
offered by Alberta's professional association all partners . . .but we can't go on like that. We
showed that, in the late 1980s, the Big Five moved can't have people who have semiretired on the
their training in-house. This exodus from provin . . .You have to reward market movers." The
job.
cially provided courses occurred because the belief same partner recognized that "being active in the
current in the Big Five was that the profession's profession takes the partner away from generating
courses lacked the necessary technical sophistica fees, which affects his pocket. So he is less inclined
tion. Further, training became seen as a way of to do it."
diffusing common values throughout the increas In summary, resource asymmetries resulted in
ingly dispersed firms. A partner in firm A referred normative and coercive processes exercising a wan
to itsworld training centers as providing "the cul ing influence upon the Big Five. The Big Five be
tural glue that holds [the firm] together." Another came too large to be effectively regulated by their
of the Big Five, firm C, though less centralized, was profession, and the complexity and scale of their
equally committed to in-house training, according activities led them to provide training in-house,
to one senior partner: "We hired a firm of consult reducing their exposure to the profession's norma
ants and it was very clear from their report tive influences. The contradiction here, we suggest,
that. . .to integrate the firm globally.. .we had no is not one anticipated by Seo and Creed (2002); it is
choice but to develop a single culture worldwide. that the object of regulation became more powerful
And that would require common training." Signif than the regulators. Consequently, the Big Five
icantly, the Big Five had the resources necessary to firms became less constrained by institutional pro
support extensive in-house training on a global cesses and more open to alternative logics.
scale. Ultimately, the collapse of Enron and the demise
Participation in the profession's activities is an of Arthur Andersen raised questions about the in
other way by which institutional logics are con dependence of auditors in multidisciplinary prac
veyed normatively. But according to one provincial tices. It provoked such an outcry among politicians
association executive: "There are fewer presidents previously supportive of the Big Five that the Sar

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 42 Academy ofManagement Journal February

banes-Oxley legislation was enacted, ending the a field and thus blind to the
possibilities of insti
Big Five's version of themultidisciplinary practice. tutional change. Their interests, moreover, are
In one sense, therefore, the demise of multidisci aligned with prevailing logics. That is, per extant
plinary practices in this context shows the reasser theory:
tion of regulatory control and a sudden restoration
resources Proposition 2. Central organizations within an
of the political available to regulatory
organizational field are embedded within, and
agencies, but this reassertion required an extraor
dinary event to push back the Big Five, indicating privileged by, prevailing institutional logics;
the significance to that moment of resource therefore, they are neither open to alternative
asymmetry. logics nor motivated to introduce them.

The model developed here adds two other as

A Process Model of Institutional pects of network position: boundary bridging and
boundary misalignment. These features counter the
Entrepreneurship
centripetal influence assumed in Proposition 2 by
We have reported that the Big Five firmswere (1)
exposing organizations to contradictions that re
motivated by adverse performance feedback, (2) duce embeddedness. Boundary bridging connects
aware of alternative possibilities through their
organizations to other organizational fields, result
unique access to global clients, and (3) open to new in their exposure to different institutional
ing log
ideas because of the significant asymmetry of re ics. Exposure tomultiple logics, we have proposed,
sources caused by the widening misalignment of is an example of Seo and Creed's (2002) idea of
regulatory and market boundaries. Using these ob
institutional incompatibilities, in that bridging
servations, we now propose a process model of
confronts an organization with new ideas and thus
elite institutional entrepreneurship in a mature or awareness
stimulates of alternative possibilities.
ganizational field and offer insights into the para
Boundary misalignment describes the relationship
dox of embedded agency. Figure 1 summarizes our between the technical (market) scope of elite organ
model.
izations and the scope of institutional jurisdictions.
Central to our model is that fields are not homo
Boundary misalignment is an example of Seo and
geneously structured, and they do not necessarily
Creed's (2002) nonadaptability contradiction be
mature toward stability and equilibrium. Instead, cause regulatory boundaries are relatively inflexi
they become stratified into specialized organiza ble, tied as they often are to political boundaries.
tional communities, each with distinct network lo As organizations outgrow their regulatory bound
cations exposure to field
that result in differential
aries, their exposure to normative de
processes
level contradictions resulting in different and a
clines, process resulting in weakening institu
unfolding levels of embeddedness. Our central tional effects and growing openness to alternative
theme, in other words, has three components: first, ideas. Boundary misalignment is also associated
that network location defines the institutional con
with a widening resource asymmetry between reg
tradictions to which specific actors will be ex ulatory agencies and elite organizations, enabling
posed; second, that contradictions affect the extent the latter to overcome coercive pressures. This form
of an actor's embeddedness and thus how far be of contradiction, in which the regulator becomes
havior is institutionally determined; third, that less powerful than the regulated, is an important
fields evolve in such a way that the embeddedness
addition to Seo and Creed's framework (2002). The
of actors can, over time, increase or decrease. In
contradictions of resource asymmetry and non
this article, we are focusing upon the network lo cause central organizations to become
adaptability
cation of central, elite organizations; therefore, our less influenced by institutional processes and thus
initial proposition is: more open to new logics.
1. Elite organizations Location within an organizational field, there
Proposition occupy dis
tinct network locations that expose them to fore, in terms of boundary bridging and boundary
contradictions. These contradic misalignment, increases the probability of central
field-level
tions affect their institutional embeddedness organizations acting entrepreneurially by making
them both more aware of and open to alternative
and thus their capability for institutional
arrangements. That is:
entrepreneurship.
Neoinstitutionalists have traditionally focused Proposition 3. Central organizations occupying
upon location as the distinction between center boundary-bridging locations are exposed to in
and periphery, leading to the assumption that cen stitutional inconsistencies, increasing their
tral organizations will be deeply embedded within awareness of alternative possibilities.

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 2006 Greenwood and 43
Suddaby

Proposition 4. Central
organizations occupying that they are more likely to succeed in their efforts

boundary-misaligning locations are exposed to to achieve institutional change. Thus:

the contradictions of adaptability and resource
their to alter Proposition 7. Institutional entrepreneurship
asymmetry, increasing openness
native possibilities. by central organizations has a higher probabil
ity of resulting in institutional change than do
To the extent that conformity to prevailing con similar efforts by peripheral organizations.
ventions does not serve the interests of organiza
tions, they will be motivated to introduce change.
This conclusion echoes Seo and Creed's "efficiency CONCLUSIONS
versus conformity" contradiction. Thus:
The paradox of embeddedagency resides in the
5. Poor a
Proposition performance produces emphasis given by institutional theorists to the tak
contradiction between institutional conformity
en-for-granted quality of widely shared social pre
and functional efficiency, increasing themoti scriptions that guide behavior. It is a mistake, how
vation to adopt alternative possibilities. ever, to overstate the lack of reflection and agency
to extrapolate in social action. DiMaggio (1988) criticized early
It is not possible the relative im
of three of neoinstitutionalists for equating institutional em
portance the components embeddedness
and from our beddedness with a complete absence of agency.
(motivation, awareness, openness)
case, nor to assess whether one triggers the others.
Oliver (1991) offered a repertoire of strategic re
For example, we cannot assess whether high dis sponses. More recently, Emirbayer and Mische
(1998) noted that agency occurs even in institu
satisfaction with performance motivates organiza
tional reproduction. Consequently, there is now
tions to seek alternatives to existing arrangements.
greater sensitivity to the possibilities for endoge
Such a sequence, though entirely plausible, is be
our data. Here it suffices that all three com nous institutional change and a growing interest in
yond
are necessary for institu identifying the processes whereby it occurs. Re
ponents of embeddedness
sponding to this interest, we have examined cir
tional entrepreneurship. That is:
cumstances that enable firms at the center of a
Proposition 6. Institutional entrepreneurship mature field to act as institutional entrepreneurs. In
by central organizations is a function of em focused upon a set of actors not
so, we have
doing
beddedness, which comprises the interaction as a likely locus of change because
usually regarded
awareness, and motivation.
of openness, of their embeddedness and privilege. Indeed, we

Figure 1 shows that a decline in embeddedness have, arguably, addressed the toughest example of
results in the imaginative reflection and collective embedded action because the paradox is at itsmost
forceful for elite actors in highly institutionalized
mobilization (i.e., praxis) to achieve change (Seo &
Creed, 2002). The move from praxis to institutional settings.
The theory put forward in this article unpacks
change is not the focus of this study, but the mul
the processes by which embeddedness isweakened
tidisciplinary practice case indicates that collective
mobilization involves three sets of resources: polit and thus how the scope for action is enlarged.
ical, financial, and organizational. Further, we have Drawing upon network theory and contradictions
shown firms can mobilize these resources to chal theory, we have identified boundary bridging and

lenge regulatory agencies, contrary to the institu boundary alignment as neglected features of net
tional literature, inwhich the power of elite organ work location
that, working through institutional
izations is typically associated with defense of the contradictions, loosen the embeddedness of elites.
status quo.3 Given that elite firms have significantly Boundary bridging results in institutional contra
more resources than do peripheral firms, it follows dictions and affects awareness. Boundary misalign
ment results in resource asymmetries and affects
openness. We make particular note of boundary
3
The notion of status quo, as we use it here, refers to because it has received little, if any,
misalignment
prevailing organizational forms. The move to themulti attention in the institutional literature. In our case,
disciplinary practice was a challenge to the status quo. led to the Big Five with
But the Big Five led this challenge in order to sustain boundary misalignment
drawing from the profession's training programs
their position of privilege. This implies that actors may
overthrow institutional structures (such as organization because they deemed those programs inadequate
al forms), rejecting the status quo of how to do things,but for their more complex requirements. But in so
that underlying patterns of privilege may remain un doing, the Big Five removed themselves from an
touched, or even be strengthened?reinforcing the status important normative process. Boundary misalign
quo of who benefits. ment also led to a substantial asymmetry in re

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 44 Academy ofManagement Journal February

sources that enabled the Big Five to resist coercive same dynamics as those outlined here. Future re
pressures. Not only were the Big Five beyond the search should examine how far the dynamics within
scope of the profession's technical capability, they our process model are generalizable. The second
even came close to undermining the SEC. When question that deserves attention, and the one thatwe
boundary misalignment and boundary bridging are believe offers the greater potential, is how the disso
combined with poor performance, elite organiza nance between institutional and market structures
tions achieve themotivation, awareness, and open occurs and unfolds. This concern is long-standing in
ness necessary for institutional entrepreneurship. theory, but the focus of previous work
institutional
Our contribution to institutional theory, there has been upon how different state-level regulatory
fore, has been to provide an account of motivated, regimes shape patterns of economic exchange (e.g.,
endogenous change. Such empirical accounts are Nee, 1998; North, 1990). Our case highlights the need
rare, especially accounts of such change in a ma for attention to how the alignment between regulatory
ture setting. Moreover, by focusing upon central and market structures alters over time,why itdoes so,
organizations as the source of institutional change, and with what consequences. Our proposition, which
we have responded to recent calls for a better un we offer to guide future research, is that field-level

derstanding of how agency may qualify institu governance structures are relatively inertial and, even
tional determinism. Our study is also an early at when they are eventually reformed, regulatory
tempt to combine two previously separated changes will lag behind the evolution of a field's elite
theoretical perspectives. It is also an early empiri actors. This observation raises the need to understand
cal application of how field-level contradictions the contribution of different agencies to the construc
affect embeddedness and contribute to change. Fi tion and reproduction of field-level norms. The insti

nally, we have extended contradictions theory by tutional logics of an organizational field are con
adding resource asymmetry between regulators and structed and conveyed not only in the day-to-day
regulated as an important contradiction. interactions of field participants, but especially
Much remains to be done. Our thesis needs ex through agencies such as the state and the professions
amination in other settings. The accounting indus (Scott, 2001). In our case, the professions were signif
try may not be typical. Its low capital intensity icant in providing a logic of professional behavior.
distinguishes it from manufacturing sectors, in What is the relative influence of these agencies, and
which investments are thought to play a larger, what are the circumstances that affect that influence?
role (Tushman & Anderson, 1986). How influential are professional norms when re
inertia-inducing
It is also considered one of the more commercial quired to stretch across very different organizational
professions (Anderson-Gough, Grey, & Robson, members, ranging from elite, central firms, to mod
a stratified
2001), a characteristic that heightens the role of estly sized, local firms? At what point can
commercial interests and depresses the role of nor field be said to have decomposed rather than
mative processes. In more conservative profes changed? We need studies of field dissolution as well
sions, such as law, central organizations may an as of field change.
chor institutional practices in a way that the Big Only when these lines of inquiry have received
Five firms did not, although Sherer and Lee (2002) fuller consideration will it be possible to validate
found mixed evidence for this possibility. Thus, we and elaborate the model outlined here. An ade
need more studies of where central organizations quate theory of institutional entrepreneurship and
act as institutional entrepreneurs and ofwhere they a more complete understanding of the paradox of
do not. Further, our case, ultimately, was a failed embedded agency, we are proposing, will require
the Big Five case analysis. This article's contribu
attempt at institutional change because comparative
were mandated to desist from some of their multi tion to the broad purpose of understanding endog
activities. It took an event of an excep enous institutional change is its focus upon the
disciplinary
tional scale, the demise of Enron, to overcome the dynamic role of elites, not as embedded defenders

Big Five's but the onset of the multi

aspirations, of the status quo and exemplars of institutional

disciplinary practice was halted. Studies of com determinism, but as motivated agents of institu
pleted change attempts
are needed. tional change enabled, not constrained, by their struc
Two other questions are worth future consider tural position at the center of an organizational field.
ation. First, researchers ought to explore whether
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tions: Executive succession in the higher education School of Business, University of Alberta. He received
publishing industry, 1958-1990. American Journal his Ph.D. from the University of Birmingham. His re
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Tushman, M., & Anderson, P. 1986. Technological dis primary research interest is in processes of institutional
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of corporate art.
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firm networks: The paradox of embeddedness. Ad
ministrative Science Quarterly, 42: 36-67. -/??\

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