BUSI7280 · Managing In A Global Context
Innovation and Institutions
The macro spine of the course zooms out from the manager to the field. Firms must innovate to survive — innovation = the successful exploitation of new ideas (not invention), spanning Bessant's 4 Ps (Product, Process, Position, Paradigm: what you change) run through the Search → Select → Implement → Capture process (how you run it). Firms are also pushed to look alike by their institutions — North's “rules of the game” (formal + informal + enforcement), Scott's three pillars (regulatory / normative / cognitive), and DiMaggio & Powell's isomorphism, where coercive, mimetic and normative pressures converge a field for legitimacy rather than efficiency (Weber's iron cage). Firms decline in predictable, mostly reversible stages (Weitzel & Jonsson: Blinded → Inaction → Faulty Action → Crisis → Dissolution), and the nature of management is shifting toward hybrid work, human–AI judgement and an empathy turn, alongside an ethics menu (six lenses) and the Friedman-vs-Freeman CSR debate. The exam reward across all of this is synthesis: name a framework, apply it, evaluate its limits, recommend — and link a second theme.
What this chapter covers
- 01Theme 8 · Innovation — the 4 Ps vs the 4-phase process
- 02Innovator resilience potential (six malleable components)
- 03Theme 9 · Institutions (North) + Scott's three pillars
- 04Institutional isomorphism — coercive / mimetic / normative
- 05Organisational decline — five stages, reversible except Dissolution
- 06Theme 10 · Changing management — hybrid, AI, the empathy turn
- 07Ethics (six lenses) + CSR (Friedman vs Freeman)
Worked example: name the isomorphism mechanism
- +1(a) Firm A = coercive: adoption is forced by dependence on a powerful party (the sole buyer) — “had to.”
- +1(a) Firm B = mimetic: it copies a successful model under uncertainty about what actually works.
- +1(a) Firm C = normative: the model spreads through professionalisation — shared training and networks (MBAs, the same consultants).
- +2(b) Discriminator: coercive = force / dependence; mimetic = uncertainty; normative = professional norms. A single case can show two or three — say which fact triggers which.
- +1(c) Why it matters: organisations adopt similar practices for legitimacy, not necessarily performance — so conformity can be rational (buys legitimacy and access) and a trap (you copy practices that don't fit). It echoes EBMgt's casual-benchmarking warning.
Key terms
- The 4 Ps of innovation (Bessant)
- The change-space — what you can innovate: Product (the offering), Process (how it's created/delivered), Position (the market/context it's framed for), Paradigm (the underlying mental model of the business). Distinct from the 4-phase process (Search → Select → Implement → Capture), which is how you run innovation. Innovation = successful exploitation of new ideas, not invention.
- Institutions (North)
- “The rules of the game in a society — the humanly devised constraints that structure interaction.” They combine formal constraints (laws, contracts) + informal constraints (norms, conventions) + enforcement, forming the economy's incentive structure. They reduce uncertainty and transaction costs but are not necessarily efficient — rules serve those with bargaining power, and path dependence shapes long-run performance.
- Scott's three pillars
- Three bases on which institutions secure compliance: regulatory (rules, laws, sanctions — “I must, or be punished”), normative (norms, ethics, expectations — “I should, it's right”) and cognitive (taken-for-granted beliefs — “it's just how things are”).
- Institutional isomorphism
- DiMaggio & Powell's finding that organisations in a field grow alike for legitimacy rather than efficiency, via three pressures: coercive (force / dependence / regulation), mimetic (copying under uncertainty), normative (shared professional training and networks). The discriminator is force vs uncertainty vs professional norms; name the mechanism, don't say “isomorphism” generically.
- Weitzel & Jonsson's five stages of decline
- A staged response (and failure to respond) to negative pressure: Blinded (doesn't recognise the threat) → Inaction (sees it but doesn't act) → Faulty Action (acts wrongly) → Crisis (last chance) → Dissolution. Decline is reversible at every stage except Dissolution, and earlier is cheaper to reverse — read the diagnostic test, not the drama.
Innovation and Institutions FAQ
What's the difference between the 4 Ps and the innovation process?
They answer two different questions. The 4 Ps (Product, Process, Position, Paradigm) answer “what can we innovate?” — the change-space. The 4-phase process (Search → Select → Implement → Capture) answers “how do we run innovation?” — the routine. Don't confuse the change-space with the routine; that's a stated exam trap.
How do I tell the three isomorphism mechanisms apart?
By the trigger: coercive = force or dependence (a regulator, a parent firm, a sole buyer makes you); mimetic = uncertainty (you copy a successful model because you're unsure what works); normative = professional norms (your trained peers and networks all do it). Never write “this is isomorphism” generically — name the mechanism and justify it with the fact that triggers it. A single case can show two or three.
What stage of decline is a firm in if it saw the threat but did nothing?
Inaction (stage 2). Recognising the threat means it's past Blinded (stage 1); not having acted wrongly means it's not yet Faulty Action; healthy reserves mean it's not Crisis. The classic error is calling a firm “in crisis” for the drama when the diagnostic test says Blinded or Inaction. Stage 2 is early, reversible and cheap to fix — install trigger points to convert recognition into action.
Is the Friedman shareholder view just “anti-ethics”?
No — that's a trap. Friedman's “profit within the rules of the game” assumes strong institutions enforce those rules, so the rules carry the ethics. His model therefore breaks down precisely where institutions are weak (e.g. a globalised economy with weak host-country regulation), which is exactly where the Freeman stakeholder view and standards like the OECD Guidelines for MNEs apply. Naming that institutions–CSR link is the synthesis the exam rewards.
Exam move
This is the exam's synthesis territory, so learn each framework and the links between them. Keep the 4 Ps vs the 4-phase process separate (what vs how); lock the isomorphism discriminator (force vs uncertainty vs professional norms) and always name the mechanism with the fact that triggers it; and memorise the five decline stages with the rule that decline is reversible everywhere except Dissolution — diagnose by the test a stage fails, not by the drama. For Theme 10, treat “the changing nature of management” as a synthesis prompt that pulls together SDT (motivation), sensemaking (ambiguity), institutions (legitimacy) and the empathy/AI turn; and for ethics, apply two competing lenses to one dilemma, show they disagree, then take a defensible stand — remembering Friedman relies on strong institutions and so breaks where they're weak. Across Themes 8–10 the move is identical: Name, Apply, Evaluate, Recommend — and link a second theme.
