Institutional Equivalence: How Industry and Community Peers Influence Corporate Philanthropy

AbstractThis paper explores how organizations respond to simultaneous institutional influences from two distinct sources: the industry in which they operate and the local geographic community in which they are headquartered. We theorize that the existence of institutional equivalents-other organizations at the same intersection of different fields, such as the same industry and the same community-provides a clear and well defined reference category for firms and thus shapes which subset of peers the focal organization imitates most closely. We develop hypotheses about how the presence or absence of institutional equivalents affects organizations' responses to behavioral cues from different peer groups, how these effects vary when peers in different fields exhibit inconsistent behaviors, and how organizational characteristics, such as size and performance, strengthen or weaken the influence of institutional equivalents. We test our propositions through a longitudinal analysis of philanthropic contributions by Fortune 1000 firms from 1980 to 2006. Our framework illuminates how simultaneous presence in multiple fields affects organizations and introduces to institutional theory the concept of institutional equivalence, which we argue is a critical factor in determining how organizations respond to multiple institutional cues.