Exploring the Dynamics of Decoupling and Recoupling in Corporate Responsibility Standardization: A Markov Model

Organizations adopt formal policies often ceremonially, meaning that policy adoption is not substantive and lacks alignment with actual practice. Prior research in institutional theory has largely assumed as static view of adoption and suggests that a situation of opacity (characterized by the difficulty or impossibility of evaluation) stabilizes ceremonial adoption and thus impedes substantive adoption. This paper offers a dynamic view of adoption sequences and re-examines the role of opacity in promoting substantive adoption among multiple organizations within a given industry. Using a three-state Markov chain model, we explore the boundary conditions under which initial opacity paired with an endogenous change towards transparency (characterized by the relative ease or possibility of evaluation) maximizes the overall number of substantive adoptions. We show that the hypocritical adoption of formal policies might prove instable and yield long-term institutional consequences, not only because of instability of decoupling within a single organization, but also because of sequence and endogeneity effects at the institutional field level. We illustrate our arguments by drawing on the case of corporate responsibility, one the most prominent global management practices. Overall, this paper contributes to the development of a general theory of diffusion and decoupling by formalizing the mutual constitution of a specific evaluation regime (opacity/transparency) and the behavioral disposition of organizations to adopt and eventually implement a policy (ceremonial adoption/substantive adoption).