Exploring the Institutionalization of Corporate Responsibility: A Formal Modeling Approach

Organizations often adopt formal policies ceremonially, that is, neither substantively nor in alignment with actual practice. Prior research on practice adoption suggested that opacity stabi-lizes ceremonial adoption and impedes substantive adoption. This paper offers a dynamic view of adoption and re-examines the role of opacity in promoting substantive and widespread adoption. Using a Markov chain model, we demonstrate that if opacity is transitory and succeeded by transparency, opacity can actually promote substantive adoption within an industry. We substantiate the validity of our arguments by drawing on the prominent management practice of corporate responsibility. Our paper contributes to the development of a general theory of decoupling and institutionalization by examining the boundary conditions under which organizations adopt ceremonially or implement substantively a policy. We discuss the implications of our findings for institutional theory and research on corporate responsibility.