Sleight of Hand? Practice Opacity, Third-party Responses, and the Interorganizational Diffusion of Controversial Practices

We examine the role of a practice’s opacity (versus transparency) in the interorganizational diffusion of organizational practices. Though the opacity of a practice is typically thought to impede diffusion, a political-cultural approach to institutions suggests that opacity can sometimes play a positive role. Given that adoption decisions are embedded in a web of conflicting interests, transparency may bring negative attention that, when observed by prospective adopters, inhibits them from following suit. Opacity, in contrast, helps avoid that cycle. Using the curtailment of health benefits for retirees among large U.S. employers (1989 to 2009), we compare the diffusion of transparent adoptions (i.e., partial or complete benefit cuts) with opaque adoptions (i.e., spending caps that trigger disenrollment). We find that transparent adoptions reduce subsequent diffusion of the practice to other organizations. This effect is fully mediated by negative media coverage, which is itself conditioned by the presence of opposition from interest groups. Opaque adoptions, in contrast, increase subsequent diffusion to other organizations and are facilitated by the involvement of professional experts. Thus, in addition to providing findings on practice opacity, our study contributes insight into how organizational fields shape diffusion by illuminating the role of third parties in the spread of controversial practices.