Organizational Diversity and Change in Institutional Theory

Institutional theory has focused on the movement towards, and maintenance of, isomorphic institutional environments. Unfortunately, little attention has been paid to the forces that change institutional environments. Starting with a discussion of the implications of isomorphism on performance, this article attempts to develop a taxonomy of organizations within an institutional environment in order to develop a theory of how organizations respond to violations of institutional norms with possible implications for institutional change. Essential to this theory is the importance of organizational diversity, risk aversion, the effect of isomorphism on performance, and the role of relative performance in maintaining isomorphism and providing incentives to change.