Professor of Entrepreneurship
Resource Dependence; Power; State Rule Change; Firm Compliance; Institutional Theory; Q11819 ;
The state creates and changes rules that coerce firms, but firms can delay or decouple responses to rule changes in order to manage the cost of demands. Theory of compliance to the state has not yet considered the degree to which the firm can delay adoption because of low exposure to rules and state links that allow cooptation, but both of these relations between state power and firm ability to counteract it can affect the adoption decision.This makes the response to state rule changes a more strategic outcome than the theory of coercive isomorphism implies. The authors develop a relational theory of delayed firm compliance to a state rule change that considers firm exposure due to discrepancy from the rule, and firm cooptation of the state due to state links, and test the theory by examining the adoption of the split-share structure reform, a state-mandated corporate governance reform among listed firms in China.The authors find that exposure and cooptation influenced the speed of adoption and the decoupling from reform intentions. The authors also found that their effects on firm response to coercion weaken when the new rule becomes institutionalized.This theory of delayed compliance is also likely to apply to coercive pressure from other powerful organizations than the state.