Organizational Survival Via Dynamic Nonmarket Strategy

ORGANIZATION SURVIVAL VIA DYNAMIC NONMARKET STRATEGY: SOCIAL MOVEMENT CONTENTION AND INDUSTRY COUNTER-MOBILIZATION IN SCOTCH WHISKY DISTILLING, 1680–1922 Michel Lander H.E.C. Paris Pursey Heugens Rotterdam School of Management Marc VanEssen University of South Carolina Timothy Werner University of Texas at Austin November 2019 Abstract We document and theorize about an elongated period of nonmarket strategic initiatives by Scottish temperance movements and whisky distillers, ensnared in a protracted conflict with the legitimacy and survival of the organizational form at stake. We use generalized estimation equation and event history modeling techniques on a unique, hand-collected dataset to bring these dynamics in purview. Analyses show, first, that nonmarket initiatives by social movements spur counter-initiatives by the industry, thus adding interplay as a salient element to the corpus of nonmarket theorizing. Second, industry countermobilization is found to drive down organizational mortality in a contested organizational field, which sheds new light on the long- term effectiveness of nonmarket strategic initiatives. Strikingly, both the repertoire of initiatives taken and the dynamics of (counter-)mobilization found in the Scotch whisky distilling field are as recognizable today as they were several centuries ago. 1 INTRODUCTION Institutional theory argues that organizations can fall victim to nonmarket forces that delegitimize organizational forms and unsettle existing institutional arrangements (Hiatt, Sine, & Tolbert, 2009; Oliver, 1992; Stryker, 2000). These forces can involve the regulative dimension of an organization’s institutional environment in the form of the coercive power of the state, or social movements that focus on the cognitive and normative dimensions (Scott, 2001). These two oppositional forces occasionally also coalesce in challenges to the societal license to operate of organizations. When this happens, marketplace competitiveness is an insufficient quality for survival. Instead, scholars have posited theoretically that survival may drive organizations’ efforts to shape their environments via nonmarket strategy (Schneiberg, King, & Smith, 2008; Walker & Rea, 2014). That is, organizations aim to deflect state coercion and counteract the influence of those social movements that seek to delegitimize or even deinstitutionalize the focal organization or organizational form via nonmarket engagement of their own (Hiatt et al., 2009). These interactions between movements, organizations, and the state are consistent with the broader observation that organizational forms rarely go uncontested in complex environments (Lounsbury, Ventresca, & Hirsch, 2003; Meyer & Rowan, 1977). Importantly, however, they also suggest that organizations’ formulation of nonmarket strategy is a dynamic, co-evolutionary process in which organizations, especially business organizations, have less agency than is often appreciated (McDonnell & Werner, 2018). This dynamic conceptualization of nonmarket strategy processes harbors three interrelated elements. First, social movements and other external stakeholders regularly attempt—either through private politics that directly target cognitive and normative perceptions of the organization (Soule, 2009; Werner, 2012) or through public politics that target the organization indirectly through the regulative power of the state 2 (McCarthy & Zald, 1977; Schneiberg, 2002)—to eliminate or constrain the behavior of particular organizations or organizational forms with which they conflict materially or ideologically. Second, the targeted organizations respond to this mobilization dynamically via nonmarket counter-mobilization of their own, which may too employ a mixture of private and public politics (McDonnell, King, & Soule, 2015; Hiatt, Grandy, & Lee, 2015). Third, depending upon whether this counter-mobilization succeeds in overcoming its movement critics, the organization survives or fails—or in the extreme, the organizational form itself is eliminated. In this paper, we develop and test this dynamic, co-evolutionary process, ultimately seeking to answer two questions: first, whether the mobilization of social movements and their initiation of subsequent nonmarket strategic initiatives leads to the unintended consequence— from the movement’s perspective—of increased and long-lasting engagement in nonmarket counter strategies by representatives of the contested organizational form. Focal organizations can respond to social movement activity by crafting formal (nonmarket action) associations of their own and by engaging in grassroots activities to directly address movements’ claims and, via these efforts to defang their critics, to indirectly reduce the threat of state intervention (Carlos, Sine, Lee, & Haveman, 2018; Hiatt & Carlos, 2019). Second, we ask whether this increased engagement by focal organizations increases their chances of survival, despite the on-going efforts of their social movement opponents. Addressing this latter question effectively would offer a unique opportunity to assess the long-term consequences of investments in nonmarket strategic initiatives by socially contested business organizations. We examine the protracted interaction between temperance movements and the whisky trade in Scotland to test two theoretically motivated hypotheses, derived from the above questions. We have constructed a unique, hand-collected dataset to test our hypotheses in this 3 context in two steps. First, we use generalized estimating equation (GEE) models to establish whether temperance movements’ anti-whisky mobilization efforts shaped distilleries’ nonmarket strategy choices. Specifically, we assessed whether temperance movement activity triggered the whisky industry to engage in counter-mobilization and in building a non-market institutional infrastructure of its own (Carlos et al., 2018). Second, we use event-history models to establish the effectiveness of the distilleries’ nonmarket strategies in terms of their impact on distillery mortality rates. The idea here is that whereas temperance movement mobilization can speed up whisky industry exit by narrowing the whisky industry’s resource base and diminishing its entrepreneurial opportunity structure (Hiatt et al., 2009; Hiatt & Carlos, 2019), industry counter- mobilization can maintain or even improve nonmarket conditions and thus slow down the whisky distillery mortality rate. Ultimately, we find support for both hypotheses and for our overarching theoretical argument that social movements and their organizational targets are mutually engaged in a co-evolutionary dynamic. Thus, along all three dimensions of the institutional environment (Scott, 2001), movements and their targets struggle for dominance, and new, lasting nonmarket strategic initiatives by industry representatives are spurred primarily when temporary victories are recorded for the movement (Meyer & Staggenborg, 1996). Through this analysis, we contribute to multiple streams of organizational and strategy scholarship. First, we add to the literature on the movement-organization interface (e.g., Carlos et al., 2018; Meyer & Staggenborg, 1996; McDonnell et al., 2015) by demonstrating how the tactics social movements adopt lead to a tactically similar counter-movement by the focal organization. Further, we show that this tit-for-tat response in terms of tactical repertoires appears to weaken the movement and prolongs the survival of focal organizations. Second, in terms of strategy formulation in the nonmarket arena (see, e.g., Bonardi, Holburn, & Vanden 4 Bergh, 2006; Hillman & Hitt, 1999), we show that focal organizations do not have as free a hand in formulating nonmarket strategy as extant literature assumes. Instead, we demonstrate that nonmarket strategic initiatives are often reactive and emerge in response to delegitimization attempts by field-level actors beyond industry competitors. Third, we contribute to the literature on organizational survival (Hiatt et al., 2009; Ruef & Scott, 1998; Soule & King, 2008) by showing how nonmarket counter-mobilization can elongate the survival of an organizational form. In doing so, we show that grassroots nonmarket tactics, which stimulate broad popular support for an organization, are roughly fifty percent more effective than more traditional forms of political mobilization, such as the creation of trade associations. Lastly, we also contribute to the emerging literature on the use of corporate social responsibility initiatives as a political tactic (Dorobantu, Kaul, & Zelner, 2017; Scherer & Palazzo, 2011), showing that the provision of public goods by an industry (even in centuries past) can pay political benefits. By looking at the effects of mobilization and the related process of counter-mobilization, we thus add a ‘strategic’ nonmarket dimension to the study of movements and counter-movements, demonstrating how strategically interacting parties “produce historical, path-dependent trajectories and a sequence over time of different movement effects” (Schneiberg et al., 2008: 657). SOCIAL MOVEMENTS, DYNAMIC NONMARKET STRATEGY, AND ORGANIZATIONAL SURVIVAL: THEORY AND HYPOTHESES Social movements need to create an understanding amongst wide societal audiences of the problematic conditions or situations they seek to address. To do so, they attribute blame or point out opportunities to third parties, propose alternatives to the status quo, and build social platforms for change (Benford & Snow, 2000; Carlos et al., 2018),

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