Poverty's Monument

Journal of Management Studies ••:•• 2018 doi: 10.1111/joms.12329 Poverty’s Monument: Social Problems and Organizational Field Emergence in Historical Perspective R. Daniel Wadhwani University of the Pacific ABSTRACT This article draws on historical institutionalism as an approach to studying the relationship between business institutions and major social problems. Using the historical case of the emergence of savings banking as an organizational response to poverty in the nineteenth-century United States, I develop three conceptual claims about how social problems shape the processes of institutional and organizational change. First, I show how the ‘historical framing’ of social problems shapes the processes of problematization, design, and legitimation related to institutional change. Second, I demonstrate how the dynamics of cooperation, competition, and alignment between an emerging organizational field and other fields shape the evolution of institutional responses to social problems. And finally, I illustrate how historical revisionism as a methodological approach can help management scholars re- consider settled empirical and theoretical claims in a way that takes social problems into account. Keywords: fields, historical framing, historical institutionalism, hybrid organizations, management history, social movements INTRODUCTION In the introduction to his 1876 History of Savings Banks in the United States, political econo- mist Emerson Keyes pondered the origins of a financial institution that had, over the previous sixty years, played a pivotal role in the development of professionally managed financial services for the general public. The savings banks he chronicled represented not only a new organizational field that had begun to transform how ordinary people conducted their financial lives, they had come to account for a massive portion of the financial systems of many European and North American economies. To what, then, did Keyes (1876, p. 4) ascribe the development of the organizational form of the savings Address for reprints: R. Daniel Wadhwani, Eberhardt School of Business, University of the Pacific, 3601 Pacific Avenue, Stockton, CA 95211, USA (dwadhwani@pacific.edu). VC 2017 John Wiley & Sons Ltd and Society for the Advancement of Management Studies 2 R. D. Wadhwani bank? ‘In a word, it is Poverty!’ he exclaimed. ‘Paradoxical as this appears, such is the legend to be inscribed on Poverty’s Monument in this country today!’ Keyes’ claim that addressing the problem of poverty was the motivating force behind the emergence of a significant portion of the modern, professionally managed system of financial institutions for the public poses an important challenge for the fields of organization and management research and their relationship to major social problems. Cur- rent appeals within management and organizational scholarship to address major social problems are often premised on the assumption that such issues pose new ‘grand chal- lenges’ that management should or must confront (Bruton, 2010; Colquitt and George, 2011), and entail the development of novel types of ‘hybrid’ organizational solutions that cross the private, public, and civil sectors (Doherty et al., 2014; Mintzberg, 2015). Traditional historical accounts of the rise of modern business institutions (Chandler, 1977, 1990) reinforce this impression by failing to acknowledge how concerns about major social problems shaped the emergence and evolution of modern business organizations in the nineteenth and twentieth centuries(Djelic and Etchanchu, 2017; Marens, 2013). A revisionist historical approach that foregrounds the social problems and struggles that shaped the emergence of modern organizations can make significant contributions to the growing interest in the relationship between business institutions and social problems. Historical research of this kind would not only offer an important corrective to the tendency to see hybrid organizational forms and business responses to social problems as new phenomena, but more importantly holds unique analytical and interpretive value in studying the relationship between social problems and the processes of institutional and organizational change. It does so not only because it provides a retrospective ‘macro’ point of view (Braudel, 1982) from which to grasp the relationship between social problems and change over long periods of time, but also because it provides a ‘micro’ perspective (Ginzberg, 2012; Levi, 2012) on how the historically situated point- of-view of actors shapes the framing of social problems and establishes motivation in mobilizing for organizational and institutional change. In this article, I use ‘historical institutionalism’ as a theoretical lens to examine the emergence of the organizational field of savings banking as a response to the social problem of poverty in nineteenth-century America. Historical institutionalism is an approach to institutional theory that derives contextually-embedded and process-oriented claims about actors’ relationship to their historical and social contexts through studies of partic- ular empirical phenomena or problems (Mutch, 2017; Suddaby et al., 2014). Though historical institutionalism is relatively new as an explicit approach to management and organizational scholarship (Rowlinson and Hassard, 2013), it is well established as a cat- egory of research within the related fields of political science (Pierson and Skocpol, 2002; Steinmo, 2008; Thelen and Steinmo, 1992) and economic sociology (Dobbin, 1994; Fligstein, 1993; Schneiberg and Bartley, 2001), and has antecedents in a number of empirical studies of management as well (Djelic and Etchanchu, 2017; Hargadon et al., 2001; Leblebici et al., 1991). Using a historical institutionalist perspective, I examine the question of how the social problem of poverty came to be framed and explore when and how this led to the emergence and evolution of the field of savings banking. I use the historical study to derive VC 2017 John Wiley & Sons Ltd and Society for the Advancement of Management Studies Poverty’s Monument 3 two sets of conceptual claims and one methodological one pertaining to the role of social problems in triggering and shaping institutional change. First, I find that ‘historical framing’ played an important role in shaping how pauperism came to be seen as a major social problem, and in shaping the design of savings banks as an organizational response to the problem. The reinterpretation of the historical causes of pauperism served to delegitimize existing institutional arrangements – such as the Old Poor Law – and form the basis for the design and legitimization of new ones – such the savings bank. The process of historical re-framing was hence crucial to both the construction of poverty as a ‘social problem’ and the processes of problematization, design, and legitimization of the resulting institutional change. Second, the process of institutional change depended on contextual interactions beyond the organizational field of savings banking itself, and involved complex ‘inter-field dynamics’ with other social welfare organizations, with for-profit banks, and with the fields of politics and law. I show that shifts in inter-field cooperation, competition, and alignment shaped the emergence and transformation of savings banking as a response to poverty. And finally, I use my interpretation of the case to elaborate on how historical revisionism as a methodological approach can help management researchers develop novel socially embedded theoretical insights on management and organization. The paper is organized as follows. In the first section, I discuss why historical institutionalism provides a useful approach to studying the relationship between business institutions and social problems, and introduce ‘historical framing’ and ‘inter-field dynamics’ as two key constructs through which I interpret the history. Next, I discuss my research design, including the research setting and empirical questions posed, the sources used, and the interpretive methods employed. The third section provides my historical narra- tive of the development of savings banks, including their origins and legitimization as a response to poverty, the development of organizational practices as managers sought to find ways to provide financial services to the masses, and the transformation of savings banks over the course of the century from an organization designed to alleviate poverty to a mainstream financial institution. The fourth section draws out the conceptual and methodological contributions derived from the historical interpretation. I conclude by discussing the implications of the article for future research. INSTITUTIONAL THEORY, SOCIAL PROBLEMS, AND ORGANIZATIONAL CHANGE The Limits of Neo-Institutionalism The relationship between business institutions and social problems is inherently complex. The problems of poverty and inequality are no exception. Poverty involves not only conditions of material deprivation, but also reflects patterns in the historical distri- bution of power, status, and cultural legitimacy (Geremek, 1994; Himmelfarb, 1983; O’Connor, 2009). Moreover, these patterns change over time, spill into multiple domains of social life, and are shaped by how actors and societies define and view poverty within a broader worldview (Katz, 1996; Lees, 1998). Business institutions are themselves both products and agents of social and historical change, emerging and VC 2017 John Wiley & Sons Ltd and Society for the Advancement

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