The Role of Institutional and Market Forces in Divergent Organizational Change

Abstract

This paper focuses on a radical change, in which organizations abandon an institutionalized template for arranging their core activities, that is likely to occur in organizational fields that have strong, local market forces and strong but heterogeneous institutional forces. We examine the role of market forces and heterogeneous institutional elements in promoting divergent change in core activities among all U.S. rural hospitals from 1984 to 1991. Results support the view that divergent change depends on both market forces (proximity to competitors, disadvantages in service mix) and institutional forces (state regulation, ownership and governance norms, and mimicry of models of divergent change).