This volume is devoted to exploring the causes, processes, consequences, and nature of wrongdoing in and by organizations. Such conduct, hereafter for convenience referred to as organizational misconduct and organizational wrongdoing, includes a wide range of behaviors – violations of criminal, civil, and administrative law; transgressions of explicit industry and professional codes; and contraventions of less codified organizational rules, social norms, and ethical principles. Given their apparent greater incidence and scale in recent years, it is not surprising that these behaviors have received increasing attention in scholarly circles, in practitioner communities, and among the general public as of late. Moreover, and contrary to previous work, recent scholarship has adopted a range of perspectives and elaborated its focus and concerns to include aspects of wrongdoing previously ignored. This introduction outlines how recent scholarship contributes to the renaissance of management scholarship on organizational misconduct.

The dearth of theory and research on organizational wrongdoing

Kenneth Boulding (1958), in his review of the first two volumes of Administrative Science Quarterly, identified the study of misconduct in and by organizations as an object of inquiry that was of enduring importance to management practitioners and society but that was receiving scant attention from the journal's contributors. Since Boulding's early assessment, other observers have periodically lamented management scholars’ neglect of organizational misconduct relative to other topics of apparently greater interest, such as organizational efficiency and effectiveness (Brief 2000; Hinings and Greenwood 1982). This lack of attention to misconduct in and by organizations implicitly conveys the assumption that organizational wrongdoing is rare and peripheral to organizational functioning.

At the dawn of the new century, though, a series of episodes of organizational wrongdoing received massive media attention, including incidents at Enron, Arthur Andersen, Tyco, and WorldCom in the United States, Barclays Bank in the United Kingdom, Parmalat in Italy, Satyam in India, as well as incidents of misconduct at a large number of multi-national financial institutions implicated in the recent global financial crisis and in international governance organizations such as the world soccer Fédération Internationale de Football Association (FIFA). These affairs likely received extensive media attention partly because new forms of media (most importantly, forms of media made possible by the expansion of the Internet) were emerging that facilitated the dissemination and amplification of news about misconduct.

Parmalat – formerly one of the largest dairy companies in the world – went bankrupt on December 24, 2003, leaving behind a “hole” of 14 billion euros, a sum almost twice the company's 2002 sales turnover. Subsequent investigations revealed that the company's financial accounts had consistently and deliberately been falsified for each of the thirteen years that Parmalat was listed on the Milan Stock Exchange. During those years, professionals – who are supposed to act as gatekeepers (Coffee 2005, 2006) – did not (or, in some cases, decided not to) see what was going on. Deloitte – which was auditing the company's group accounts – did not raise any concerns until October 2003 when they issued a disclaimer on the company's accounts, as they could not determine the amount of a fund held by a subsidiary. Standard and Poor's constantly rated the company at the investment grade and even improved its outlook only a few months before the company defaulted. Securities analysts, similarly, remained positive on Parmalat's shares until the company was already on the verge of bankruptcy; only a few days before the fraud was detected, fifty-seven of sixty-six of their equity research reports recommended buying or holding the company's shares.

Enron's story, one of the biggest scandals in American history, is not much different, although it took place in the supposedly more developed US stock market. As in the Parmalat story, professionals did not effectively perform their ascribed roles. Arthur Andersen, the company's auditors, consistently approved Enron's accounts without raising any concerns and failed to inform “the company's audit committee about both the accounting policies in use at Enron and the unusual transactions the company had conducted” (Batson Report 2003: 40–41). Management consultancies such as McKinsey, which advised Enron, endorsed its strategic repositioning and praised its “asset light” strategy (Kipping, Kirkpatrick, and Muzio 2006). Not until four days before bankruptcy was declared on December 2, 2001, did rating agencies lower their ratings of the company to below the mark of a safe investment. As late as October in the same year, fifteen securities analysts rated Enron a “buy” and twelve of them recommended it as a “strong buy.”

Introduction

Institutional scholars have recently started to reach out to strategy-as-practice concepts to better conceptualize institutional landscapes and the ways in which organizations construct and navigate them in practice. Specifically, they seek to engage SAP scholarship in order to enhance their theorizing of institutional logics (Thornton, Ocasio and Lounsbury 2012), ‘institutional complexity’ (Greenwood et al. 2011) and ‘institutional work’ (Lawrence and Suddaby 2006) and their understanding of the ‘micro-foundations’ of institutions (Powell and Colyvas 2008). Simultaneously, strategy-as-practice scholars have begun to look beyond the intra-organizational activities that have traditionally preoccupied them and to work at their stronger contextualization in the broader social orders that have been the hallmark of institutional research (Vaara and Whittington 2012; Whittington, in this volume).

This rapprochement may appear unsurprising, given that both theoretical strands share common roots in the seminal works of Bourdieu (1977; 1990) and Giddens (1984). Much like siblings separated at birth, however, institutional and practice theories have gone on distinct journeys, characterized by different foci on the structure–agency spectrum and levels of analysis. While institutional scholarship through the 1990s often gave primacy to structure, stability and the macro-level contexts that condition organizations (DiMaggio and Powell 1983; Greenwood et al. 2008; Scott 1987), strategy-as-practice scholars have emphasized agency, potential for change and the collective activities of individuals inside organizations (Chia and Holt 2009; Jarzabkowski 2005; Jarzabkowski and Wolf, in this volume). This history makes the recent re-engagement noteworthy and means that, much like reunited siblings with different views of the world, they can open each other's eyes to new phenomena and start looking at familiar phenomena in new ways.

The metaphorical notion of estrangement, reunion and mutual enrichment drives the structure of this chapter. In the second section we briefly trace the evolution of institutional theory to understand where and why it lost touch with practice theory and which issues have recently motivated it to reach out for re-engagement. The third section then outlines shared concerns and concepts over which institutional and strategy-as-practice scholars can connect and strike up fruitful conversations. The fourth section sketches the nascent insights that have recently emerged from some of those conversations. Finally, the conclusion summarizes the mutual benefits to be gained from blending institutional and SAP scholarship and outlines yet under-explored areas as avenues for future research.

Status is an important concept that is invoked widely across the social sciences. One common definitional starting point emphasizes how status enables an “effective claim to social esteem in terms of positive or negative privileges” (Weber, 1978, p. 305). In this way, status distributes esteem, deference, honor, and prestige within a social collective (Berger, Cohen, and Zelditch, 1972; Ridgeway, 1991) and, as such, stratifies its members (Knoke and Burt, 1983; Lounsbury, 2002; Podolny, 1993). Because status tracks closely with influence, prominent actors often have the ability to shape the development of fields and markets to their advantage (Fligstein, 1996, 2000) and challenge extant arrangements without facing the harsh penalties levied on other change agents (Greenwood and Suddaby, 2006; Lounsbury, 2007; Merton, 1968; Rao, Monin, and Durand, 2003). Prominent actors also receive more acclaim for performing the same practices than their low-status alters (Benjamin and Podolny, 1999; Merton, 1968). Moreover, high-status actors tend to be targets of imitation, with the result that their practices become widely adopted and highly valued (Haunschild and Miner, 1997; Kraatz and Zajac, 1996).

However, while extant literature has highlighted the many benefits related to high status, much less attention has been paid to the conditions, especially those related to cultural context, under which such benefits are realized. For instance, it is typically assumed that the value of a particular practice tracks closely with the status of its most prominent advocates. This is reinforced by the empirical emphasis on relatively settled fields where culture, status, and practice are well aligned and mutually constitutive (e.g., Bourdieu, 1984; Podolny, 1993). In addition, studies of institutional change suggest that the deference given to high-status actors allows them to foment and valorize new practices relatively unproblematically (e.g., Fligstein, 1996, 2001; Greenwood, Suddaby, and Hinings, 2002; Rao et al., 2003). The resulting imagery is of culture as uniformly beneficial to prominent actors or something which they can act upon to their advantage. But this is not always the case, since marginal actors can also catalyze and facilitate the spread of novel practices and facilitate institutional change (e.g., Leblebici et al., 1991).

Since 1974 local authorities in England and Wales have been under increasing fiscal pressure for two reasons. Firstly, reliance upon a property tax, rates, for raising tax revenue makes local authorities especially vulnerable to the effects of inflation. The property tax is not buoyant, since the assessed value of property is not raised annually in keeping with inflation. Thus, rates produce the same revenue yield each year unless the level of taxation, i.e. the rate per pound of assessed value, is altered. During a period of high inflation, such as Britain has experienced since 1974, local authorities inevitably face acute fiscal pressure, because inflation pushes up costs without increasing revenue (Sharpe 1981).

The second cause of fiscal pressure, of greater concern here, arises from the interconnection of central and local government fiscal measures. At Westminster successive governments have pursued policies of limiting public expenditure in order to combat inflation. Part of that macro-economic strategy has involved setting local government annual expenditure targets intended to reduce the growth of local spending, or even lower the volume of local services. The targets, although advisory and without the force of law, have been reinforced by reductions in grant support by central governments. A consequence of central government's policy has been to increase the financial difficulties already facing local authorities because of inflation by reducing the effective value of central government grants, which provide local authorities with almost half of their income.