10 - The institutional framework I – Market creation and dynamics

Question 1

How are markets created?

Answer 1

1. A market can be created Through identification and fulfilment of an unmet customer need or the development of a new technology.

That is a process of discovery

2. A market can be created Through a political and social process that is affected by the environment that exists outside the firm or industry

That is a process of legitimation

Question 2

MARKET CREATION AS A PROCESS OF INSTITUTIONALISATION

Answer 2

The process of market creation as a process of institutionalising certain shared understandings and practices of exchange

Question 3

What is an institution?

Answer 3

Institutions are ubiquitous social structures that

• Enable action by offering guidelines and resources (symbolic and material) for action
• Circumscribe the possibilities for action

A firm’s success is not only dependent on economic fitness (efficiency, effectiveness) but also on its social fitness or legitimacy

Question 4

What is legitimation?

Answer 4

Legitimation is the process of making a practice or institution socially, culturally and politically acceptable within a particular context

Question 5

What are the three pillars of institutions

Answer 5

1. Regulative
2. Normative
3. Cultural-cognitive

• Regulative legitamicy is the degree to which an organization adheres to “explicit regulative process: rule setting, monitoring and sactioning activities”
• Normative legitimacy is the degree to which an organization adheres to the norms and values in the social environment. Proposes that legitimacy is a property of the relationship between the organization and its generalizedd environment, and it frames legimitions as a process of garnering normative accpetance in this environment.
• Cultural-cognitive legitimacy is the degree to which an organization is known and understood by social actors. CC legitimacy is most measured as the quality of being taken for granted - that is the degree to which an organization or innovation fits with existing cognitive and cultural scemas.

Question 6

What are the three types of legitimacy?

Answer 6

1. Regulative legitimacy: the degree to which an organisation adheres to explicit regulative processes: rule-setting, monitoring and sanctioning activities
2. Normative legitimacy: the degree to which an organisation adheres to norms and values in the social environment
3. Cultural-cognitive legitimacy: the degree to which an organisation is known and understood by social actors

Question 7

Mention one way to manage/influence the legitimacy

Answer 7

Example: Casino

Rhetorical action;

1. Amplification (Ratpack)
   - Idealization, embellishment, clarification or invigoration of existing values/beliefs
2. Extension (Add Hotels, restaurants etc.)
   - Enlarging concepts to include issues or concerns presumed to be of importance
3. Bridging
   - Linking two or more ideologically congruent but structurally unconnected frames
4. Transformation
   - Changing understandings and meanings and/or generating new ones

Question 8

Take us through the stages of legitimation

Answer 8

Stage 1: Innovation
- Type of legitimacy: Cultural cognitive
- Managerial action: Amplification

Stage 2: Local validation
- Type of legitimacy: Regulative
- Managerial action: Amplification

Stage 3: Diffusion
- Type of legitimacy: Normative
- Managerial action: Extension

Stage 4: General validation
- Type of legitimacy: Regulative
- Managerial action: Bridging