Nonlinear Institutional Change Driven by Endogenous Im-passe:A Case Analysis of Chinese Infant Formula Industry
Scholars have paid great attention to institutional change.However,existing research mainly adopted an"actor-centered"per-spective and described institutional change as a smoothly progressing process.This study breaks away from this linear trajectory and studies the role of goal alignment between members of institutional field based on the perspective of multi-agent interaction.Through in-depth case studies of China's infant formula industry,we unveil a non-linear institutional change process featured by endogenous impasse:(1)In the early stage of reform and opening up,government deregulation was an external factor that enabled enterprise innovation.It gave birth to the collective milk source model of"dairy farmers+milk stations+infant formula producers".At the same time,institu-tional void existed in the field and the goals of organization field play-ers diverged.The government wanted higher industrial productivity,consumers had increasing demands for infant formula products,and manufacturers saw profit as the most important factor.As a conse-quence,the divergence in goals led to the disorderly expansion of infant formula producers,and eventually resulted in the impasse of vicious competition for raw materials and supply shortage;(2)During the pe-riod of supply shortage,government's tighter controls of quality and price further exacerbated the deviation of goals,making it impossible for manufacturers to find solutions that meet the goals of all players.In the contradiction between complying with national standards to improve product quality and short-term profits of enterprises,the in-stitutional gap provides an opportunity for manufacturers to choose illegal loose coupling,triggering the melamine scandal impasse;(3)The melamine scandal focused government and consumer attention on product quality,which was at odds with producers'goal of maximizing short-term profits,making is impossible to find a solution that meets the goals of all players.Infant formula producers opted for deceptive loose coupling,hoping to reduce the impact of scandals through low-cost change.But strong government regulation and social scrutiny by"expert"consumers have sparked an impasse of nation-wide recession of the industry;(4)In the final stage,infant formula producers began to combine quality,innovation and quality as an important goal.The convergence of goals and the narrowing of institutional voids together led to fundamental institutional change in the organizational field.Our study shows that the institutional change of the infant formula industry has experienced three cycles of"goal divergence-temporary institutional solution-endogenous impasse-new goal divergence"before the new institutions are established.We reveal the role of goal divergence among organizational field members in the generation of impasses,and the role of goal convergence in institutional change.Endogenous impasse is the result of goal divergence,while the scale and destructiveness of the impasse and institutional voids affect orga-nizational coping strategies.At the same time,the impasse triggers a shift in the goals of the members of the organizational field.After each impasse,at least one member,such as the government and business,government,government and consumers,in the first three stages,ad-justs their actions and finds a new development path and higher goals from the impasse.It is in this repeated impasse and adjusting that the organizational field is constantly deconstructed and reconstructed.In the end,the goals of field members show a high degree of alignment and new institutions are established.The trajectory of institutional change reflects the process unique Chinese industrial upgrading,and also illustrates the important role of goal alignment and institutional voids in institutional change.Our research makes three distinct contributions to the literature.First,the nonlinear process of institutional change based on endogenous im-passe suggests a strong need to summarize and reflect on the process of institutional change in existing literature.In our case,the institutional change in China's infant formula industry is by no means a gradual and smooth process.Institutional change also does not unfold in the same order as the literature suggests,such as the theorization phase and the alliance building stage(Greenwood et al.,2002,Guérard et al.,2013).On the contrary,the institutional change process of Chinese infant formula industry is full of short-term failures and even regressions.In this trajectory,divergent goals among members of the organizational field lead to a series of impasses and force them to find solutions to achieve alignment.Second,this study shows that institutional change is not a one-man show of one group of members.Rather,it is the result of goal alignment of different field members and institutional voids in the organizational field.In relation to the heroic image of institutional entrepreneurs,most of the existing studies adopt an"actor-centered"perspective,which views institutional change as the single-handedly achievement of a certain group of members(Guérard et al.,2013,An-sari et al.,2011,Nicholls et al.,2016,Powell et al.,2017).However,this study shows that the goal alignment among the government,producers,and consumers is an important force in determining the path of institu-tional change.This conclusion implies the need for institutional change as a multi-layered,conflictual process(Guérard et al.,2013),and also responds to the latest call for scholars to pay attention to the relation-ship between forces in institutional change(Willmott,2015,Lounsbury et al.,2021,Su Yufeng et al.,2015).Last but not the least,this study focuses on institutional change in the context of China's economic transition,which is a necessary complement to the current research that dominated by the Western context.The results show that the social norms and values,the institutional voids in the organizational field,and the initial goals of each member in the transition to a market economy played an important role in institutional change.The transition to a market economy does not happen overnight.On the contrary,a quick transition to market economy and a duplication of Western institu-tions can lead to setbacks and impasses in the process of institutional change.This finding,on the one hand,helps to explain the paradox of embeddedness-agency in institutional change(Greenwood et al.,2006,Seo et al.,2002),explains why members embedded in the current sys-tem and are constrained by it have the motivation and ability to change the system(Battilana et al.,2009a,Strang et al.,2002),and on the other hand,it also shows the uniqueness of China's industrial upgrading and the necessity of Chinese management theory.
Organizational FieldInstitutional ChangeImpasseActorsInfant Formula Industry
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