Wednesday, March 3, 2021

The Diffusion of Differences: Two Paradoxes in Management Research

Is it possible to copy what others do and still become different from them? That seems like a paradox, but it could be reality in the world of organizations. Here is how it happens: Some new practice appears that claims to solve a problem, for example a technological innovation or a management technique. Is the claim true? It might be, but it might not, and the uncertainty about the value of an innovation is a problem that management needs to solve. Often, looking at what others do and copying them is an easy and smart solution. But if that is what organizations do, they should become similar to each other, right?

Wrong. Organizations are multidimensional in their activities and the environments they face. Some organizations copying others does not mean that all organizations do; they are often trying to solve different problems. Some organization copying specific other organizations does not mean that all organizations do; they often have different peer reference groups. Some organizations copying other organizations does not mean that they fully accept what the others do as true; they often try out innovations and reject those that do not fit their needs. For each new practice all these processes occur, and organizations live in a chaotic environment with many new practices that spread and are copied. What we see is the diffusion of differences.

How do we know this? In a recent research paper published in the Academy of Management Annals, Ivana Naumovska, Vibha Gaba, and I checked the last 20 years of diffusion research – 178 research articles in total. What did we find? First, less than half the studies reported how many organizations adopted a practice at the end of the study period, but from the studies that did report, less than 20 percent adopters was the most common result. Why did organizations react so differently? Usually because they faced different environments, so they were solving different problems, though other differences such as past learning and network ties also distinguished adopters from non-adopters. Looking over the past research, the diffusion of differences is a consistent finding across the articles.

This brings me to the second paradox. Most diffusion researchers believe that diffusion leads to similarity, or in their language, “mimetic isomorphism.” Why? One reason is that the diffusion of differences is surprising conceptually. It is hard to believe until you examine the evidence and think about the process. The more important reason is that the researchers have started with a deservedly famous theory article, “The Iron Cage Revisited: Institutional Isomorphism and Collective Rationality in Organizations Field” by Paul DiMaggio and Woody Powell, and have gone on to over-interpret its conclusions. In that paper, copying other organizations was one process that could lead to similarity. Researchers these days say that copying other is a process that does lead to similarity. These are very different claims.

Our conclusion? First, obviously, theory should not get in the way of evidence. Second, the strong belief in diffusion creating similarity means that there are lots of holes in our knowledge about what diffusion processes do. Because differences among organizations have been overlooked, we simply do not know enough about their sources.

Naumovska, Ivana, Vibha Gaba, and Henrich R. Greve. 2021. "The diffusion of differences: A review and reorientation of 20 years of diffusion research." Academy of Management Annals forthcoming.