Action at a Distance: Client Relations as a Conduit for External Institutional Influence

Prior empirical research on institutional change shows that the actions of institutional actors in one locale can impact organizational behavior in another. In this paper, we explore how extrajurisdictional regulative and normative pressures faced by a set of organizations affect the strategic decision making of their suppliers. We utilize a novel dataset that tracks the adoption of a green building practice by a panel of 226 architecture studios in Australia from 2008–2015. In line with our theoretical predictions, firms respond to regulation, social norms and competitive pressures from cities where they do not operate but where their prospective clients do. We find that a focal studio’s position in the market for the new practice shapes its response to extrajurisdictional regulation but not its response to extra-jurisdictional norms. The study advances our understanding of how network mechanisms shape firms’ conceptions of the institutional field that governs exchange. We discuss resultant effects on organizational behavior which may be crucial to market formation.