Global Professional Service Firms and the Challenge of Institutional Complexity: ‘Field Relocation' as a Response Strategy

• Published date: 01 January 2016
• DOI: http://doi.org/10.1111/joms.12122
• Date: 01 January 2016
• Author: James Faulconbridge,Daniel Muzio

Global Professional Service Firms and the Challenge

of Institutional Complexity: ‘Field Relocation’

as a Response Strategy

James Faulconbridge and Daniel Muzio

Lancaster University; Newcastle University

ABSTRACT In this paper we use the case of the internationalization of English law firms into

Italy, and the refocusing of their operations on the city of Milan, to make a number of

contributions to existing literatures on responses to institutional complexity. First, we

contribute to the literature on how organizations address complexity at the field level, by

revealing the role of ‘field relocation’ as a particular response strategy. We also identify a

number of organizational tactics – re-scoping, re-scaling, and re-staffing – through which ‘field

relocation’ is accomplished. Second, we also show the importance of further developing our

understanding of the geography of institutional fields by highlighting how the ‘receptivity’ of

different field locations may affect responses to complexity. This identifies the importance of

geographically locating fields and sub-fields in studies of organizational responses to

institutional complexity.

Keywords: field location, institutional complexity, institutional receptivity, multinationals,

professional services firms, strategic responses

INTRODUCTION

A growing body of work calls for more attention to how multinational enterprises

(MNEs) can reveal distinctive theoretical and empirical insights into the challenges of

and responses to institutional complexity (e.g., Greenwood et al., 2010, 2011; Smets

and Jarzabkowski, 2013; Smets et al., 2012). As they operate across multiple and

diverse international contexts, MNEs are inevitably exposed to competing and poten-

tially incompatible institutional pressures, and therefore to experiences of complexity. In

Address for reprints: Daniel Muzio, Newcastle University Business School, 5 Barrack Road, Newcastle NE1

4SE, UK (daniel.muzio@newcastle.ac.uk).

This is an open access article under the terms of the Creative Commons Attribution License, which per-

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[The copyright line for this article was changed on 30 April 2015, after original online publication.]

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Journal of Management Studies published by John Wiley & Sons Ltd and

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Journal of Management Studies 53:1 January 2016

doi: 10.1111/joms.12122

particular, as exemplified by the literature on institutional duality (Kostova and Roth,

2002), MNEs are exposed to a particular form of complexity which arises from the

need to reconcile the different logics of home and host country jurisdictions. However,

despite this theoretical promise and the growing importance of MNEs in the contempo-

rary economy, our knowledge of their responses to complexity remains limited.

This paper is based on an exploratory case study of a group of English law firms,

their internationalization into the Italian market, and their responses to the institu-

tional complexity they encountered. As a particular type of MNE, law firms poten-

tially experience and respond to complexity in unique ways. As Muzio and

Faulconbridge (2013) highlight, the partnership form of ownership and governance

which characterizes these organizations distinguishes them from public owned corpo-

rations insofar that partners are the co-owners of the firm. This means that these

firms lack the hierarchical headquarters–subsidiary relationships which characterize

most corporate MNEs. Thus, partners in host country offices are, at least in theory,

equal to their peers at head-office and, therefore, enjoy a significant degree of influ-

ence and autonomy. Hence, the partnership model demands a degree of consultation

and consensus building between subsidiaries which is unparalleled in other types of

MNEs. In addition, legal services are characterized by high levels of national embedd-

edness due to the role of lawyers in the administration of justice (e.g., Krause, 1996).

This provides partners in each office of the firm with further resources to resist the

imposition of strategies by headquarters. These distinctive features all potentially

affect how law firms in particular and professional services firms in general might

experience and respond to complexity.

We, therefore, use our exploratory case to address a number of empirical questions:

How do law firms, as a distinctive type of MNE, experience institutional complexity

when they internationalize? How do these firms respond to such complexity?

Addressing these questions emphasizes the distinctively spatial forms of complexity expe-

rienced by global law firms, and how these organizations may respond to such com-

plexity by exploiting the uneven and dynamic nature of fields. These insights allow the

paper to make two related contributions to recent calls to give greater consideration to

field level characteristics when analysing the causes of (Davis and Marquis, 2005;

Fligstein and McAdam 2012; Wooten and Hoffman, 2008), and, in parti cular,

responses to institutional complexity (Greenwood et al., 2011; Quirke, 2013).

First, the paper reveals how MNEs can respond to complexity through a ‘field relo-

cation’ strategy. For our case study firms this involved relocating to a specific sub-field

where complexity was reduced. We also identify three key organizational tactics – re-

scoping, re-scaling, and re-staffing – through which ‘field relocation’ was accom-

plished. This extends recent studies (e.g., Greenwood et al., 2011; Smets and

Jarzabkowski, 2013; Smets et al., 2012) which show how organizations can handle

complexity internally within their own structures and practices by highlighting the

role of a field level strategy. Second, in line with growing recognition of the need for

institutional theory to take the geography of fields more seriously (e.g., Greenwood

et al., 2010; Lounsbury, 2007; Marquis et al., 2007), our paper highlights the rela-

tionship between geographical location and ‘receptivity’, whereby this concept refers

to the potential of a particular field location to be more open to alternative

90 J. Faulconbridge and D. Muzio

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Journal of Management Studies published by John Wiley & Sons Ltd and

Society for the Advancement of Management Studies

institutional logics. Specifically, we show how English law firms relocated within the

field by refocusing their operations on the city of Milan. This location was more

‘receptive’ to their home country logics, thus reducing the degree of complexity they

experienced. Together, the insights we provide into ‘field relocation’ and ‘receptivity’

highlight the importance of locating the field in studies of responses to complexity,

given that in uneven and dynamic fields different locations are associated with varying

degrees of complexity.

The rest of the paper proceeds over eight further sections. We begin by reviewing

the literatures on institutional complexity. We then explain our methodology and

introduce our case study. This is followed by three empirical sections, focusing respec-

tively on: causes, experiences, and responses to complexity. We then describe the

Milan sub-field to which our case study firms were able to relocate. We conclude by

developing the theoretical implications of our case study.

Organizational Responses to Institutional Complexity

Institutional complexity arises when organizations ‘confront incompatible prescriptions

from multiple institutional logics’ (Greenwood et al., 2011, p. 317). MNEs are a par-

ticularly interesting context for the study of institutional complexity. As MNEs strad-

dle different national jurisdictions, they experience a particular form of complexity

arising from different national logics. This has been long understood in the literature

as ‘institutional duality’ (e.g., Kostova, 1999; Kostova and Roth, 2002; Muzio and

Faulconbridge, 2013); this concept refers to headquarter subsidiary relationships

where ‘each foreign subsidiary is confronted with two distinct sets of isomorphic pres-

sures’ (Kostova and Roth, 2002, p. 216), emanating respectively from home and host

country contexts. As a result, ‘achieving and maintaining legitimacy are very difficult

for MNEs because of the multiplicity and complexity of legitimating environments’

(Kostova et al., 2008, p. 1000). Such difficulties increase with the ‘institutional dis-

tance’ between home and host country; this consisting of ‘the difference between the

institutional profiles of the two countries’ in question (Kostova, 1999, p. 316). In this

context, we contend that institutional duality is a particular form of institutional com-

plexity concerned with how MNEs experience the potentially incompatible prescrip-

tions of home and host country logics. Duality is, thus, a form of complexity which

has distinctive spatial dimensions as tensions emerge as much from national variants

of a particular logic, such as professionalism, as from the collision of altogether differ-

ent logics such as professionalism and managerialism. For the purposes of this paper,

we use the term complexity when discussing our case study, as this is the broader

term used in the literature we draw on and contribute to, but it is the specificities of

duality as a spatial form of complexity that are our primary concern.

There is now an extensive literature that examines how organizations respond to

institutional complexity (e.g., Battilana and Dorado, 2010; Greenwood et al., 2011;

Jarzabkowski et al., 2009; Kraatz and Block, 2008; Smets and Jarzabkowski, 2013;

Smets et al., 2012). Most recently studies have focused on responses which seek to man-

age the effects of complexity through various intra-organizational tactics. For instance

the notion of compartmentalization (Binder, 2007; Greenwood et al., 2011; Hamilton

91‘Field Relocation’ as a Response Strategy

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C2015 The Authors

Journal of Management Studies published by John Wiley & Sons Ltd and

Society for the Advancement of Management Studies