The Emergence of Proto‐Institutions in the New Normal Business Landscape: Dialectic Institutional Work and the Dutch Drone Industry

• Author: Katrin M. Smolka,Pursey P. M. A. R. Heugens
• DOI: http://doi.org/10.1111/joms.12540
• Date: 01 May 2020
• Published date: 01 May 2020

© 2019 The Authors. Journal of Management Studies published by Society for the Advancement of Management

Studies and John Wiley & Sons Ltd.

The Emergence of Proto-Institutions in the New

Normal Business Landscape: Dialectic Institutional

Work and the Dutch Drone Industry

Katrin M. Smolkaa and Pursey P. M. A. R. Heugensb

aUniversity of Warwick; bErasmus University

ABSTRACT In the current business landscape, in which technology-enabled entrepreneurship is

part of the New Normal, regulatory institutional structures are in constant flux. Previous studies

have framed the challenges facing entrepreneurs in mature organizational fields as avoiding the

power of overbearing regulators long enough to establish the legitimacy of their ventures. In

fields typified by New Normal conditions, however, regulatory frameworks for evaluating new

technology-enabled ventures are often still lacking. Regulators may choose to actively reach out

to entrepreneurs to arrive at a better understanding of the radical technological changes and

high-frequency entrepreneurial behavioural adaptations that occur in these settings. To grasp

how novel regulatory institutional structures come about in the New Normal business land-

scape, we conducted a processual study of the emergence of a new technology that is the Dutch

remotely piloted aircraft systems (drone) industry between 2000 and 2018. Our findings show

that regulatory proto-institutions result from dialectic institutional work in the form of structured

interactions between entrepreneurs and regulators. Specifically, we present a process model that

reveals how new regulatory structures evolve in contexts where high levels of technological and

behavioural change induce systemic uncertainty, and enlarge the interdependence between en-

trepreneurs and regulators. We suggest that our process theory of proto-institutional emergence

generalizes towards other organizational fields in which technology-enabled entrepreneurship

has become the main driver of g rowth. Theoretically, our findings speak to the literatures on

institutional work, proto-institutional emergence, and the New Normal business landscape.

Keywords: (dialectic) institutional work, drones, entrepreneurship, industry emergence,

New Normal, proto-institutions

Journal of Man agement Studi es 57:3 May 2020

doi:10. 1111/j om s.12 54 0

Address for reprints: Katrin M. Smolka, Warwick Business School, University of Warwick, Coventry CV4 7AL,

UK (Katrin.Smolka@wbs.ac.uk).

This is an open access article under the terms of the Creat ive Commo ns Attri bution License, which

permits use, distribution and reproduction in any medium, provided the original work is properly cited.

The Emergence of Proto-Institutions in the New Normal Business Landscape 627

© 2019 The Authors. Journal of Management Studies published by Society for the Advancement of Management

Studies and John Wiley & Sons Ltd.

INTRODUCTION

How do regulatory proto-institutions arise in the type of technology-enabled and be-

havioural change-prone organizational fields that are emblematic for the New Normal

business landscape? Prior research on institutional work has predominantly focused on

the relationship between agency and structure, gleaning inspiration also from the liter-

ature on institutional entrepreneurship (Garud et al., 2002; Greenwood and Suddaby,

2006; Maguire et al., 2004). Others have stressed that ‘institutional work insists on the

need to consider the permanent recursive and dialectical interaction between agency

and institutions’ (Lawrence et al., 2011, p. 55), thus pointing to the interactive element of

institutional work. However, a complete picture of institutional emergence requires that

we move beyond heroic accounts of how institutional entrepreneurs struggle with fully

entrenched institutions (Peng et al., 2017). Especially in the New Normal business land-

scape, in which technology-enabled entrepreneurship often is the norm (Hitt et al., 1998;

Verbeke, 2018), our current theoretical understanding of institutional change does not

suffice for grasping how key stakeholder groups like entrepreneurs and regulators jointly

contribute to proto-institutional emergence. In fact, Forbes and Kirsch’s (2011, p. 589)

earlier claim that the study of entrepreneurial activities in emerging industries ‘remains

relatively neglected by researchers’ still rings true today.

We define the New Normal business landscape as an environmental condition in which

new growth opportunities primarily stem from robust entrepreneurial activities that are

enabled by technological innovation and new business models, and where responsiveness

to these growth opportunities leads entrepreneurs to make major and sometimes frequent

change to their behaviours (see Verbeke, 2018). In combination with the increasing financial

and capacity constraints facing governments (Abels, 2014; Davis, 2009), the technological

and behavioural volatility that is constitutive of the New Normal further more necessitates

regulators to actively seek entrepreneurs’ input in the regulatory process, and make it more

co-creational (see Ahlstrom and Bruton, 2010; Lewin and Volberda, 1999). Under such

conditions, the grip of regulatory proto-institutions – novel normative and regulatory pre-

scriptions that are not yet fully legitimated and diffused (Lawrence et al., 2002; Zietsma

and McKnight, 2009) – on entrepreneurial behaviour is looser than it might otherwise be

in more mature fields. Because regulators cannot fully oversee the new realities that emerge

from entrepreneurial activities in such contexts, and yet are eager to facilitate initiatives that

hold the promise of economic development, entrepreneurs are given considerable leeway

to participate in the creation of regulatory proto-institutions. Entrepreneurial behaviour

hereby becomes an important source of industry regulation in itself, in that the regulatory

proto-institutional prescriptions entrepreneurs face have sprung, at least in part, from their

own interactions with regulators. At present, however, we lack theory explaining how entre-

preneur–regulator interactions lead to regulatory proto-institutional emergence. Our aim

is to develop a process-theoretical account of these dialectic interaction patterns between

entrepreneurs and regulators, based on multiple complementary sources of longitudi-

nal qualitative data (Faems and Filatotchev, 2018). We document the micro-momentary

actions through which entrepreneurs shape their own regulatory contexts in interaction

with regulators. These actions have a profound conditioning effect on the opportunity and

constraint structures facing later generation entrepreneurs.

628 K. M. Smolka and P. P. M. A. R. Heugens

© 2019 The Authors. Journal of Management Studies published by Society for the Advancement of Management

Studies and John Wiley & Sons Ltd.

Our study is set in an organizational field that is representative of the New Normal

business landscape: the Dutch industry for businesses that produce, commercially oper-

ate, and/or deliver services for remotely-piloted aircraft systems (RPAS), colloquially re-

ferred to as drones. We rely on several sources of longitudinal qualitative data, including

participation in industry events, analysis of archival data, field notes, and personal obser-

vations, as well as 27 semi-structured, in-depth interviews with industry participants. Our

analyses show how the regulatory proto-institutions in this field have emerged in four

consecutive evolutionary phases. Proto-institutional structures emerge in each phase as

a joint entrepreneurial and regulatory response to challenges and opportunities experi-

enced in prior phases. At the same time, new structures also give rise to institutional fric-

tions,1

which continue to mount until they cause an institutional transition that sounds in

a next evolutionary phase (Padgett and Powell, 2012; Schneiberg, 2006). Our results thus

have a strong processual character, in that entrepreneur–regulator interactions occur in

different phases of the proto-institutional emergence process, and play a central role in

moving the emergence process along from one phase to the next.

Our study makes several theoretical, empirical, and practical contributions. First, by in-

troducing the concept of dialectic institutional work, we go beyond the commonly researched

interplay between agency and structure to illustrate how diverse entrepreneur–regulator

interactions in the New Normal business landscape contribute to proto-institutional

emergence. We specifically build on Lawrence and colleagues (2011, p. 56), who state

‘[e]xamining institutional work in the context of emergent institutional processes points

to the actions of those who affect, or attempt to affect, institutional processes at both the

general and the local levels’. Following these authors’ advice, we apply the institutional

work lens to analysing the emergence of proto-institutions in a New Nor mal setting. T his

is in line with work by Ozcan and Gurses (2018, p. 1811), who point to the need ‘to con-

sider the various contradictory and complementary institutional work done by the dif-

ferent actors involved in institutional processes (Delbridge and Edwards, 2008)’. Second,

by translating our findings into a clear framework, we show how entrepreneurs and reg-

ulators create new proto-institutions in the New Normal business landscape. Specifically,

we contribute to the literature on institutional emergence (Padgett and Powell, 2012) by

documenting a process through which proto-institutions can evolve. In doing so, we re-

spond to a call by McMullen and Dimov (2013) for more process-oriented approaches in

entrepreneurship studies and to the ‘need for more studies to clarify how scholars, man-

agers and policymakers can better understand and interact with emerging industries’

(Forbes and Kirsch, 2011, p. 590).

In addition, this work advances our collective understanding of the New Nor mal busi-

ness landscape by showing that under conditions of radical technological change and

frequent behavioural adaptations (Hitt et al., 1998; Verbeke, 2018), entrepreneurs and

regulators face greater uncertainty and interdependence than in more mature organi-

zational fields. These parties are especially interdependent in the New Normal business

landscape because growth from existing businesses has stagnated in many fields, which

gives centre stage to high-growth entrepreneurial ventures; public pressure on govern-

ments to regulate newly emerging fields is on the increase; and financial and capacity

constraints facing federal and local governments (including the state level in the USA

and the member state level in the European Union) necessitate regulatory co-creation