How Foundations Think: The Ford Foundation as a Dominating Institution in the Field of American Business Schools
Executive Summary — What causes institutions to change? This paper adds organizational and exogenous perspective to existing theories by looking at the idea of "dominating institutions"—a class of formal organizations purposively designed to change other institutions. HBS professor Rakesh Khurana and colleagues look at the Ford Foundation and its work reshaping America's graduate schools of management between 1952 and 1965 through funding of "centers of excellence" at a number of schools, including Harvard Business School. Key concepts include:
- The goal of this paper is to describe the structural characteristics and associated behaviors of dominating institutions, specifically the Ford Foundation, as they incite change within other institutions.
- Through its analysis and recommendations, the Ford Foundation reshaped America's graduate schools of management between 1952 and 1965 from a vocationally disparate, but "successful" field to a more academically and discipline-based orientation.
- The researchers anchor their work around two questions: What are the structural characteristics of a dominant institution? What key behaviors do dominant institutions use to allow them to significantly reshape an existing institution?
- The power of these institutions to change other institutions resided in their ability to broker personnel and practices across institutional sectors, elevating and legitimating particular practices, and providing resources in ways that increase the interdependence between the foundations and their beneficiaries.
- Large-scale institutional change does not occur in isolation, the findings suggest, but rather has to be understood in relation to what is happening in other institutional fields.
- Scholars studying institutional change should make an analytical distinction between the structure of the position of organizational actors in an institutional field and the interactions among the organizations in that field. Both are important in understanding the processes of institutional change.
The question of institutional change has become central to organizational research (Powell, 2008). Recent scholarship has demonstrated, often through carefully researched cases, that institutions can and sometimes do change. According to this research, there are two primary factors that can cause institutions to change. First, institutional entrepreneurs, including individual actors or small groups of actors, are able to think and act outside the confines of their institutional context and, therefore, mobilize change in directions that favor new sets of interests (for a review, see Battilana, 2010). A second factor that contributes to institutional change is determining whether the processes are endogenous to the everyday functioning of institutions, such as the loose coupling between formal and informal practices or the contested meanings in the adoption of new practices (Leblibici, et al., 1991; Lounsbury and Pollack, 2001). While both research approaches have been quite productive and provocative, some scholars have raised concerns about this turn in institutional research. They point out that there is a theoretical inconsistency between the strong reliance on individuals as the primary unit of analysis and the examination of endogenously generated processes to explain institutional change (Scott, 2008). For example, the practical deficiencies of individual agency and endogenous processes as the primary sources of institutional change become especially apparent when one considers large-scale institutions such as healthcare, academic disciplines, or social services, which are nested within or cut across a variety of institutional sectors. These institutions either operate within a highly constrained environment of norms, regulations, and practices that are taken for granted or in a context of pluralistic and contested demands (D'Aunno, Succi, and Alexander, 2000; Denis, Lamothe, and Langley, 2001; Abbott, 1988; D'Aunno, Sutton, and Price, 1991). This research modestly attempts to explore a decidedly more organizational and exogenous perspective to explain institutional change. We start with a construct called dominating institutions, a class of formal organizations that are purposively designed to change other institutions. We suggest that such organizations exist and provide us with a stepping stone toward a more theoretically consistent and empirically grounded explanation for how large-scale institutional change sometimes occurs. The goal of this paper is to describe the structural characteristics and associated behaviors of dominating institutions as they incite change within other institutions. Their primary structure can best be described as adjacency, a space between institutional fields that provides these organizations with the advantages of connectivity across a wide variety of institutions and with a vantage point that allows them to think strategically about key intervention points for changing an institution. However, while adjacency is an important structural position, it is not, by itself, dominance. Dominance requires action. Dominating institutions exercise dominance by (1) brokering across different institutional sectors, (2) legitimizing or stigmatizing organizations and/or their practices, and (3) creating resource dependencies with the key organizations they are trying to change. We carry out this research by examining a large-scale foundation and its approach to reshaping one of the largest institutional sectors within higher education. Specifically, through a historical analysis, we document the Ford Foundation's organizational characteristics, its modus operandi, and substantive decisions for reshaping America's graduate schools of management between 1952 and 1965 from a vocationally disparate, but 'successful' field to a more academically and discipline-based orientation. We frame two questions in order to anchor the scope of our investigation: What are the structural characteristics of a dominant institution? What key behaviors do dominant institutions use to allow them to significantly reshape an existing institution? Our paper is organized in four parts. Part one describes, in greater detail, the constructs of dominating institutions, adjacency, and dominating behaviors. Part two introduces our research context, data sources, and research methods. Part three presents the key findings of how the Ford Foundation dramatically shifted the nature of business education. Part four discusses the implications of our findings and the potential for future research on institutional change.