- 07 Jun 2011
- Working Paper
The Institutional Logic of Great Global Firms
Executive Summary — In practice, many large firms are now realizing the importance of humanism in corporate management. But in academia, much of management theory is still stuck on the ideas of early industrialization - focusing solely on the idea that the only real value is financial value. In this paper, Rosabeth Moss Kanter discusses how social logic guides the practices of many high-performing companies. Kanter suggests that such successful practices should provoke the creation of new economic theory, which will in turn provoke other firms to take note. She puts forth several propositions to make the case. Key concepts include:
- Regarding the firm as a social institution is a buffer against uncertainty and change, and generates a longer-term perspective than merely considering financial concerns.
- Articulation and transmission of social values can evoke positive emotions, stimulate intrinsic motivation, and propel self- or peer-regulation among a firm's employees.
- Embracing globalization requires a concern for social issues that extend beyond the boundaries of the firm.
Theories of the firm have been dominated by a legacy of ideas from early industrialization that pose zero-sum opposition between capital and labor (or capital and nearly everything else), differentiating the economy from society and often posing irreconcilable conflicts. The search for mathematical models has turned the negotiated order of organizational activities, which necessarily include particularistic elements, into abstract generalizations that favor quantifiable variables. This paper offers another logic, a social or institutional logic, to let practice provoke the creation of new theory. It provides examples that show how social logic guides the practices of widely admired, high-performing companies, and why people and society are not an after-thought to be used or discarded, but core to the purpose and definition of the firm. It builds on in-depth, ongoing global field research on admired companies from four continents, followed in over 20 countries, to derive six propositions about the role of humanistic institutional logic.