When the Regulatory Pillar Falls: How Social Movements and Political Ideology Superseded the Influence of a Market-Based Policy

While we know much about what causes institutionalization and their effects on organizations, the issue of how institutions are maintained when challenged is relatively under theorized. Using data associated with the Acid Rain Program (ARP) from 1995 to 2011, I explore what social factors led coal-fired facilities to maintain their reduction in Sulphur Dioxide (SO2) emissions even after the policy was legally challenged by the stakeholders. This phenomenon is to some extent puzzling for scholars in social science fields. From an economic standpoint, a significantly lower allowance price could have incentivized fossil-fuel power plants to increase, or at least maintain their current level of SO2 emissions through market activities as the marginal cost of reducing emissions decreased. In addition, from a sociological perspective, the loss of legitimacy and the broken trust in the allowance market could have directed coal-fired plants to deviate from the regulatory expectations.

To resolve this puzzle, I revisit sociological perspectives on organizations. From an institutional standpoint, when the ARP was taken for granted by stakeholders (1995~2005), I show that the legitimacy of the allowance market absorbed the effects of other institutional elements engaged in the ARP. In a similar vein, some institutional scholars suggested that once an institutionalization process is complete no further effort is required for maintenance (Scott, 2014). However, when the regulatory pillar fell (2006-2010), other normative sources sharing the same cultural value with the ARP reactivated and took on the role of the broken pillar. In particular, I investigate the role of social movement organizations and political ideology involved with the ARP. 

The empirical findings in this study offer some theoretical implications. First of all, my results imply that Scott’s (1995) prominent three-pillar distinctions of institution (regulative, normative, and cognitive) as a source of conformity should be extended. During the institutionalization process, the role of the three-pillars may be clear and static as actors increasingly conform to the pressure over time. However, when institutions attempt to persist against disorder, I argue that the boundaries of the three pillars and their influence on actors in a given field could become ambiguous and dynamic. In particular, I attempt to explore the effect of replacing a broken regulatory institution with social movement activism and common normative framework. As long as other social forces buttress the cultural values held by an eroded institution, I suggest that organizations under the influence will not necessarily deviate from the institutional expectations.

Lastly, most organizational studies from a social movement perspective have focused on the role of social movement organizations as change agents by challenging the current institutional expectations. In this vein, scholars have shown that these organizations stimulate innovations and change. However, their role after the innovation took place has been largely overlooked. In this proposal, I argue that social movement organizations contribute to institutional maintenance if they support the underlying cultural and normative elements that are buttressing a given institution. That is, the stronger the movement, the greater will be the resilience to disorder.