When Is a Governmental Mandate not a Mandate? Predicting Organizational Compliance Under Semicoercive Conditions

Xuanli Xie, Wei Shen, Edward J. Zajac

Research output: Contribution to journalArticle

Abstract

While institutional theorists have long viewed governmental mandates as a prototypical coercive pressure generating homogeneous organizational compliance, we suggest that such mandates are often subject to enforcement uncertainty, resulting in a pressure more aptly characterized as “semicoercive” and a compliance result more aptly characterized as heterogeneous. We advance and test a theoretical framework to predict the specific form of heterogeneous compliance in semicoercive contexts, with particular attention to the differential sensitivity of firms to pressures to comply, based on differences in their specific legal, political, and social context. We use the setting of a mandated corporate governance reform in China requiring listed Chinese firms to add independent directors and find general evidence of noncompliance and more specific evidence consistent with the predictions from our sociopolitical framework. We discuss the implications of our theoretical approach and findings for future research on institutional environments, governmental regulations, organizational compliance, and corporate governance.

Original languageEnglish (US)
JournalJournal of Management
DOIs
StateAccepted/In press - 2020

Keywords

  • board of directors
  • corporate governance
  • enforcement uncertainty
  • institutional change
  • organizational compliance
  • state ownership

ASJC Scopus subject areas

  • Finance
  • Strategy and Management

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