Faking It or Muddling Through? Understanding Decoupling in Response to Stakeholder Pressures

Abstract

We advance a multilevel argument that challenges and qualifies existing explanations of firms' responses to institutional pressures. In an in-depth study of 17 multinational corporations involving 359 interviews with internal and external actors, we find that firms facing identical pressures decouple policy from practice in different ways and for different reasons. When firms' responses are generated locally, without firmwide coordination, these responses can be either intentional or emergent. In the presence of information asymmetry between firms and their stakeholders, we find that managers' responses are intentional (“faking it”) and depend on how they perceive their interests. In the presence of competing stakeholder expectations, responses are emergent (“muddling through”) and depend on the degree of consensus among managers in their readings of the environment. These findings suggest that theories of decoupling need to be broadened to include the role of “muddling through” and the interplay of internal managerial and external stakeholder dynamics.