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0Academy ofManagement Review1994. Vol. 19.No. . 728-755.

MACROCULTURES: DETERMINANTSAND CONSEQUENCES

ERIC ABRAHAMSONColumbia University

CHARLES J. FOMBRUNNew York University

Faced with turbulent nation al an d international environments, entire

U.S. industries-most notably steel a nd automobiles-haverevealeda distinct propensity to overlook radically new ty pes of competitors,

cling to traditional technologies, and remain mired in similar, yet

outdated, str ategic postures. In this article, we ascribe the adapti ve

failures of entire industries not only to the microcultures of sin gle

organizations, but also to what w e term interorganizational macro-cultures

-

relatively idiosyncratic beliefs that ar e shar ed by ma nag -

ers across organizations. More specifically, we propose that value-added networks linking organizations into collectivities both inducean d reflect the existence an d persistence of more or less homoge-

neous macrocultures. In turn, homogeneous macrocultures (a) in-crease the level of inertia these organizations experience, (b) influ-ence the inventiveness of organizations and the diffusion of

innovations among them. and (c) increase t he similarity of memberOrganizations strategic profiles.

Commentators generally ascribe the failure of the U.S. auto industryin the 1970s and 1980s to organizational-level phenomena, principally toidiosyncratic features of the organizational cultures at GM, Ford, orChrysler (e.g., Keller, 1989). Similar attacks have been leveled at large,vertically integrated steel makers for failing to recognize new competi-tors, changing technologies, a nd key strategic issues (Lawrence& Dyer,1983).

We suggest that interorganizational phenomena-particularly be-liefs widely shared by managers across related organizations-are alsoto blame for the collective failure of industries. In his detailed accountof the auto industry, Halberstam (1986). for instance, attributed the de-cline of U.S. manufacturers not only to their myopic organizational mi-crocultures, but also to a homogeneous and insular interorganizationalmacroculture that encouraged manufacturers to overlook new types of

We have greatly benefited from comments and discussion with many colleagues on

earl ier versions of this manusc ript, particularly Warren Boeker, Donald Hambrick, and

Joseph Porac. Many thanks.

72%

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1994 Abrahamson and Fombrun 729

competitors, cling to traditional technologies, and remain mired insimilar, yet outdated, st rategic postures.

Not only does the homogeneity of beliefs within a n interorganiza-tional macroculture inhibit adaptation by organizational members tochanging environments, but it al so influences how inventions arise an dhow quickly and completely they diffuse. In the last 20 years, relativelyfew technological innovations were developed within the culturally ho-mogeneous U.S. auto industry, for instance, and the Big Three were vis-ibly slow to imitate Japanese rivals.

In part, insularity and sluggishness result because homogeneity ofbeliefs within a n interorganizational macroculture encourages memberfirms managers to interpret environments in similar ways, to identifysimilar issues as strategic, and so to adopt similar competitive positions.By benchmarking against each other rather than against global rivals,U.S. manufacturers converged in making similarly misguided resource

commitments over the years and in disregarding looming threats fromseemingly peripheral producers (Halberstam, 1986; Keller, 1989).

The main purpose of this article is to explore some key determinantsand consequences of interorganizational macrocultures. The article con-sis ts of five sections. The first introduces the concept of a n interorgani-zational macroculture an d distinguishes it from the more familiar discus-sion of organizat ions microcultures. The second sect ion provides adiscussion of types of beliefs that top managers share. In the third sectionwe turn to these determinants and develop propositions that relate thestructure of interorganizational value-added networks to macroculturalhomogeneity. In the fcurth section we advance propositions that relatemacrocultural homogeneity to inertia, innovation, an d strategic similar-ity. We treat macrocultures primarily as variables, not metaphors (Smir-cich, 1983). The final section includes our propositions for some reason-abl y coarse-graine d a nd operationa l definitions of macrocult uralhomogeneity to facilitate large-scale, comparative studies of many mac-rocultures determinants an d consequences.

FROMMICROCULTURE TO MACROCULTURE

Articles bearing on the study of organizational culture often begin bydecrying the diverse ways of defining organizational culture (Kroeber &Kluckhon, 1952). Definitions typically stress the varied types of cognitionsconstituting the many-faceted or many-leveled culture construct: taken-for-granted assumptions and deep patterns of meaning (Jermier,Slocum,Fry, & Gaines, 1991; Schein, 1983); values (Deal & Kenedy, 1982;Wiener,1988); norms and expectations (Cook& Rousseau, 1988; Homans, 1950);philosophies (Ouchi. 1981; Pascale & Athos, 1981); frames of reference(Wilkins & Dyer, 1988); or the observable behavioral regularities thatthese cognitions engender- rites, rituals, an d structures (Meyer &Rowan, 1977;VanMaanen, 1979).

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730 Academy ofManagement Review October

Apparent diversity, however, masks the fact that most definitions

have at least two important features in common: Management theorists

generally define organizational culture as relatively idiosyncratic, orga-nization-related beliefs that are shared among individuals within a n or-ganization or part of a n organization (Meyerson& Martin, 1987). We de-scribe this as the prevailing focus the field places on organizationalmicrocultures and distinguish it from what we term interorganizational

macrocultures, by which we mean the relatively idiosyncratic, organiza-tion-related beliefs that are shared among top managers across organi-zations.'

Theorists and researchers about macrocultures have typically sought

to document macrocultures' existence and to codify their idiosyncracies.For instance, Huff (1982: 125) argued that a n industry "is defined by sharedor interlocking metaphors or world views." In a study of three Britishindustries, Spender (1989: 17) found a n "altogether surprising degree of

homogeneity amongst the constructs being appl ied by managers.

. . ineac h industry." Similarly, in a study of environmental scanning in threeindustries, Hambrick (1982: 167) noted that "a common body of knowledgeappears to exist within an industry . . . which is disseminated throughmedia equally available to and used by executives within the industry."More recently, researchers have detected macrocultures in various sec-tors, among Scottish knitwear producers (Porac, Thomas, & Badden-Fuller, 1989); small-city retailers (Gripsrud & Gronhaug, 1985; Porac &Thomas, In press); U.S. airlines (Marcus& Goodman, 1986);New York andChicago banks (Goodman, 1988; Reger, 1990; Reger & Huff, 1993; Walton,1986); New York hotels (Baum & Lant, 1993);as well as iron and steelmanufacturers (Newell, 1989; Spender, 1989; Stubbard & Ramaprasad,1988). Others have noted that macrocultural homogeneity can vary in

intensity (Gordon, 1991; Gronhaug & Falkenberg, 1989; Walsh, In press).Documenting the existence an d contents of macrocultures constitutes

a vital step-but it i s a n initial step only (Walsh, In press). Two otherissues need to be explored because they have important consequences forboth theory an d practice. First, what determines the emergence a nd con-solidation of macrocultures? Second, how do macrocultures affect mem-ber organizations?

To address these questions, we contend, on the one hand, that thestructure of value-added networks linking organizations both induces an dreflects the emergence a nd persistence of relatively homogeneous mac-rocultures. We argue, for instance, that the structure of the value-addedchain linking parts suppliers to auto manufacturers and, in turn, to autoretailers engendered a homogeneous macroculture that stabilized this

'We use the shorthand macroculture rather than the longer interorganizational mac-roculture. The term macroculture should not be confused with national culture, which typ-ically describes beliefs, not necessarily pertaining to organizations, that are widely shared

by members of a nation state.


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exchange structure. On the other hand, we propose that the homogeneityof a macroculture influences (a) the level of strategic inertia besett ing

organizations bound by this culture, (b ) patterns of inventiveness andinnovation diffusion across these organizations, an d (c) the similarity oftheir strategic profiles.

MACROCULTURAL BELIEFS

There are doubtless multiple facets to macroculture. We focus here onhow three types of beliefs that bear on strategic decision making becomewidely shared by managers across organizations. First, we examine man-agers' beliefs about boundaries, that is, with which organizations theycompete or cooperate (Porac & Thomas, 1990). Second, we focus on man-agers' beliefs about organizational reputations- the salient evaluativecharacteristics that they ascribe to other organizations (Fombrun, 1993;

Fombrun & Shanley, 1990).Third, we point to top managers' beliefs aboutenvironments- what strategic issues managers should attend to and howto rank them (Daft & Weick, 1984; Dutton & Jackson, 1987).Boundary Homogeneity

What constitutes a n organization? a n industry? a community? AreMerrill Lynch and J. P. Morgan, for instance, better described as commer-cial banks, investment banks, or even financial service companies? Howdo banks' managers know with which firms they compete? Is their rivalrywith firms offering any one of their services or only with firms broadlybased in all related financial services? Such questions of boundary set-ting preoccupy not only strategic managers, but also the researchers who

study them: Both attempt to develop cognitive categories that captureobserved patterns of organizing activity.

For top managers, failures to categorize competitors effectively canhave dramatic consequences; witness, for instance, the cost to U.S. au-tomakers of ignoring Japanese competitors. Miscategorizations havesomewhat les s dramatic consequences for management scholars. We re-fer to the boundaries of competitive or cooperative action as "industries"and argue that the product/market sectors they define constrain the scopeand intensity of competition, as well as the identity of rivals. Yet seldomdo these boundary categories-especially as classified into SIC codes-accurately descr ibe the locus of competition: Companies producing sub-stitute products, for instance, often compete over technological standardsbut are not classified into the same industries.

Rather than place boundaries around a collection of organizationsbecause they sha re common markets or technologies, Porac and Thomas(1990) proposed a subjective definition that relies on categories defined bymanagers. In their view, a boundary category is formed from "a collection


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of organizations that a re perceived as similar to each other an d differentfrom those outside the category" (1990: 227).2

We build on this interpretive view in three ways. First, we stress notonly categories of organizations that managers perceive as competitors,but al so categories of organizat ions with which managers perceive mu-tua l benefits, be they suppliers, distributors, or consumers. We call suchorganizations symbionts. Second, we focus not so much on the question:How do manager s categorize certain organizational attributes when dis-tinguishing competitors or symbionts? but rather on the question: Why domanagers across organizations take the same attributes as the basis fortheir boundary categories and, therefore, tend to agree to a greater or

lesser degree on with whom they compete or cooperate? In a study ofretailing firms in a small city, for instance, Porac an d Thomas (In press)detected two cliques of firms in which members within cliques perceivedeach other as close competitors. We ask: Why did retailers within cliques

share the belief that they competed with each other an d not with retailersoutside their clique? Third, categories of organizations can be definedobjectively (they share similar suppliers or consumers) as well as subjec-tively (their top managers agree on the existence of such boundaries). Wespeculate about the relationships between objectively and subjectively

defined categories and urge researchers to explore these relationships.To begin addressing such questions, we define a macroculture's

boundary homogeneity as the degree to which categories of competitorsor symbionts are shared among top managers across different organiza-tions. We discuss a more operational measure of this construct in thisarticle's last section.

Reputational Homogeneity

Managers and researchers also tr y regularly to evaluate organiza-tions and industries. Which organizations are among the "top ten" in anindustry? Which organizations are better managed, have the highest po-tential, or constitute the best investments? The proliferation of such rat-

'Porac and Thomas (1990, In press) developed a theory of competitor definition tha tstr ess es three characteri stics of th e cognitive categorizations of competitors. First, their

polythetic nature-categorizations of competitors have fuzzy boundaries def ined by a setofattributes that (a)need not be ass ociated with every competitor within t he boundary an d (b )need not all be associated with at least one prototypical competitor within the boundary.

Second, their hierarchical nature-cognitive categories can b e ranked into a taxonomy of

categories at three levels of abstraction (Porac. Thomas, & Emme, 1987; Rosch, 1978). Thus,(a)a superordinate level category, say banks, can be divided into (b) less abstract basic-level categories, s uch as commercial a nd investment banks, a nd further subdivided into (c)still more concrete subordinate-level categories, such as small versus large commercial or

investment banks. Third, in these taxonomies the basic level i s the level of abstraction in the

taxonomy at which categ ories a re perceived to carry the most pertinent information about

competitors an d which are , therefore, detec table operationally because of their frequency of

usag e (Porac & Thomas, In press).

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ings an d rankings indicates widespread interest in relative orderings oforganizations (Witness the popularity of Fortunes annual listing of the

Best managed companies in America, the Fortune 500 listing itself, an dthe plethora of derivative rank orderings by Forbes, Inc., and other pub-lications. Indeed, recent rankings of business schools and academic de-partments by popular media like Business Weekand US.News & WorldReport have led to probing discussions about the merits of rankings asperformance appraisals. Ye t little is understood of the socio-cognitiveprocess that produces high-reputation organizations.

Fombrun (1993)defined organizational reputation as certain salientevaluat ive characteristics that external observers ascribe to an organiza-tion. In their study of Fortunes annual rankings, Fombrun and Shanley(1990) drew on signaling theory (e.g.,Spence, 1984) to identify the orga-nizational attributes that influence judgments about organizational rep-utations. Their findings suggest that, for large organizations, reputations

embody information, not only about firms financial attributes, but alsoabout such non-financial attributes as media prominence, advertisingexpenditures, and charitable contributions.

This article builds on the work of Fombrun an d colleagues by focus-ing not so much on the question: What underlying attributes signal rep-utations? but rather on the question: Why do the top managers of certaingroups rely on the same attributes as signals of reputation and , therefore,agree to varying degrees on the reputational orderings of organizations inthese groups?

To address this question, we define a macrocultures repututionalhomogeneity as the degree of agreement among managers ofa group oforganizations about the reputational ranking of organizations belongingto the group. We discuss a more operational measure of this construct in

this articles last section.

Strategic Issue Homogeneity

What ar e the major trends affecting an industry? What events prom-ise to alter radically their competitive environments? How should orga-nizations interpret and react to these trends or events? Such questions arehotly debated, not only by scholars studying strategic decision making,but al so by top managers in organizations planning units. Overlookingsome key issues can have dramatic consequences, as the experiences ofU.S. steel industries and automakers suggest. What forces cause collec-tive inattention to certain trends or events and collective recognition ofothers?

Bombarded by ambiguous information about their environments, topmanagers engage in what can be defined analytically as an information-processing sequence that involves attention, interpretation, and action(Daft & Weick, 1985; Dutton & Jackson, 1987; Hambrick & Mason, 1984).First, top managers have limited information-processing capabilities an dselectively ignore certain issues while focusing at tention on others.


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attributes affect the categorization a nd ranking of issues in the ag enda oftop managers, how do the same issues rise to the top of the strategic

agendas of top managers in different organizations?We propose that the structure of value -added networks linking orga-

nizations provides a partial answer to these questions. We therefore be-gin by describing the general structure of value-added networks. We thensuggest how some key structural dimensions of these networks inducemacrocultural homogeneity.

Interorganizational exchanges have a n input-output structure (Leon-tief, 1951).Each organization (a )receives from supplier-organizations in-put goods and services in exchange for capital, (b)ad ds value to theseinputs by transforming them into output goods or services, and (c) ex-changes them with either consumer organizations or end users for capi-tal. The output produced by one organization becomes an input for theorganization with which it transacts (Pennings, 1981), and every organi-zation is situated in a value-added chain of symbionts. Value-addedchains have competitive an d symbiotic interdependence along vertical,horizontal, a nd diagonal dimensions (Astley & Fombrun, 1983).

Vertical interdependence. Consider the value-added chain createdwhen (a)organizations drill for crude oil, which they sell to (b)companiesthat process it into petroleum products, which they market to (c)organi-zations that transform these products into plastics that they vend to (d)firms that shape the plastic into household goods that they merchandiseto (e)wholesalers that peddle these goods to ( f ) retailers that sell thesegoods to end users. Such a value-added chain hangs in Figure 1 along avertical dimension all the way from raw material suppliers to end con-sumers. Symbionts are linked in Figure 1 by vertical symbiotic relations(Pennings, 1981).

Horizontal interdependence. Figure 1 also indicates that there is ahorizontal aspect to competitive interdependencies within value-addedchains. At every step, organizations that transform similar inputs intosimilar outputs (all organizations that transform crude oil into petroleumproducts, for example) compete for access to similar suppliers of theseinputs (crude oil producers) and for similar clients for their outputs (plas-tic manufacturers). Close rivals are linked in Figure 1 by horizontal rela-tions and c an be described as structurally equivalent. They occupy equiv-alent positions in the value-added networks because they are linked,along the vertical dimension, by similar exchange relations with sym-bionts who are themselves similarly linked vertically (Burt, 1982, 1987;

Lorraine & White, 1971).Diagonal interdependence.Astley and Fombrun (1983) al so proposed

that organizations in neighboring value-added chains experience diago-nal symbiosis an d diagonal competition. For instance, train and airlineorganizations value-added chains compete diagonally in transportation;television and motion picture chains cooperate diagonally in servinghome enterta inment functions. The diagonal convergence of value-added


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-I(D(DP

Horizontal

Competition

e

Diagonal

Competition

CompetitiveInterdependence

Horizontal

Symbiosis

DiagonalSymbiosis

.0

SymbioticInterdependence

1 I I

Value-Added

Chain 1

Value-Added

Chain n

0 _... _ _ _ _- - - - - - - - - - - -Vertical

Symbiosis

Industryn4

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1994 AbrahumsonandFombrun 737

chains that fulfill substitute functions challenges established boundarybeliefs held by managers.

We suggest three reasons why, in an ocean of microcultural hetero-geneity, islands of greater macrocultural homogeneity tend to emergean d persist along vertical, horizontal, a nd d iagonal dimensions ofvalue-added networks. First, transactions and competition between organiza -tions expose them to a similar set of attributes that they must interpret.Second, organizations that compete or cooperate in value-added net-works tend to socialize each other into shared categorizations of theseattributes. Third, macrocultures restrict top managers attention to a fixedset of symbionts or competitors and to fixed ways of cooperating andcompeting, thereby reinforcing previously established st ructures of coop-eration an d competition.

As Figure 2 indicates, cooperative and competitive interdependen-cies in value-added networks both shape macroculture and ar e stabilized

and perpetuated by the macroculture they engender. At any time, then,the network structure of competitive and cooperative interdependenciesshould tend to correlate with the structure of networks of shared beliefs(Fombrun, 1986). Moreover, as we contend in the next section, currentmacrocultural homogeneity influences future collective inertia, techno-logical traditionalism, an d strategic similarity oforganizations bound bya culture.

Where in a value-added network will relatively homogeneous mac-rocultures tend to emerge and persist? Scholars who employ network-analysis techniques advance two arguments that suggest differentanswers to this type of question: a cohesion argument and a structural-equivalence argument (Burt, 1987; Friedkin, 1984).We outline these twoarguments briefly in this section and flesh them out in the following

cohesion and structural equivalence sections.The cohesion argument suggest s that links between actors in a net-

work constitute conduits through which beliefs are shared (Friedkin,1984). Therefore, in either more densely linked or more centralized areasof a network, there should be a greater sharing of beliefs, and a greaterlevel of macrocultural homogeneity should result. Value -added networkslink symbionts to each other. Therefore, we argue that the cohesion ar-gument should explain macrocultural homogeneity bearing on symbioticrelations between organizations.

The structural equivalence argument suggests that the more similarthe pattern of l inkages binding actors A and B to other actors in theirnetwork-that is, the more structurally equivalent A and Bs linkages totheir network, (a) the more intensely A and B will compete with eachother, (b) the more likely that A and B will share similar beliefs, andconsequently, (c) the more homogeneous the macroculture binding A andB (Burt, 1987). This general argument suggests, for instance, that twoorganizations that ar e linked to the sa me type of suppliers and consumerswill tend to compete intensively and develop similar beliefs bearing on

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738 Academy of Management Review October

FIGURE 2

Macroculture: Present Determinants and Future Consequences

PRESENT FUTURE

Reputational

Strategic issue

homogeneity

Macrocultural

Tradit ionalisrn

Value-AddedNetwork Structure

Network density

Network centrality

Network structural

competition. Therefore, we argue that the structural equivalence argu-ment should explain macrocultural homogeneity bearing on competitiverelations.

Whereas cohesion an d structural equivalence ar e typically seen ascompeting explanations (Burt, 1987),we see them as complementary. Co-hesion explains macrocultural homogeneity bearing on symbiosis,whereas structural equivalence explains macrocultural homogeneitybearing on competition.


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Cohesion Argument

As shown in Figure 3, NetworkA has fewer exchange linkages thanNetwork B. We define the density or connectedness of a value-addednetworkas the ratio of the number of organizations in the network thatexchange resources (5 in NetworkA) to the number that could exchangeresources, if each organization exchanged resources with every other or-ganization in the network(10 in the maximally dense NetworkB).

Why might value-added network density correlate with macrocul-tural homogeneity? Greater density in an exchange network causes (a)adenser network of interorganizational social ties through which (b)ambi-guity-reducing categorizations come to be shared more extensively, giv-ing rise to a more homogeneous macroculture.

First, extensive literature suggests that value-added network densityshould coincide with greater social network density (Fombrun, 1986).Re -

source dependencies encourage organizations to forge social ties withtheir exchange partners to reduce their dependencies on these partners,whether through mergers, reciprocal trade agreements, board interlocks,or joint ventures (Pfeffer, 1981; Pfeffer & Salancik, 1978). The greater the

Network A

/ O

0 K :

Network C

W X

"\/"0/OY0Y

FIGURE 3Network Structures

Network B

Network D

competitor x

competitor

Y


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Proposition 2: The more centralized a value-added net-work, the greater the homogeneity of macrocultural

beliefs abou t cooperative boundaries, symbiont reputa-tions, and cooperative strategic issues.

Structural Equivalence Argument

Competitors in value-added networks are typically not linked to eachother by exchange relations; rather, they occupy structurally equivalentpositions-that is, they are linked vertically by similar exchange rela-tions with comparable symbionts. Organizations x andy, for instance,are structurally equivalent in Figure 3s networkD (Burt, 1982, 1987; Lor-raine & White, 1971).This is because, even though x and yare not linkedto each other, they are linked to the s a m e type of symbionts (wand z). Acollection of structurally equivalent organizations is called a position innetwork terminology (Burt, 1982).

Why might organizations within positions be bound by a relativelyhomogeneous macroculture? First, as Burt (1987: 1293) put it, "Structuralequivalence predicts that two people identically positioned in the flow of

influential communication will use each other as a frame of reference forsubjective judgments a nd somake similar judgments even if they have nodirect communication with each other." Top managers in organizationsoccupying the s a m e structural position tend to become acutely aware ofeach other; they also tend to monitor each other's competitive moves an dactively try to reason like their competitors. So oligopolists often demon-strate a convergence on prices that are well above costs without actuallymeeting to fix prices (Scherer & Ross,1990).Each organization decides itsprice based on shared understandings about how rivals will set prices.

Second, competitors forge certain social ties and informational ties

with each other. Pfeffer and Salancik (1978)pointed to the existence ofjoint lobby groups, trade associations, cartels, and coordinating councils,for instance. Elsewhere we have pointed to the coordinating influence ofindustry-specific newspapers, magazines, and newsletters (Abrahamson& Fombrun, 1992). These social and informational ties may also act asconduits for the diffusion of categories and the existence and persistenceof shared macrocultures. Jointly, these arguments suggest that

Proposition 3: There will be greater homogeneity ofmac-rocultural beliefs about competitive boundaries, com-petitor reputations, and competitive strategic issuesacross organizations within structurally equivalentpo-sitions than between structurally equivalent positions.

MACROCULTURAL HOMOGENEITYANDINTERORGANIZATIONAL DYNAMICSInterorganizational macrocultures define a potentially useful context

for investigating interorganizational dynamics. Value-added networksshape macrocultural content. Macrocultural homogeneity in turn


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influences managers' attention and interpretations an d so may affect or-ganizations' strategic actions and, in turn, the structure of value -added

networks (Daft & Weick, 1984).In the next section, we advance propositions about the consequences

ofa macroculture's homogeneity of beliefs about boundaries, reputations,an d strategic issues on member organizations. In particular, we call at-tention to their effects on (a)inertia and change, (b) the invention anddiffusion of innovations, an d (c) strategic similarities across organiza-tions.

Inertia and Change

Research on why organizations fail to change highlights organiza-tional-level constraints, be they (a)the cognitive biases of individual de-cision makers that hamper recognition of the need for action, (b)the socialpressures that provoke conformity and rigidity within decision-makinggroups, or (c) the structural and cultural features of organizations thatlimit their ability to notice and respond to environmental stresses (Staw,Sandelands, & Dutton, 1981). Failure to change may also be ascribed tointerorganizational-level phenomena, such as macrocultures. Hambrick,Geletkanycz, and Fredrickson (1993). for example, found that top manag-ers' tenure in their industry provides a better predictor of their commit-ment to the s tatus quo than their tenure in their organization. They inter-preted this finding as evidence of the powerful effect of macroculturesthat acculturated managers find difficult to set aside.

Dutton and Jackson (1987) reviewed evidence indicating that uncon-trollable, negative situations, in which losses are likely, tend to be cat-

egorized as threats, whereas controllable, positive situations, in whichgains a re likely, are categorized as opportunities. When it comes to rec-ognizing new competitive threats or transactional opportunities, organi-zations that shar e boundary categories will be both helped a nd hinderedby their common beliefs about competitive or cooperative boundaries. Inmacrocultures with more homogeneous boundary beliefs, members tendcollectively to recognize competitors or symbionts only when their attrib-utes trigger shared boundary categories. When competitors or symbiontsdo not trigger shared boundary categorizations, then a homogeneousmacroculture blinds its members to their effects on the collectivity. Incontrast, the less homogeneous a macroculture's boundary beliefs, themore likely a member is to recognize external competitors or symbiontsand to alert other members to their effects on the collectivity. It follows

thatProposition 4:The greater the homogeneity ofa macro-culture's beliefs about boundaries, the less likely areany top managers to react to threats or opportunitiesfrom organizations outside these boundaries.


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1994 Abrahamson and Fombrun 743A macrocultures reputational homogeneity may also affect manag-

ers willingness to undertake change. Organizations are likely to experi-

ence higher levels ofrivalry in communities in which most organizationsdisagree about reputational s tatus. Because the reputational ordering isfluid, organizations change frequently and aggressively in the hope ofscaling these fluid reputational hierarchies (Shrum & Wuthnow, 1988). Incontrast, higher reputational homogeneity in a macroculture may dis-courage rivalry because leadership by highly-reputed organizations iswidely acknowledged and taken for granted. Their high reputational sta-tus may, therefore, go unchallenged, encouraging complacency and in-ertia by high- and low-reputation organizations alike, as stated here:

Proposition 5: The greater the homogeneity ofa macro-cultures beliefs about reputations, the less likelyale topmanagers to initiate rivalry-creating changes.

A macrocultures strategic-issue homogeneity may also blind topmanagers to new strategic issues. Novel issues are peripheral to manag -ers shared issue sets and so tend to be ascribed lower importance on theshared agenda.As a result, new issues may tend to go completely unno-ticed by all managers or fail to be acted upon by any of them. By contrast,if organizations have more varied issue sets and agendas, then managersare more likely to recognize and act upon a new strategic issue and toalert other managers to the importance of these issues. It is a common-place observation in social psychology that group homogeneity inducespremature closure, screens out information inconsistent with shared as-sumptions, an d resists change (Janis, 1972). Applied at the interorganiza-tional level, it suggests that

Proposition 6: The greater the homogeneity ofa macro-

cultures beliefs about strategic issues, (al the Jess likelyare top managers to notice and attend to informationabout new strategic issues and (bl the Jess likely theyare to initiafe change in reaction to these issues.

Invention and Diffusion of Innovations

Innovations are invented in interorganizational settings: They fr e-quently arise from the symbiotic exchanges between multiple specializedorganizations linked by value-added and social ties (Mowery & Rosen-berg, 1979;Piore &Sabel,1984; Rogers, 1983;Tushman & Rosenkopf, 1992).Studies of innovation support the view that innovations develop in suchnetworks. In biotechnology, diverse financial, educational, an d informa-tional relationships tie organizations to universities, research institutes,venture capitalists, regulators, suppliers, and trade associations (Free-man &Barley, 1989). Similarly, the development and commercialization ofcochlear implants for the hearing impaired involved interactions within abroad network of private organizations, academic researchers, regula-tors, funders, and associations over 10 years (Van de Ven & Garud, 1992).


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The ambient macrocultures around these networks should therefore heav-ily condition the development and diffusion of subsequent innovations.

A macrocultures boundary homogeneity may reduce the likelihoodthat innovations invented outside the macroculture will make their wayamong member organizations. Top managers in such a macroculture a reless likely to pay attention to innovative activities by organizations out-side the macroculture, because they consensually agree that these orga-nizations a re different or unrelated. These arguments suggest that

Proposition 7: The greater the homogeneity ofa macro-cultures beliefs about boundaries, the lower the rate ofintroduction of innovations invented by organizationsoutside the boundaries.

On the flip side, more innovations originating from outside macro -

cultures with less homogeneous boundary beliefs should make their way

among member organizations. Infusion of innovations would occur be-cause a macrocultures lower boundary homogeneity widens the range oforganizations that some managers consider to be both within the bound-ary and worthy of imitation. In turn, infusion of new ideas and new prac-tices may itself spark innovations that come from combining ideas andpractices that have appeared in different macrocultures.As a result,

Proposition 8: The lower the homogeneity of a macro-cultures beliefs about boundaries, the greater the rateof radical invention an d innovation diffusion within themacroculture.

Innovation-diffusion research reveals three types of diffusion pat-terns across reputational hierarchies. They can be distinguished as (a)

trickle-down processes that spread innovations from high- to low-reputation organizations, (b)trickle-up processes that do the reverse, an d(c) trickle-around processes that diffuse innovations in no particular rep-utational order (Abrahamson& Rosenkopf, 1991, 1993).

Trickle-down processes tend to diffuse innovations that are consistentwith macrocultural norms because high-reputation organizations eitherinvent or are first to find out about innovations and thus adopt pronor-mative innovations because doing so will not violate cultural norms andendanger their reputation (Becker, 1970; Kimberly, 1981; Rogers, 1983).They are imitated by lower reputation organizations that assume thathigher reputation organizations have the know-how to pick better inno-vations.

Trickle-up processes tend to diffuse contranormative innovations.

High-reputation organizations do not adopt first, because doing so putstheir reputations at risk. Low-reputation organizations, however, are will-ing to take this risk in return for economic rents and the chance to im-prove their reputations if the innovation succeeds. When a critical massof lower reputation organizations adopts, however, they push higher


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reputation organizations to adopt, and the innovation trickles up the rep-utational hierarchy.

Trickle-around processes occur when there are no clear reputationaleffects. In a computer simulation of diffusion across reputational hierar-chies, Abrahamson and Rosenkopf(1991)found that well-established rep-utational hierarchies facilitated trickle-down diffusion because high-reputation organizations give a strong impetus to the diffusion process. Itsuggests

Proposition 9: The greater the homogeneity ofu macro-cultures beliefs about reputations, the greater the inci-dence of trickle-down diffusion and the lower the inci-dence of trickle-up and trickle-around diffusion.

Competence-enhancing innovations are consistent with prevailingorganizational strategies and technologies. Studies by Tushman andAnderson (1986) and Anderson and Tushman (1990) support the claim thatcompetence-enhancing innovations are generally initiated by organiza-tions well socialized into their macrocultures by virtue of their tenure.Organizations less strongly socialized (less tied to established interestsand interpretations) (new entrants, for instance) are more frequently theagents of radical change.

W e extend this argument by suggesting that macrocultures with highstrategic issue homogeneity bring together organizations that are wellsocialized into the macroculture and, thus, tend to generate higher ratesof competence-enhancing innovation. To the contrary, in less homoge-neous macrocultures, weakly socialized organizations tend to generatehigher rates ofcompetence-destroying innovations. It follows that

Proposition 10: The greater the homogeneity of a mac-rocultures beliefs about strategic issues, the higher therate of competence-enhancing innovation and the lowerthe rate of competence-destroying innovation.

Innovation-diffusion research indicates that the more compatible aninnovation iswith the prevailing interests and interpretations ofpotentialadopters, the more rapidly and extensively it will be adopted (Burt, 1987;Rogers, 1983). This research suggests that diffusion of competence-enhancing innovations should be more rapid and complete in macrocul-tures with a higher degree of strategic issue homogeneity. Competence-destroying innovations, on the other hand, are likely to be resistedactively by fully socialized organizations and hence more readily adoptedby organizations in macrocultures with a lower degree of strategic issuehomogeneity. Therefore,

Proposition 11: The greater the homogeneity of a mac-rocultures beliefs about strategic issues, the more rapidand complete the diffusion of competence-enhancing in-novations and the less rapid and complete the diffusionof competence-destroying innovations.


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Strategic Similarity

Greater homogeneity of boundary beliefs reduces the likelihood thatinnovations invented outside a macroculture will make their way amongmember organizations. Lower boundary homogeneity, in contrast, facili-tates the introduction of such innovations and sparks radical innovationsthat come from combining ideas an d practices that have emerged in dif-ferent macrocultures. These arguments should apply not only to techno -logical innovations, but a lso to strategic an d organizational innovations.In particular, we suggest that macrocultural homogeneity affects (a)stra-tegic homogeneity, (b) the persistence of strategic groups, and (c) thenumber of such groups in a collectivity.

First, if stra tegic innovations are more likely to make their way acrossorganizations operating in macrocultures with lower homogeneity of

boundary beliefs, then the strategic similarity of organizations within

these macrocultures should also be lower. It suggests thatProposition 12:The greater the homogeneity ofa mac-rocultures beliefs about boundaries, the lower the vari-ety in member organizations competitive strategies.

Second, greater homogeneity ofa macrocultures reputational beliefsmight also foster stability in the patterns of stratification within the mac-roculture and encourage organizations to remain in the same strategicgroups over time. Despite changing environments, for instance, Fiegen-baum and Thomas (1990) found three dominant groups to have persisted

in the macroculturally homogeneous insurance industry between 1970an d 1984. Clearly, their findings suggest that change must have occurredin a n orderly fashion: Managers in rival organizations within groups must

have perceived environments in similar ways, prompting them to intro-duce simultaneous and commensurate shifts in strategy relative to oneanother (Mascarenhas, 1989). Therefore,

Proposition 13: The greater the homogeneity of a mac-rocultures beliefs about reputations, the more stable thestra tegic group structure of the collectivity.

Third, amacroculture with more homogeneous beliefs about key stra-tegic issues is also likely to encourage its managers to make similarresponses to environmental situations. Within the macroculture, memberorganizations a re therefore likely to demonstrate lower variation in theirstrategic repertoire: Managers enact similar environments and thus formfewer strategic groupings (Caves & Porter, 1977; Fombrun & Zajac, 1987).We suggest, therefore, that

Proposition 14: The greater the homogeneity of a mac-rocultures beliefs about strategic issues, the lower thevariety in member organizations competitive strategiesand the fewer the number of strategic groups.


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Nonmutual linkagerequired

OPERATIONAL DEFINITIONS

Throughout this article, we treated macrocultures primarily as vari-

ables, not metaphors (Smircich, 1983). In this section we propose somereasonably coarse-grained and operational definitions of macroculturalhomogeneity to facilitate large-scale, comparative studies of many mac-rocultures' determinants and consequences.

Macrocultural boundaries. From an interpretive perspective, allboundaries are a function of the categories employed to define them.Researchers might wish to use one of two categorization schemes of theirown for defining what might be called a "macrocultural boundary." First,they might define a macrocultural boundary as a set oforganizations thatshare boundary categories. Second, they might define boundaries using anoncognitive criterion: Organizations share a common set of suppliersand consumers, for instance. The adequacy of this noncognitively definedboundary, as a macrocultural boundary, would then be established byshowing that boundary categories are shared to a greater extent amongtop managers within the noncognitively defined boundary than amongmanagers across these boundaries. We discuss first what it means to"share a boundary category" and second what it means to do so to agreater extent-what we call greater boundary homogeneity.

In Figure 4, an arrow from one organization to a second organizationsignifies that the first considers that the second is a close competitor or

Mutual l inkage required

FIGURE 4Criteria for Inclusion in Macrocultural Boundaries

Organizations

1.2 .3 .4

included

Direct linkage

sufficient

Organizations

1.2, 3included

Organizations 1. 2. 3. 5includedI

Organizations1.2,3,4. 5 , 6 includedI

Indirect linkage

sufficient


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748 Academy ofManagement Revi ew October

symbiont. Of course, we could draw such an arrow if the first considersthe second a distant or even a very distant competitor or symbiont. A

two-headed arrow signifies that both organizations consider each otheras belonging to this boundary category.Which of these six organizations in the simple network depicted in

Figure 4 share the others' boundary categories and, therefore, can beconsidered to belong within a macrocultural boundary? The answer de-pends on the answer to two questions (Burt, 1991). First, must organiza-tions be linked by single- or double-headed arrows to be considered shar-ing the belief that they a re competitors? This is called the mutuali ty of thelinkage in network analysis (mutual or nonmutual). Second, must a n or-ganization be linked directly to other organizations that ar e included, orcan it be linked through one or more other organizations to the organiza-tions that are included? This is called the directness of the linkage innetwork ana lys is (direct or indirect). Figure 4 presents a 2 x 2 matrix thatdefines four inclusion rules and lists the number of each of the organiza-tions that would be included within a macrocultural boundary if we areusing each rule.

Which of these four rules is preferable? The answer awai ts empiricaltests. We advanced propositions about where relatively more homoge-neous macrocultural boundaries will exist and persist and with whatconsequences. Presumably, one rule will generate definitions that pro-duce better results when these propositions are tested.

Boundary homogeneity. The most restrictive operational definition ofboundary homogeneity is the ratio of(a)the number of times, within a setof organizations, that an y two organizations' top managers share the di-rect and mutual perception that the other's organization is a close com-petitor and (b) to the total number of such sharing if every pair of topmanagers perceived the other's organizations as a close competitor. Thisdefinition can be made less restrictive by substituting distant competitorfor close competitor in the operational definition, direct for indirect, ornonmutual for mutual.

Reputational homogeneity. An operational definition of reputationalhomogeneity is somewhat more complicated. If two top managers rankorder five organizations in a set from 1 (high reputation) to 5 (low reputa-tion), the degree of agreement in their ranking can be represented bysumming the absolute value of the difference of each of their rankings.The sum equals 0 if they agree perfectly an d 12 if their rankings arereversed. Likewise, the degree of agreement of all five top managers inthe se t could be calculated by summing this measure of agreement be-tween al l pairs of top managers in the set. This measure would, however,

have two undesired effects. First, it would tend to increase when moreorganizations are in the set. Two managers who had inverse rankings forsix rather than five organizations would have a n agreement score of 17rather than 12. It might be necessary to divide the measure by a functionof the number of organizations in the set. Second, even this modified


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1994 Abrahamson an d Fombrun 749

measure would decrease, rather than increase, with disagreement onreputational rankings, so that it might be more elegant to t ake its inverse.

Strategic homogeneity. An operational definition of the strategic is-sue homogeneity construct closely resembles that for the reputationalhomogeneity construct, with two exceptions. If two top managers rankorder issues in their agenda from 1 (high importance) to n (low impor-tance), the degree of agreement in their ranking can be represented bysumming the absolute value of the difference of each of their rankings.One possible problem would occur if an issue was part of one top man-ager's issue set an d not the other. One way around this problem would beto code such issues as a very low importance issue in the agen da of themanager when the issue was absent. Degree of agreement among topmanagers could be calculated by summing this measure of agreementbetween a ll pairs of top managers. This measure would, however, havetwo undesired effects. First, it would tend to increase when more issues

ar e in the agenda of top managers and when there ar e more top manag-ers. It might be necessary to divide the measure by a function of thenumber of issues and managers. Second, even this modified measurewould decrease, rather than increase, the greater disagreement in theranking of issues, so that it might also be more elegant to t a k e its inverse.

CONCLUSION: STUDYING MACROCULTURES

We argued that the structure of interorganizational value-added net-works both induces and reflects the existence and persistence of morehomogeneous macrocultural beliefs about boundaries, reputations, andstrategic issues. We suggested the practical importance of macroculturesby pointing to their possible consequences for interorganizational inertia

an d change, innovation, diffusion, and strategic similarity.There are probably other determinants of macrocultural homogene-

ity. Certain sociologists point to coercive influences exerted by organiza-tions outside the business community that engender homogeneity(DiMaggio 8t Powell, 1983).whereas others stress homogeneous politicalbehavior arising out of interorganizational relations (Mizruchi, 1992). Oth-ers suggest that mass-media, educational-sector, and management-consulting organizations may also exert such homogenizing influences(Abrahamson, 1991; Abrahamson 8c Fombrun, 1992). Still others suggestthat major environmental changes may cause short-term decreases inmacrocultural homogeneity as organizations struggle to adapt (Gordon,1991). A full description of these determinants, however, exceeds thescope of this article.

Macrocultures could al so have negative consequences not discussedpreviously, as well as some positive consequences. The homogeneity ofamacroculture binding organizations, for instance, probably influences thedegree of perceived cooperation or rivalry among these organizations. Forinstance, Porter (1980)argued that interorganizational rivalry will be moreintense among organizations acting on different beliefs (aswould be the


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Academy ofManagement Review October750

ca se in less homogeneous macrocultures), because they tend to misinter-pret each others competitive moves. At the same time, macrocultural

homogeneity might al so facilitate negotiation among top managers shar-ing common assumptions, increase trust, an d generally reduce transac -tion costs. Moreover, in more homogeneous macrocultures, top managerstend to pay attention to the same strategic issues, recognize the same

challenges to their industry, more readily see their common interest, andtherefore may have greater capacity to engage in collective strategiesnecessary to counter threatening events an d trends (Abrahamson& Fom-brun, 1992; Fombrun, 1986).

Throughout this article, we were silent about the performance impli-cations for organizations of being bound by a homogeneous macrocul-ture. It seems likely, however, that if shared beliefs among members ofamacroculture facilitate interorganizational coordination, reduce the in-tensity of rivalry among these organizations, and facilitate collective ac-

tion by organizations, they ar e also likely to enhance the average profit-abil ity of organ izations

-

so long as the structure of value -addednetworks remains stable. If this structure changes, however, organiza-tions bound by homogeneous macrocultures may underperform fora num -ber of reasons already advanced in our propositions: their inabili ty to

recognize new types of competitors or symbionts, notice new strategicissues, or initiate change.

Most importantly, we specified a circular influence process betweenvalue-added networks and macrocultural homogeneity: Interorganiza-tional cooperative and competitive interdependencies both shape mac-roculture and are stabilized and perpetuated by the macroculture they

engender . We did not, however, explore the implications of this processfor the evolution of macrocultures. Although a full discussion of these

dynamics was beyond the scope of this article, a cursory examinationsuggests what might be described as spirals of macrocultural homogeni-zation. We argued, for instance, that the density of value -added networkswill cause greater macrocultural homogeneity. Greater macrocultural ho-mogeneity, in turn, may cause (a)severance of value-added network tieswith organizations on the periphery of these macrocultures and (b)pro-liferation ofvalue-added ties with organizations within the macroculture.Repeated cycles of such a feedback loop might lead to increasingly densevalue-added networks and increasingly homogeneous macrocultures. Aspiraling process of this sort would leave organizations within its gripincreasingly vulnerable to exogenous changes in the structure ofvalue-added networks and, thus, limit collective adaptation. It may well illu-minate the deteriorating position of the United States in industries like

auto and steel throughout the 1970s and 1980s.

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EricAbrahamson received his Ph.D. deg ree from th e Stern School of Business, NewYork University. He is a n asso ciate professor at th e Management of OrganizationsDepartment, Columbia Business School. His research interests include innovationdiffusion, macrocultures, ag ency theory. an d symbolic management theory.

Charles J. Fombrun (Ph.D., Columbia University) is the researc h professor of ma n-agement at New York University's Leonard Stern School ofBusiness. His primaryresearch interests involve the study of institutional environments and the collectiveadaptation of firms. His ongoing research exam ines processes of strategic changean d reputation building.

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