Mimicry and the Market: Adoption of a New Organizational Form

This paper investigates institutional changes in the Dutch accounting industry during the period 1925-1990. While all firms were composed of partners only before 1925, some among them began to partition professional accountants into partners and associates (PAform) and the PA-form became a dominant form. We suggest that the institutional change was the result of an interaction between selection at the population level and imitative adoption at the firm level. In the empirical part, we focus on the effect of negative selection on imitation behavior, and propose that strong market feedback favoring the PA-form enhanced its legitimacy, which in turn fostered imitative adoptions. We also hypothesized on the spillovers between firms: that the market feedback differentially affects the adoption of PA-form on the basis of firm idiosyncratic filters such as network embeddedness to adopters, percentage of adopters among similar-sized firms and geographically proximate firms. The analysis produces results that are supportive of our hypotheses. We conclude with a discussion of innovation diffusion in the private sector as a legitimization process, where this process unfolds at both the industry and firm levels