The effect of the national institutional environment on business recipes: comparative case studies of ESSO in Britain and Germany

Abstract

The increasing globalisation of business activities since the Second World War might seem to indicate the end of economic diversity within and among nations, and to point towards the standardisation of business recipes across the industrialised world. However, various cross-cultural studies have revealed considerable differences among organisations even within the fairly narrow context of Europe (for example. Lane, 1989; 1992), which are attributed to differences in the institutional environments in which the organisations are embedded. Institutional theorists argue that contingency theorists' emphasis on the influence of the task environment of an organisation, and cultural theorists' focus on the influence of ideational factors, are not sufficient to explain the continuing diversity of organisations across nations. This research analyses the influence of the institutional environment on the business recipe of private sector organisations. It thus combines institutional theories of organisations and the concept of business recipes. The companies analysed are Esso in Britain and Germany. Given that Esso in both countries is part of the Exxon Corporation, the research not only considers the influence of the national institutional environment, but also offers insights into the workings of a multinational organisation. In-depth case studies of both companies were undertaken by way of interviews and documentary research. These case studies were contextualised by research into areas such as the nature of the petroleum industry, the economic context of the companies, and the history and policy of Exxon Corporation. The case studies reveal that despite each company's common dependence on Exxon and a fair degree of similarity in the technical factors of their environments, they have distinctive features in their business recipes, and these can be attributed to the configurations of the respective institutional environments. The study illustrates the need for the managers to cope with conflicting institutional pressures, especially from their parent company and the national institutional context. Overall, the findings support the view of institutional theorists (for example Lane, 1989; Whitley, 1992a) that economic diversity among countries will persist as long as the configurations of key national institutions differ.