Industry Identity in an Oligopolistic Market and Firms’ Responses to Institutional Pressures

Abstract

This study sought to explain the puzzle of firm noncompliance under conditions of highly salient and coercive institutional pressures from stakeholders. Based on a qualitative study of the Canadian banking industry’s responses to institutional pressures from government, clients, and the media for higher-quality banking service to small and medium-size enterprises (SMEs), results revealed that oligopoly power could not account exclusively for firms’ dismissiveness of salient stakeholder expectations. We introduce the concept of industry identity to explain how market power interacted with industry identity to predict firms’ nonconformity to institutional pressures and their willingness to maintain identity–image misalignment. Our study contributes new insights into theories of institutional conformity, identity, and oligopoly behavior.