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Toe the line?


Insiders and outsiders are most likely to conform compared to entities with “middling” affiliation, says study co-authored by Dr Lionel Paolella of Cambridge Judge.

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Lionel Paolella.
Dr Lionel Paolella

We expect some degree of conforming behaviour from other people or entities affiliated with us. But how much conformity is there in practice? It depends on whether the other party is an insider, an outsider or a “middling” affiliate, says a new study co-authored by Lionel Paolella, University Lecturer in Strategy & Organisation at Cambridge Judge Business School.

The study published in the journal Social Forces finds that the relationship between organisational identity and the likelihood of conformity is U-shaped: both insiders and outsiders are most likely to conform, but those with “fuzzy” or partial affiliation are less likely to adapt their behaviour.

The study finds further that the likelihood of conformity is affected by whether a certain category of activity has “taken-for-granted” status – a shared understanding that brings the expectation of certain behaviours. Such status reduces scrutiny for insiders and makes them less likely to conform, while increasing scrutiny for outsiders to prompt them to toe the line.

The study is based on research into “categorisation”, or the use of categories to identify and make sense of various entities in order to set the stage for subsequent actions including economic decisions. (For example, venture capitalists assess a prospective investment by considering how it might fit the firm’s existing market categories.)

“In the face of increasing category taken-for-grantedness, audiences will decrease their scrutiny of some actors – namely, insiders or those that are seen as full members of the category – while simultaneously holding outsiders to stricter standards,” the study says. “As a result, increasing taken-for-grantedness is only likely to create strategic opportunities for insiders to resist conforming.”

The study was based on a unique dataset on 118 Islamic banks in 23 countries over the period 2001 to 2014, and focuses on the payment of zakat, an expected annual 2.5 per cent charity donation on the wealth of Muslim individuals above a certain threshold. Whether banks and other businesses are also expected to make such a donation is a matter of some debate among Islamic scholars and organisations.

The research found that banking firms that are “insiders” to the Islamic banking category (more Islamic-owned) are able to take advantage of the category’s taken-for-grantedness to reduce their zakat payments, while banks considered outsiders are unable to do so due to greater pressure to conform.

“There had been a gap in the research regarding organisational identity and category taken-for-grantedness, so our study addresses this,” says co-author Lionel Paolella.

“We found that that high level of taken-for-grantedness allows deviation from category codes by insiders, and this means, ironically, that those banks viewed by audiences as most committed (as compared to profit-driven) were in fact more likely to deviate from rules when a strategic opportunity arose.” The study – entitled “Beyond the Insider-Outsider Divide: Heterogeneous Effects of Organizational Identity and Category Taken-for-grantedness on Conformity” – is co-authored by Lionel Paolella of Cambridge Judge Business School and PhD alumna Maima Aulia Syakhroza of Cass Business School.