Organizational adaptation to institutional change: A comparative study of first-order change in prospector and defender banks

Using grounded theory, we examined a "defender" and a "prospector" bank's strategic adaptation to the Community Redevelopment Act across seven years during which they were under increasing regulatory pressure to comply. The interplay of institutional, organizational, and strategic issue context patterns led the defender to an aborted adaptation and the prospector to a reorientation. Each demonstrated a different form of resistance to demands for compliance to the act: identity resistance (change inconsistent with organizational identity) and virtuous resistance (change not needed since already part of the bank's identity). We observed both incremental and punctuated equilibrium change modes, though only incremental change was sustained. Institutional isomorphism and organizational performance exerted counterintuitive pressures for initiating and sustaining change. Drawing on our results, we develop propositions on organizations' adaptations to change.