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Academy of Management Review January environment, although this perspective has also addressed the social environment of organizations (Pfeffer & Salancik, 1978: 147-152) and the effect of state pressures on organizations (Pfeffer, 1972a; Salancik, 1979). Differences in emphasis on the institutional versus task environment suggest different loci of external power (those who shape and enforce institutional rules and beliefs versus those who control scarce resources) and different linkage processes between the organization and environment (exchange and resource flows versus incorporation and isomorphism) (Scott, 1987b: 194). These differences, in tum, lead to alternative conclusions about appropriate responses to the environment. Institutional theorists have emphasized the survival value of conformity with the institutional environment and the advisability of adhering to external rules and norms (DiMaggio & Powell, 1983; Meyer & Rowan, 1977). Resource dependence theorists stress the organizational necessity of adapting to environmental uncertainty, coping with problematic interdependencies, and actively managing or controlling resource flows (Pfeffer & Salancik, 1978). These differences in the appropriate mode of responsiveness to the environment reflect divergent assumptions about the degree of choice, awareness, and self-interest that organizations possess for handling external constraints. Resource dependence theory focuses on a wide range of active choice behaviors that organizations can exercise to manipulate external dependencies or exert influence over the allocation or source of critical resources (

This article suggests that the context and process of resource selection have an important influence on firm heterogeneity and sustainable competitive advantage. It is argued that a firm's sustainable advantage depends on its ability to manage the institutional context of its resource decisions. A firm's institutional context includes its internal culture as well as broader influences from the state, society, and interfirm relations that define socially acceptable economic behavior. A process model of firm heterogeneity is proposed that combines the insights of a resourcebased view with the institutional perspective from organization theory. Normative rationality, institutional isolating mechanisms, and institutional sources of firm homogeneity are proposed as determinants of rent potential that complement and extend resource-based explanations of firm variation and sustainable competitive advantage. The article suggests that both resource capital and institutional capital are indispensable to sustainable competitive advantage.

Deinstitutionalization refers here to the erosion or discontinuity of an institution alized organizational activity or practice. This paper identifies a set of organiza tional and environmental factors that are hypothesized to determine the likelihood that institutionalized organizational behaviours will be vulnerable to erosion or rejection over time. Contrary to the emphasis in institutional theory on the cultural persistence and endurance of institutionalized organizational behaviours, it is suggested that, under a variety of conditions, these behaviours will be highly susceptible to dissipation, rejection or replacement.

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