We extend institutional theory's account of diffusion by examining the interplay between economic and social considerations in adoption decisions. Drawing on organizational decision-making research, we argue that both early and late adopters respond to framing and interpreting adoption decision situations as opportunities versus threats. Using data on the diffusion of total quality management (TQM) among U.S. hospitals, we found that motivations to appear legitimate coexist with motivations to realize economic performance improvement, and that issue perception is related to the extent of practice implementation. These findings prompt rethinking of the classic institutional diffusion model.

Firms that do not fit into established business categories tend to be overlooked, but new markets often form around these “misfits.” Because being seen as part of a growing population makes new populations seem real, counting them is important to mainstreaming new markets. Yet, if firms outside the mainstream are overlooked, how can they be counted? Extending the embeddedness perspective to social cognition about markets, this research exposes the media's central role in market formation. Using a new method for extracting data about market networks from media coverage, this study demonstrates that early entrants benefit from inviting coverage that makes a few-but not too many-links to other entrants, thus helping audiences perceive an emerging category. As the market matures, however, references to rivals become unhelpful. These findings illustrate the value of a linguistic turn to empirical studies of meaning construction and the reification of social structure.

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