Ideological Purity vs. Hybridization Trade-Off: When Do Islamic Banks Hire Managers from Conventional Banking?

Abstract

Organizations that compete in institutional environments in which oppositional logics compete for dominance face a risk-return trade-off between maintaining ideological purity versus pragmatism by borrowing template elements from the rival ideology. Deviating from ideological purity might improve a firm's competitive strength, however, at the same time, it might also undermine its very identity and legitimacy. Although such decisions are of strategic importance, research about why, how, and where these trade-offs are made is still limited.We develop the argument that organizations will be more likely to deviate from ideological purity when the potential return of borrowing from the oppositional template exceeds the perceived risk of doing so. The more organizations aspire to be ideologically pure, the more they are constrained by the moral codes that define the category, and, therefore, the higher the risk associated with deviating from purity. However, given the potential benefits of pragmatism, pure organizations will be particularly sensitive to contextual cues that reduce the perceived risk of borrowing, tilting their tradeoff balance toward pragmatism. Specifically, we expect that pure (compared to less pure) organizations will be particularly tempted to seize the opportunities offered by pragmatism when (1) they perform below aspiration, (2) the relevant market attaches less importance to ideological purity, and (3) pragmatism is becoming taken-for-granted.We test our hypotheses on detailed data of the hiring process of branch managers of Turkish Islamic banks analyzing when and in which communities Islamic banks hire managers from conventional banking in order to implement their geographical expansion strategy in the period 2003-2016.

“God at Work”: Engaging Central and Incompatible Institutional Logics through Elastic Hybridity

“…Second, these incompatibilities are especially vivid in KT Bank as Germany is a predominantly non-Muslim market. While Islamic banks have been contested even in Muslim-majority countries (Boone and Özcan, 2016), accommodating Islamic banking in a context such as Germany accentuates contradictions in discourse and practice and should prove particularly challenging (Gümüsay, 2017). Therefore, any insights are of theoretical significance to institutional theorists and paradox scholars interested in how organizations constructively engage demands that are mutually constitutive, yet persistently incompatible.…”

“…However, similar tensions afflict non-Western religions and faith-based economic systems (Weber, 1920). Boone and Özcan (2016), for instance, show how Islamic banks in Turkey were contested, despite operating in a religiously embedded market.…”

“…Weber's arguments have been rejected for "absence of empirical support" (Iannaccone, 1998(Iannaccone, : 1474). Megachurches face criticism for "a consumerist approach to theology that is absent of the rigor and sacrifice often demanded by traditional churches" (Washington, Van Buren III, & Patterson, 2014: 194), and Islamic banks have been controversial even in Muslim countries (Boone & Özcan, 2016). As the contested existence of these organization shows, some individuals are able to balance these competing values for themselves while others resent the respective balances they strike.…”

Holier than Thou? Identity Buffers and Adoption of Controversial Practices in the Islamic Banking Category

“…Nevertheless, the pursuit of competitive advantage does lead firms to push boundaries of what is legitimate or desirable (Rao, Durand, and Monin, 2005;Boone and Özcan, 2016).…”

“…Identity, therefore becomes a central consideration in a firm's decision to adopt or reject a particular practice that deviates from the category code (Durand, Rao, and Monin, 2007;Durand and Kremp, 2016). This is not to suggest, of course, that organizations cannot differentiate themselves (within limits) from their peers in pursuit of a competitive advantage (Boone and Özcan, 2016;King, Clemens, and Fry, 2011;King and Whetten, 2008) but simply to state that navigating between conformity and violation of codes is a central challenge for all category members.…”