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Management internationalGestiòn InternacionalInternational Management

Co-evolution between Stages of Institutionalization andAgency: The Case of the Music Industry’s Business ModelEmilien Moyon et Xavier Lecocq

Volume 14, numéro 4, été 2010

URI : https://id.erudit.org/iderudit/044658arDOI : https://doi.org/10.7202/044658ar

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Éditeur(s)HEC Montréal et Université Paris Dauphine

ISSN1206-1697 (imprimé)1918-9222 (numérique)

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Citer cet articleMoyon, E. & Lecocq, X. (2010). Co-evolution between Stages ofInstitutionalization and Agency: The Case of the Music Industry’s BusinessModel. Management international / Gestiòn Internacional / InternationalManagement, 14(4), 37–53. https://doi.org/10.7202/044658ar

Résumé de l'articleLa relation entre structure et agence est une problématique centrale dansl’étude du changement. L’objectif de cette recherche est de s’intéresser auxinteractions entre le processus de changement institutionnel et lecomportement stratégique des acteurs organisationnels. A partir d’une étudeempirique menée sur l’industrie de la musique, nous observons la co-évolutionentre le niveau de l’acteur et le niveau du champ organisationnel en identifianttrois conséquences de l’agence sur le changement institutionnel (sélection despratiques alternatives, modification des pratiques alternatives et durée duprocessus) et trois conséquences des pressions coercitives sur l’agence(ajustement stratégique, modification des pratiques traditionnelles etlégitimation).

In the last decade, the advent of disruptive innova-tions such as digital technologies and the Internet has

unleashedarevolutioninthemusicindustrytransformingconsumer behavior, business models and the competitionstructure(Alderman,2001;Hensmans,2003;Michel,2005;Michel, 2006,Tschmuck,2006).Whilenewentrants likeNapsterorAppleconsideredthesechangesagreatoppor-tunity,incumbents,andmainlythemajorcompanies1,weremorepessimisticaboutthefuture.

Neo-institutionaltheoryisoftenbeingusedtoexplainchangeandtheemergenceofnewinstitutionswithinafield.Aninstitutionisasetofroutinesorpracticesthatarebeingreproducedovertimeandthatactsasacognitiveframeworkstructuring theorganizationalfield. In this frame, institu-tional changehas traditionallybeendescribedas a socialmechanismoperatingatthefield-levelandoftenneglectingthe influence of actors. However, recently authors havere-introducedtheroleofactorspromotingchange,forins-tancethroughtheconceptofinstitutionalentrepreneurship

(DiMaggio, 1988; Fligstein and McAdam, 1995; Holm,1995;Fligstein,1997;Dorado,2005).Byconsideringtheinstitutionalentrepreneurasaheroicfigure,otherforcesofthefieldareoftenneglectedorconsideredtopassivelyfol-lowtheentrepreneur’sdynamic(DemilandLecocq,2006).

Without denying the influence of the institutionalentrepreneur working in favor of change, we considerthat focusing mainly on this category of actors offers alimited understanding of the global process of institutio-nalization and does not fully take into consideration thedynamicaspectofthefieldwithitsconflicts,negotiationsand trade-offs. To better understand institutional change,boththeinfluenceofheterogeneousactorsatthefieldlevelandthefield’sinfluenceontheactors’behaviorneedtobeconsidered.Thisconstitutesamorefine-grainedapproachencompassingtheintertwiningofthetwolevelsofanaly-sis (agency/institutions) in a dynamic perspective. In thisresearch, we study actors who want to preserve traditio-nal institutions and their strategic behavior to hinder and

Résumé

La relation entre structure et agence estuneproblématiquecentraledansl’étudeduchangement.L’objectifdecetterechercheest de s’intéresser aux interactions entrele processus de changement institution-nel et le comportement stratégique desacteurs organisationnels. A partir d’uneétudeempiriquemenéesurl’industriedelamusique, nous observons la co-évolutionentreleniveaudel’acteuretleniveauduchamporganisationnelenidentifianttroisconséquences de l’agence sur le change-mentinstitutionnel(sélection des pratiques alternatives, modification des pratiques alternatives et durée du processus)ettroisconséquences des pressions coercitives sur l’agence (ajustement stratégique, modifi-cation des pratiques traditionnelles et légi-timation).

Motsclés:Agence,pressionscoercitives,changement institutionnel, co-évolution,businessmodel

AbstRAct

The relationship between structure andagency is a central issue in studyingchange.Theaimof thispaper is to focusontheinteractionsbetweentheprocessofinstitutionalchangeandtheactors’strate-gic behaviour. Based on research on themusic industry,weobservedco-evolutionbetween theactor leveland theorganiza-tionalfieldlevelbyidentifyingthreecon-sequences of the incumbents’ actions onthe institutional change process (alterna-tive practices selection, alternative prac-tices modification and process duration)and three consequences of coercive pres-sures on agency (strategic adjustment, traditional practices modification and legitimization).

Keywords: Agency, coercive pressures,institutionalchange,co-evolution,businessmodel

Resumen

La relación entre estructura y agencia esuna problemática central en el estudiodel cambio. El objetivo de esta investi-gación es estudiar las interacciones entreel proceso de cambio institucional y elomportamiento estratégico de los actoresorganizacionales. A partir de un estudioempírico hecho sobre la industria de lamúsicaseobservalacoevoluciónentreelniveldelactoryelniveldelcampoorga-nizacionalalidentificartresconsecuenciasde la agencia sobre el cambio institucio-nal (selección de prácticas alternativas,modificacióndelasprácticasalternativasyduracióndelproceso)ytresconsecuenciasdelaspresionescoercitivassobrelaagen-cia(ajusteestratégico,modificacióndelasprácticastradicionalesylegitimación).

Palabrasclaves:Agencia,presionescoerci-tivas, cambio institucional, coevolución,businessmodel

Co-evolution between Stages of Institutionalization and Agency: The Case of the Music Industry’s business Model

EMILIEn Moyon xAVIEr LECoCqIAE de Lille IAE de Lille, IESEG School of Management, LEM, UMR 8179

1. UniversalMusic,SonyMusic,BMG,EMIandWarnerarethemajorcompaniesoftenreferredasthe«BigFive».Theybecameleadersinthemusic industryafteryearsofconcentration.After themerger in2004

betweenSonyandBMG,theyarenowthe“BigFour”andaccountforabout80%oftheUSmusicmarketand70%oftheworldmusicmarket.Source=http://www.ifpi.org.09/03/09.

38 Management international / International Management / Gestión Internacional, 14 (4)

thenbenefitfrominstitutionalchange,followingtheworkofHensmans, (2003)andLawrenceandSuddaby(2006).However, we move to a more dynamic approach of therelationshipbetweenagencyandinstitutionsbylookingattheco-evolutionbetweenincumbents’strategiesandstagesof institutionalization of the field.To do so, we combineOliver’s(1991)typologyofstrategicresponsestoinstitutio-nalpressuresandGreenwoodandal.’s(2002)frameworkofinstitutionalizationprocesstoshedlightonthecomplexityoftheactors’strategicbehavior(actorlevel)andtheirevo-lution during the different stages of institutional change(fieldlevel).

The music field is particularly conducive to illustrateinstitutional work to maintain institutions (Lawrence andSuddaby, 2006). We focused on the dominant businessmodel of the traditional music industry which has beenchallenged over the last ten years. The outcome of thisresearch gives a better understanding of the interactionsbetweentheagencyattheactorlevelandthecoercivepres-suresatthefieldlevel.Weidentifiedthreewaysincumbentsimpact institutionalchangeprocesswithinthefield.First,theincumbentsdevelop(veryheterogeneous)strategicres-ponsesthatcontributetothediscriminationbetweenalter-native practices2. Second, they actively participate in thebuildingof institutionsbymodifyingalternativepracticesintroducedbynewentrants.Third,activestrategicrespon-sesfromincumbentsaffectthedurationoftheoverallpro-cess of institutional change.Also looking at the coercivepressuresof thefield,weidentifiedthreewaystheevolu-tionofinstitutionalchangeprocessaffectstheincumbents’action.First,theytendtoadapttheirstrategydependingontheoutcomesofthealternativepractices;weobservedmoreandmorepassivestrategicresponseswhilealternativeprac-ticesweregaininglegitimacywithinthefield.Second,theevolutionoftheinstitutionalprocessleadstoamodificationoftraditionalpracticesthatnolongersuittheinstitutionalcontext.Third, incumbentsused their legitimacy tobene-fitfromsuccessfulnewpracticesandespeciallytocapturerevenuesfromemergingbusinessmodels.

Agency and Stages of Institutional Change

Traditional approaches to neo-institutional theory pri-marily focus on the influence that institutions have onthe behavior and structure of organizations (Meyer andRowan, 1977; DiMaggio and Powell, 1983; DiMaggio,1988; Scott, 1995). The fundamental concepts of legiti-macy (Suddaby and Greenwood, 2005), “taken-for-gran-tedness” (Tolbert and Zucker, 1983) and isomorphism(DiMaggio andPowell, 1983) demonstrate howactors inagivenfieldfollowthesamepatternsandhowinstitutionshavethetendencytoremaininert.Thereciprocalrelationand the influence of actors in the change process have

been commonly overlooked until recently when resear-chersbegantopayparticularattentiontotheroleofactorsand the impact that theycanhaveon institutions (Oliver,1991; Hensmans, 2003; Greenwood and Suddaby, 2006;LawrenceandSuddaby,2006).

These non-isomorphic perspectives on institutionalchangeemphasizedtheimportanceofthepoliticaldimen-sion and of strategic agency within the field (DiMaggio,1988;DiMaggioandPowell,1991;Holm,1995;ClemensandCook,1999;Fligstein,2001;SeoandCreed,2002).Ina first stage, research that reintroduced actors’ influencewithin institutional processes primarily focused on theconceptoftheinstitutionalentrepreneur(DiMaggio,1988;Fligstein and McAdam, 1995; Fligstein, 1997; Beckert,1999; Dorado, 2005). The institutional entrepreneur mayrecognize change as an opportunity and therefore choo-sestoadoptanactivebehaviortowardsagivenchange.Itsrange of action widely depends on the opportunities thatare presented in the field. Institutional opportunities aredefinedas“thelikelihoodthatanorganizationalfieldwillpermit actors to identify and introduce anovel institutio-nalcombinationandfacilitatethemobilizationofresourcesrequiredtomakeitenduring”(Dorado,2005:391).Theseopportunitiesdependon thedegreeof institutionalizationofthefieldwhichdeterminestheinfluenceinstitutionshaveonactors.Dorado(2005)identifiesthreedifferenttypesoffieldsdependingonthecombinationbetweenthelevelsofmultiplicityof referentsand institutionalization.Thefieldisdefinedasopportunity opaquewhentherearelittleornoopportunitiesduetofewinstitutionalreferentsandahighlevelofinstitutionalization.Ontheotherhandwhentherearemanyreferentsandasubstantiallevelofinstitutionali-zation,actorswillhavemanyopportunitiesinafielddes-cribedasopportunity transparent.Finally,thethirdtypeoforganizationalfield,opportunity hazy, isconsideredcom-plexandunpredictableandthereforeisnotanappropriatecontextforinstitutionalagency.

The institutional entrepreneur has been the focus ofmany researchers trying to explain institutional agency.However,focusingonanentrepreneurchangingafieldmayleadtoconceivinghimasahero(DemilandLecocq,2006)andtoneglectingtheessenceofneo-institutionalism,i.e.theweightofinstitutionsandtheholisticapproach(DiMaggioandPowell,1983).Thus,inordertobetterunderstandthechangeprocess,researchershavestartedtoconsidertheroleofotherkindsofactors,whowanteventually topreserveinstitutions(Oliver,1991;Hensmans,2003;LawrenceandSuddaby,2006;Scott,2007).Indeed,theinertnessofinsti-tutionscannotbesimplyexplainedbysocialmechanismslikeisomorphism(DiMaggioandPowell,1983)whichdonottakeintoaccountthestrategicbehaviorofactorswhowanttomaintainastatus quo.

2. ‘Alternativepractices’refer to thepractices(in termsofactivities)thatdonotcomplywiththeinstitutionsofthefield.Thesepracticesare

usuallyintroducedbynewentrants,thoughincumbentsmayeventuallyintroducesuchalternativepractices.

Co-evolution between Stages of Institutionalization and Agency: The Case of the Music Industry’s Business Model 39

Oliver(1991)questionedthepassiveroleoforganiza-tionsbypresentingatypologyofdifferentstrategicrespon-sestoinstitutionalpressure.Thesedifferentresponsesareclassifiedaccording to theirvirulencefromconformity tomanipulation(Table1).Theauthorsuggests that the typeofbehaviordependsonthenatureandoriginofinstitutio-nalpressure.Forexample,whenthepressurecomesfroma dominant actor in the field other organizations will bemorelikelytorespondmorepassively.Moreover,contraryto the traditional institutional entrepreneurship approach,Oliver(1991)alsoevokes thatactorsmayunintentionallyinfluencetheprocessofinstitutionalchange.

More recently, authors reconsidered agency withconcepts like“institutional construction” (Scott, 2007)or“institutional work” (Lawrence and Suddaby, 2006). Thelater distinguishes various types of influence that actorscanhaveoninstitutions.Someactorsmaychoosestrategicmoves tobreakdown thepresent institutionsor tocreatenew ones (typical behavior of the institutional entrepre-neur), while other actors who have vested interest try toprotect the present institutions. Different ways of preser-ving institutions have been identified by Lawrence andSuddaby (2006): coercive pressure towards institutions(enabling, policing, deterring) or reproducing norms and

beliefs to maintain institutions (valorizing/demonizing, mythologizing, embedding/routinizing).

Thus, research on agency within neo-institutionaltheoryhasmovedtoabetterintegrationofactors’strategicbehavior, regardlessof theirposition towards institutions.However, beyond the story of actors’ confrontation withinstitutions,westillneedtoknowif there isasystematicrelationship between strategic behavior and the evolutionof the field. For instance, one may ask if the position ofactors progressively evolves throughout the different sta-gesofinstitutionalchangeaccordingtotheleveloflegiti-macyof traditionalandemerging institutions.Adynamicapproachreintroducingthepermanentinteractionbetweenthetwolevelsofanalysis(actorsandstagesofinstitutiona-lization)wouldhelptobetterunderstandthecomplexityofthechangeprocess.

Withtheirempiricalstudyoftheaccountingprofession,Greenwoodandal. (2002)outlinedamodelof institutio-nalchangeinwhichsixkeystagesarepresented(Table2).Thischangeprocessisprovokedbysocial,technologicalorregulatoryenvironmentaloutbreaks(Munir,2005)thatmayimpacttheorganizationalfieldandweakenprevailinginsti-tutions.Greenwoodandal.(2002)describetheprocessbywhichsome institutionsdisappear (deinstitutionalization),

TAblE 1

Strategic Responses to Institutional Processes (Oliver, 1991).

Strategies Tactics Examples

Manipulate

Control Dominatinginstitutionalconstituentsandprocesses

Influence Shapingvaluesandcriteria

Co-opt Importinginfluentialconstituents

Defy

Attack Assaultingthesourcesofinstitutionalpressure

Challenge Contestingrulesandrequirements

Dismiss Ignoringexplicitnormsandvalues

Avoid

Escape Changinggoals,activities,ordomains

Buffer Looseninginstitutionalattachments

Conceal Disguisingnonconformity

Compromise

Bargain Negotiatingwithinstitutionalstakeholders

Pacify Placatingandaccomodatinginstitutionalelements

Balance Balancingtheexpectationsofmultipleconstituents

Acquiesce

Comply Obeyingrulesandacceptingnorms

Imitate Mimickinginstitutionalmodels

Habit Followinginvisible,taken-for-grantednorms

40 Management international / International Management / Gestión Internacional, 14 (4)

while emerging structures spread and gain legitimacythroughoutafield(preinstitutionalization,theorization,dif-fusion)tobecomeinstitutionalized(reinstitutionalization).

Inthisresearch,weapplyGreenwoodandal.’s(2002)frameworktothemusicindustryinordertounderstandthewayformer institutionswerebeingabandonedwhilenewonesweregaininglegitimacy.Attheactorlevel,wearealsointerestedinanalyzingmorespecificallythestrategicbeha-viourofactors.Wehavechosentofocusthisresearchontheroleofthemajorsthatattempttopreservetheirpositionwithinthefield.Todoso,weuseOliver’s(1991)typologyofstrategicresponsestoinstitutionalprocess.Thecombina-tionofthesetwoconceptualframeworks(Oliver’stypologyonstrategic responsesandGreenwoodandal. frameworkon the institutionalevolution)givesanewperspectiveoninstitutionalchangethatemphasizesthedynamicbetweenchangeintheorganizationalfieldandagency.Theintegra-tionofthetwolensesmentionedaboveisquiteeasyfromatheoreticalpointofviewastheydealwithdifferentlevelsofanalysisandtheyallowconsiderationofboththestrate-gicbehaviourofthefirmsandtheevolutionofinstitutionswithinthefield.However,combiningtheseframeworksismoredifficultfromanempiricalpointofviewasitrequi-resdatacollectionandanalysisaboutgeneralprocessesandindividualactions.

The Music Industry

ReseARch design

Over the last decade institutions in the music field havebeenincreasinglychallengedandthishasthereforeweake-nedtheirlegitimacy.Theapparitionofnewactorsandthedesignofrivalbusinessmodelshavethreatenedthecentralandprivilegedpositionofthemajorsandsomeinstitutio-nalizedpracticesthattheyprotect.Theoppositionbetweenthemajorsandnewentrantsresultsinsevereturbulenceinthemusicindustrywhichmakesitparticularlyinterestingtoobserveinstitutionalchange(Hensmans,2003)andpar-ticularlytheroleplayedbyincumbents.

The research design includes two separate steps.Preliminaryfield researchhasbeen conducted toprovideathoroughbackgroundinthetraditionalmusicindustry,tounderstand the interactionbetweenactorsand the institu-tionalcontextandtocalibratethedifferentstagesofinsti-tutional change (Greenwoodandal., 2002).We reviewedseveralpiecesofliteraturewhichfocusonthemusicindus-tryfromauthorslikeAnandandPeterson(2000),Alderman(2001),Dubosson-Torbayandal.(2004),Huygensandal.(2001), Knopper (2009), Lampel and al. (2008), Lopes(1992), Molteni and Ordanini (2003), Michel (2005),Michel (2006), Spitz and Hunter (2005) and Tschmuck(2006). Then seventeen semi-directive interviews werethenconductedwithexperts3fromthefieldwhohavebeen

TAblE 2

Stages of Institutional Change (Greenwood et al., 2002).

Stages Characteristics

1 - Precipitating jolts Social,technologicalorregulatoryeventsthatdestabilizepractices

2 - Deinstitutionalization

Emergenceofnewplayers

Ascendanceofactors

Institutionalentrepreneurship

3 - PreinstitutionalizationIndependentinnovation

Technicalviabilityparamount

4 - Theorization

Specificationofgeneralorganizationalfailing

Justificationofabstractpossiblesolution

Moraland/orpragmaticlegitimacy

5 - DiffusionIncreasingobjectification

Pragmaticlegitimacy

6 - Re-institutionalization Cognitivelegitimacy

3. PhilippeAstor,Musique InfoHebdo;MorvanBoury,EMIMusic;Xavier Bringué, Microsoft; Jeff Cali, Reshape-Music; Silvy Castel,Ministry of Culture, France; Thierry Chassagne, Warner Music;David El-Sayegh, SNEP; Caroline Gillet, BMG Canada; Stéphane

LeTavernier, Sony Music; Olivier Montfort, EMI Music; EmmanuelMougin-Pivert,WarnerMusic;GillesPariente,EMIMusic;GuillaumeQuelet,V2Music;CécileRap-Veber,UniversalMusic;JérômeRoger,UPFI,HervéRony,SNEP;JulienUlrich,VirginMegaMusic.

Co-evolution between Stages of Institutionalization and Agency: The Case of the Music Industry’s Business Model 41

confronted with change in French and Canadian musicmarket.Wealsoparticipatedinseveralconferences4onthemusicindustryduringwhichwewereabletocontinueourresearchwithmore informal interviews.Thispreliminarywork first helped us to immerse ourselves in the musicindustryand to identifyonecore institutionandfour ins-titutionalizedpracticesthatwerebuiltovertime,reprodu-ced and “taken-for-granted” by the different actors fromthefield.Second, the semi-directive interviewswerealsonecessarytocapturetheactors’representations.Specialists’perspectivesonchangehelpedustoidentifykeyactorsandto determine the different stages of institutional change.Forinstance,intervieweeswereaskedtonameeventsthatinducedthechangeprocess.Mostofthemconsideredtheintroductionofpeer-to-peer5(fromthispointonreferredtoasP2P)networksandthespreadofmp3technologytobethemainprecipitatingjoltsthatinducedchange.Moresur-prisinglysomeintervieweesalsomentionedtheCDburneras having a major impact in the consumption patterns ofmusic.Becausethespreadofmp3andtheintroductionofbothP2PnetworksandCDburnersoccurredin1997,weconsidereditasaturningpointinourresearchandthereforewemakereferencetothetimebefore1997asthetraditio-nal eraandfromthatpointonthechange era.Thisdelimi-tationisconsistentwithLampelandal.’s(2008)perspectiveof exogenous jolts that are repeatedly causing importantdiscontinuitiessincethebirthofthemusicindustry.

Concerningthesecondstepoftheresearchdesign,wecollected secondary data in order to identify more spe-cifically the strategic behavior of two major companies–UniversalMusic,UMfromnowon,andBMG-facingins-titutionalchange.Basedonpreliminaryresearch,wechosetofocusourdatacollectiononthesetwomajorsthathelda representativepositionof thiscategoryofactorswithinthe field. When interviewees were asked to describe theroleeachmajorcompanywasplayingduringchange,UMandBMGclearlyappearedtopositionthemselvesagainstchangepressureswhileEMIMusicandWarnerMusicwerepresentedasmore inactiveactorsoreven followers.AlsoUniversal and Sony-BMG represented respectively 26%and21%oftheworldmusicmarket6in2005whichempha-sizes theirneed toprotect former institutions.Becauseofthe 2004 merger between BMG and Sony Music whichconstitutesbyitselfarevealingstrategicresponsetoinsti-tutionalchange,wecollectedthestrategicresponsesoftheBMG entitybeforethemergerandthestrategicresponsesoftheSony-BMGentityafterthemerger.Wesystematicallyandchronologicallyconsideredall thearticles that revea-ledastrategicresponsefromUMorBMGtowardchangeduring thechosenperiod (1997-2006) thatwere found inpublicsources.Thisworkisbasedonasignificantdatabase(1397 news articles) from a wide range of sources: IFPI(International Federation of the Phonographic Industry),

RIAA (Recording IndustryAssociation ofAmerica), andfinallySony-BMGandUM’scorporatewebsites.Screeningthedatabaseledtotheidentificationofsixty-eightstrategicresponsesfromUMorBMGtowardsoneormoresourcesofinstitutionalchange.

In the first stage of the data analysis, each institutio-nalized practice was considered separately.Therefore weconsiderinstitutionalchangeasfourinterwovenprocessesinwhichaspecificpracticeisbeingquestioned.Thusanysinglestrategicdecisioncanpotentiallyberelatedtomorethatoneprocess.Toillustrateourmethodologicalapproach,wepresentintable3the37strategicresponsestochangetowards the album/single format collected between 1997and2006–15responsesfromUM,5responsesfromBMGand17jointresponsesfrombothUMandBMG.Oliver’s(1991)typologyhasthenbeenusedforeachprocesstoana-lyzethenatureofeachdecision.Forinstancewhenactorsrefusedtochangeandworkedardentlytomaintaintheins-titutionsofthetraditional era,weinterpreteditasavirulentstrategicbehaviortowardspressures(ManipulateandDefy;Oliver, 1991). But when actors were substantially moreinfavorofchangeandtheemergenceofnewinstitutions,we considered that the majors were using passive strate-gicresponses(AcquiesceandCompromise;Oliver,1991).We chose a double-coding analysiswhich sometimes ledtodisagreementsbetweentheauthorsandthereforediscus-sionswithactorsinthefield.Finallyweconsultedexpertsinthefieldtoconfirmouranalysisandresultsinordertoraise the internalvalidityofour research.Wepresent theanalysisofUM’s32strategicresponsestochangetowardsthealbum/singleformatintable4.Figures2to5illustratetherepartitionofstrategicresponsetype(Oliver,1991)foreachpracticeduringtheperiodofchange

In thesecondstageof thedataanalysis, thefourpro-cesseshavebeenaggregated(table6)toobservethestra-tegicresponsesthatcharacterizeeachstageofinstitutionalchange.We used jointly Greenwood and al.’s (2002) fra-meworkandOliver’s (1991) typologyto investigatecoer-civepressuresatthefieldlevel.

institutionAL pRActices in the tRAditionAL music fieLd

Inthispartweaimtodescribethemusicfieldinitstradi-tional setting: thepositionofactors, their interactionandthe institutional context (Figure 1). In the second half ofthe 20th century, the music field was highly concentratedwiththedominationoffewmajors.Concentrationbeganinthe60’swiththeintroductionofWarnerthatradicallyrein-ventedtheorganizationofmusiclabelsandthedistributionnetworks.Originallybased in themovie industry,Warner

4. OrganizedbytheFrenchMinistryofCulture,theFINGFoundationandtheassociation«ObservatoiredelaMusique».

5. Internet network that enables users to share files (music, movies,softwares…)

6. Source=http://www.ifpi.org.22/05/2006.

42 Management international / International Management / Gestión Internacional, 14 (4)

TAblE 3

Universal and bMG’s Responses to Change Pressures toward the Album/Single Format (1999-2006).

  Date Major EventResponse

(tactic)

1 1999 U+B LaunchofGetMusic Challenge

2 1999 U+B LawsuitsagainstNapster Attack

3 2000 B AgreementwithOD2 Challenge

4 2000 U+B Lawsuitsagainstmp3.com Attack

5 2000 U+B CommunicationtowardsP2Pusers Challenge

6 2000 B AgreementBMG/mp3.com Bargain

7 2000 U Investmentinmp3.com Control

8 2001 B AcquisitionofNapster Control

9 2001 B LaunchofMusicNet Challenge

10 2001 U LauchofPressPlay Challenge

11 2001 U AgreementwithMicrosoft/MSN Co-opt

12 2001 U AcquisitionofEmusic Influence

13 2001 U LaunchofEcompil Challenge

14 2001 U Acquisitionofmp3.com Control

15 2002 U+B Agreementbetweenmajorlabels(MusicnetandPressplay) Challenge

16 2002 U AgreementwithMusicNet,OD2andStreamwaves Challenge

17 2002 U+B LawsuitsagainstInternetproviders Attack

18 2002 U+B «Spoofing». Attack

19 2002 U Targetingcell-phones(VuNet) Challenge

20 2002 B Targetingcell-phones(Nokia) Challenge

21 2002 U+B Lawsuits(Kazaa,Grokster,Streamcast) Attack

22 2003 U+B AgreementwithApple Challenge

23 2003 U+B LawsuitsagainstP2Pusers Attack

24 2003 U CessionofEmusic Challenge

25 2003 U AgreementwithVirginmega Challenge

26 2003 U+B Agreementwithstreamwaves(streamin) Bargain

27 2003 U+B AgreementwithNapsterforunlimitedoffers Balance

28 2004 U+B AgreementforP2Pdistribution Control

29 2005 U Targetingcell-phones Challenge

30 2005 U+B Agreementwithyahooforunlimitedoffers Balance

31 2006 U AgreementwithMotricity Challenge

32 2006 U AgreementwithSpiralFrog Challenge

33 2006 U+B AgreementwithMusicmeunlimited Bargain

34 2006 U LaunchofBuzzmusic.fr,unlimitedoffer Balance

35 2006 U AgreementwithQtrax Challenge

36 2006 U+B AgreementwithLaFnac Bargain

37 2006 U+B AgreementwithMusicnow Balance

Co-evolution between Stages of Institutionalization and Agency: The Case of the Music Industry’s Business Model 43

rapidly played an important role in the music field byimplementingastrategyofacquisitionofsomeofthemostsuccessfulAmerican independent record labels7:Atlantic,ElektraandAsylum(Huygensandal.,2001).Thisstrategybecameageneraltendencyinthefield;successiveacquisi-tionsofindependentlabelsledtothebuildingofimportantstructures that operated globally and were diversified inmanymusicgenresandinexternalactivities.Theconcen-trationoftheindustryledtofivegiants,UniversalMusic,BMG,EMI,SonyandWarner(Tschmuck,2006).Rapidlythe“BigFive”accountedformorethan70%ofretailmusicsales8.Twocategoriesofactors thenconstituted thefield,on one side the majors and on the other the independentlabels. The high-level of concentration and the unevenrepartition of resources and power within the field natu-rallyshapedinteractionsbetweenthetwotypesofactors;themajorswerelookingfornewacquisitionopportunitiesinorder toenrichtheircataloguesandindependentlabelsgravitatedaroundthemajorstobenefitfromtheirresources(Lopes,1992).

For years, the “traditional business model” remainedefficientandappropriatedespitetechnologicaldisruptions(radio, magnetic tape, CD) and was taken-for-granted byartists, independent labels, distributors, media and custo-mers.Forthesereasons,adominantbusinessmodelactsasacognitivetemplatestructuringthefield;weconsiderthebusiness model a key institution of the pre-digital era.Abusinessmodelisdefinedas“adescriptionoftherolesandrelationshipsamongafirm’sconsumers,customers,allies,and suppliers that identifies the major flows of product,information,andmoney,andthemajorbenefitstopartici-pants” (Weill andVitale,2001).Businessmodels capturetheorganizationof thefieldbydescribinghow thevaluechain is organized around the focal firm (Amit and Zott,2001;LinderandCantrell,2000;ZottandAmit,2008)butalsohowthefirmgeneratesrevenue.Todescribethisdomi-nantbusinessmodel,wedisassociateditstwomaincompo-nents,thefirstisthevaluechainorganization(Component1inFigure1)andthesecondisrelatedtothevalueproposi-tion(Component2inFigure1).Bothofthesecomponentscan also be split into two more specific institutionalized

TAblE 4

Strategic Responses from Universal Music (1999-2006) (bMG’s Responses Have been Excluded). See Table 3 for the detailed responses

Universal P3   1999 2000 2001 2002 2003 2004 2005 2006

Manipulate

Control 7 14 28

Influence 12

Co-opt 11

Defy

Attack 2 4 17,18,21 23

Challenge 1 5 10,13 15,16,19 22,24,25 29 31,32,35

Dismiss

Avoid

Escape

Buffer

Conceal

Compromise

Bargain 26 33,36

Pacify

Balance 27 30 34,37

Acquiesce

Comply

Imitate

Habit

7. Independentmusiclabelsaresmalleractorsthatareusuallyspecia-lizedinauniquemusicgenre.

8. 77,4% of the market shares in 1998. Source MEI World Report2000.

44 Management international / International Management / Gestión Internacional, 14 (4)

practices(Practice1and2inComponent1,thenPractices3and4inComponent2).

The first institutionalized practice is control of distri-bution(P1)whichcapturestheorganizationofdistributionnetworks.As the music labels were concentrating duringthetraditionalera,themusicdistributorsalsofollowedthesamepath,goingfromsmallrecordshopstothedomina-tionofhypermarketsandbigspecialtystoressuchasVirginMegastoreorFnacinFrance.Themajorssetupstrongtieswiththeseretailersinordertodistributetheirwidemusiccatalogues.Alsomostindependentlabelsusedthemajors’distributionnetwork inorder tobenefit from theirworld-wide networks. By controlling the distribution of almosteveryartist,themajorshadapowerfulandprivilegedinter-mediary position between artists and consumers (Lopes,1992).

Themajorshavealsoestablishedstrongtieswithmediain order to promote their artists. The second practice iscontrol of promotion(P2)whichcapturestheorganizationofmusicpromotion.ThemajorshavesufficientresourcestodevelopimportantmarketingcampaignsusingradioandTVchannels inorder toreacha largepublic.Their inter-national structures also enable them to promote artists

worldwide. Inopposition, independent labelsuse specific

mediabecausetheyoftenfocusonlocalmarketsandparti-

cularsegmentsofcustomers.Indeed,artistswhoareaffilia-

tedtooneofthemajorshaveaccesstomoreresourcesand

benefitfromtheirdistributionandpromotionnetworksthat

willgivethemmoreopportunitiestosucceedandtodeve-

lopinternationally(Tschmuck,2006).

Thealbumandsingleformatwerethetwocommercial

standardsofthetraditionalerainwhichthepriceofmusic

wassetforalimitednumberoftracks;thisrevenuemodel

isconsideredthethirdinstitutionalizedpractice(P3).Music

labels generalized this delivery format through different

technologicalsupport:thevinylrecord,theanalogicaltape

andtheCompactDisc.

Finally,copy control(P4)isakeypracticeforthetradi-

tionalbusinessmodel’sstabilitybyenablinglabelstocap-

turevalue.Becauseconsumerscouldnotduplicatemusic,

music labels were capturing revenue out of the music

duplicationprocess,especiallywiththeCompactDiscthat

requiredlessproductioncosts.

FIGURE 1

Institutionalized Practices and Change Pressures

!

Traditional BusinessModel

C1

Value chain

C2

Value proposition

P1

Distribution

P2

Promotion

P3

Format

P4

Copy Protection

CP1 CP2 CP3 CP4

InstitutionC

omponents

PracticesC

hange

Pressure (CP)

Co-evolution between Stages of Institutionalization and Agency: The Case of the Music Industry’s Business Model 45

chAnge oveR the LAst decAde

Afterdescribingthefieldduringitstraditionalera,wewillnow present chronologically how the different institutio-nalizedpracticeshavebeenchallengedbetween1997and2006. Some technological jolts have precipitated changeand allowed the introduction of new actors from tangentfields that developed innovative business models. TheInternetanddigitaltechnologyhavebeentremendousinno-vationsthatcannotbeisolatedfromtheprocesswearestu-dying,buttheirapplicationandtheirimpactsonthemusicfieldreallystartedwiththedevelopmentofP2Pnetworksandthespreadofthemp3encodingformat.Becausethesetwoinnovationsappearedin1997,weconsiderthisthestar-tingpointofthechangeperiod.

The mp3 format which reduced the amount of datarequiredtoencodemusicrapidlybecamethestandardforaudiofileontheInternet.Forthefirsttime,themp3techno-logyalloweduserstocopymusicwhileminimizingqualitylossesincomparisontoanalogicalcopy(magnetictape,forexample).Withtheintroductionofthemp3format,musiclabelswerenolongerexclusivelyincontrolofduplicatingmusic.Also in 1997 the first CD burners became availa-bleforpersonaluse,whichallowedconsumerstotransferdigitalmusictoamaterialsupportandduplicateit.Basedon these technological innovations, new actors starteddeveloping alternative models that threatened the majors’traditional business model, their central position and thestructureofthefield.In1997,MichaelRobertsonintrodu-ced a revolutionary model, the website mp3.com, whichwasanewwaytolistentoandsharemusic.Itisconside-redthefirst“P2Pmodel”ofmusicdistribution(Alderman,2001; Knopper, 2009). Mp3.com could be used by anyartist topromoteanddistribute independently theirmusiccreations using the mp3 format and therefore challengedsimultaneouslythefourinstitutionalizedpractices.Rapidlymp3.comusershadonlineaccesstothousandsofsongs.

In 1999 a more sophisticated kind of P2P is introdu-ced,Napster.Itsimmediatesuccessgreatlydestabilizedthemusicfieldandalsochallengeddifferentinstitutionalprac-tices.Napsterswiftlybecamethebiggestmusiccatalogueaccessintheworld,offeringmuchmorediversitythananyothertraditionalretailer.Itssuccessgreatlycontributedtoestablishing themp3 format as thenew standardofdigi-talmusicontheInternet.Inthebeginningofthe21stcen-tury,musicsalesdeclinedmassivelywhile thenumberofP2P networks (Emule, Gnutella, Grokster, Imesh, Kazaa,Limewire…) and users continued growing. In 2003, P2Pnetworkscountedmore that60millionusers in theUSAwhileKazaa,oneofNapster’sclones,claimed9.5millionusers in Europe who could download music tracks from

a 180 million-track catalogue (Dubosson-Torbay and al.,2004).ThemusicindustryaccusedP2Pnetworksofcopy-rightinfringementandlawsuitsweremadeagainstthem.

In 2000, E-music reacted to the P2P revolution andintroduced the first legal subscription model that offe-red “unlimited” independent music for a monthly fee. In2002 and 2003, MusicNow and Streamwaves developedstreaming9modelsalsoofferingunlimitedaccesstomusicdirectlyontheweb.Althoughconsumerscouldlistentoanymusictheywanted,theycouldn’tstoreorshareit.

Anewgenerationofbusinessmodelsfocusingoncom-munitybuildingandgeneratingrevenuesfromadvertisingappearedin2004withtheemergenceoftheso-calledweb 2.010.Forinstance,MySpaceestablishedasocialnetworkthatartistscouldusetoshareandpromotedirectlytospeci-ficcommunitieswithoutinvolvinganyintermediatemusiclabel.In2005,YouTubedevelopedasimilarconceptspe-cializedinthediffusionofvideosintroducingtheopportu-nityforuserstointeractcreativelywithmusicbypostingaremixofasongtheylikeortheirowninterpretationofthemusicvideo.

Thesenewbusinessmodels revealedconsumers’ inte-rest for creative music offers even though these modelswere still struggling to convert traffic into cash.Whereastheindustryevolutionusedtobedrivenbyaqualityneed(from the gramophone until the CD format), consumersarenowsensitive to accessibility andflexibility.Thedis-course of Jerry Pierce, vice president of technologies inUniversalPictures,illustratesperfectlythisnewparadigm:“In themusic industry, consumerswereoffered,with theSACD11,abrandnewformatwithmuchhigherqualityandveryrestrictiveDRMrules.Andconsumerschosemp3astheirsolution.Theycouldhavehadhigherquality,buttheychoseflexibilityandusability”12.In2005,theInternetser-vicecompanyYahooinaugurateditsnewunlimitedmusicsubscriptionmodel,YahooUnlimited.Thefollowingyear,MySpace recorded its 100-millionth subscription andYouTubecountedmore than100millionusersdailywat-chingsomeoftheir6.1millionvideos.Thehugesuccessofcommunitywebsitescaught theattentionof largegroups.ForinstanceRupertMurdoch’smediaconglomeratecom-pany News Corp bought MySpace in July 2005, GoogleboughtYouTubeinOctober2006whileMicrosoftlauncheditsownInternetvideoservice,SoapBox.

In 2007, the music field was facing a debate regar-ding the interoperability issue of digital music protectedwithDRM.NotonlydoesDRMrestricttheduplicationofmusicfiles,italsolimitsthewaymusiccanbeused.UnlikeDRM-free music from P2P networks, DRM music soldthroughlegitimatechannelswasoftennotcompatiblewith

9. Direct method of data transmission that is playable as it is beingreceived,ratherthanonlyafteritiscompletelydownloaded.

10.Web2.0referstoanevolutionofInternettowardsamoreuser-orien-tedservicebasedoninteractionsbetweenInternetusersandparticipa-tionintheprovidedcontents.

11.SuperAudioCD

12.Source=http://www.tomsguide.com/us/tg-daily-interviews-univer-sal-pictures,review-783.html.24/11/2006.

46 Management international / International Management / Gestión Internacional, 14 (4)

someelectronicdevices.Thisveryspecificaspectprovided

a competitive advantage to P2P networks that distributed

a wide range of music from different labels without any

constraints.Somelegitimateactorsrapidlyunderstoodthat

itwasacentral issue forconsumersand launchedDRM-

freemusicservices.

We presented chronologically the main change pres-

sures (referred hereafter as CP) that have been challen-

ging each institutional practice thatwasdescribed earlier

(Figure 1). For example, models that allow music distri-

butionwithoutthemajors’involvement(P2Porplatforms

specializedinindependentmusic)areconsideredaspres-

surestowardcontrolofdistribution(CP1,pressurestoward

institutional practice 1). During the change period, the

emergenceofalternativepromotiontoolssuchasweb2.0

sites,whichprovidedanotheroutletforindependentartists

toreachtheiraudience,areconsideredaspressurestowards

controlofpromotion(CP2).Thenchangepressurestoward

format (CP3) are related to alternative revenue models,

those models include P2P offers, subscription offers and

alsostreamingwebsites.Finally,changepressurestowards

copycontrolimposedonmusic(PC4)wererepresentedby

innovations suchasmp3 technologyaswell asbyactors

thatsoldDRM-freemusic.Inthenextchapter,wedescribe

UMandBMG’sstrategicresponsestothesefourtypesof

changepressurebetween1997and2006.

Stages of Institutional Change and the Majors’ Strategic Responses to Change Pressures

AnALysis At the ActoR-LeveL, focusing on the mAjoRs’ stRAtegic Responses

WehaveusedOliver’s(1991)typologytoanalysethestra-tegicbehaviourofUMandBMGandobservethevariationof their responses tochangepressuresoverseveralyears.Theirstrategicresponsestopressurestowardseachinstitu-tionalizedpracticearepresentedinseparatefigures(figures2to5).Tacticsub-categoriesdonotappear in thefiguresbecausewechosetofocusonthemainstrategiccategories.Tobetter understand the encodingof dataweprovide anexampleoftworepresentativeeventsthatoccurredduringthechangeperiodandexplainthewayweinterpretedthem.

Since1998,P2Pnetworkshadbeenasignificantthreatto the majors and especially to the traditional distribu-tionpractice(P1).Asaresult,in2001BMGacquiredtheP2PnetworkNapsterthatwasanindependentdistributionnetworkontheInternet.Thiscostlyacquisitionwasconsi-dered as a control tactic which refers to a manipulation strategy(Oliver,1991).Alsoinresponsetotheincreasingpressures linked to Internet distribution, UM and BMGdecided to heavily develop music distribution for mobilephones in2002.Onthisspecificmarket, themajorswereable tomaintainhighmarginsondiversemusicproductsformobilephones.Inthiscase,UMandBMGadoptedanescapetacticwhichreferstoanavoidancestrategy(Oliver,1991).

FIGURE 2

Strategic Responses to Change Pressure toward Control of Distribution

Co-evolution between Stages of Institutionalization and Agency: The Case of the Music Industry’s Business Model 47

FIGURE 3

Strategic Responses to Change Pressure toward Control of Promotion

FIGURE 4

Strategic Responses to Change Pressure toward the Album/Single Format

48 Management international / International Management / Gestión Internacional, 14 (4)

For the purpose of our approach, we decided to lookseparately at the four institutionalized practices to studychangeandtheincumbents’strategicresponses.Thesefourinstitutionalchangeprocessesarenotsynchronizedwhichhasledtodifferent timeframesin thepresentationof theresults. For instance, strategic responses to change pres-surestowardscopycontrolstartedin1997whenUMandBMGintentionallyignoredthemp3technology.Howeverfigures2,3and4startin1999becausewedidn’tobserveanystrategicresponsesrelatedtodistribution,promotionorformat practices during the previous years. On the actor-level,theresultsdemonstratethecomplexityandtheevolu-tionofincumbents’strategicresponsesovertime.

First,weobservedawiderangeofstrategicresponsesthat have been used simultaneously by the majors. ThisresultisfardifferentfromLawrenceandSuddaby’s(2006)researchon institutionalworkwhich suggests a homoge-neousperspectiveonagency.On thecontrary, themajorsadoptedconcomitantlydifferenttypesofstrategicresponsestothreatsonasingleinstitutionalizedpractice.Thisobser-vationcanbeinterpretedasapoorstrategicvisionfromthemajors thatwerefacingahigh levelofuncertainty in themusicfield.Howeveradoptingamorequalitativelookatthedata,werealizedthatthetypeofresponsesdependsonboththenatureofthealternativepracticeandthesourceofinsti-tutionalpressureswhichisconsistentwithOliver’s(1991)perspective.For instance in2003,UMandBMGchoseacompromisestrategyregardingApple’salternativedistribu-tion practice by licensing their entire catalogue and evenaccepting the$.99pricingpolicy.At the same time, theyfiledalawsuitagainsttwoofthemostimportantP2Pprovi-ders,KazaaandGrokster,whichalsointroducedalternative

distributionpractices.Notonlydidthemajorstrytoprotectformerpracticesbuttheyalsoparticipatedintheselectionprocess of new alternative practices.The majors selectedthealternativedistributionpracticefromAppleconsideringitslegitimacyinthecomputerfieldbutalsotheopportunitytocapturerevenuesparticipatinginItunes’businessmodel.

Second,themajors’responsesappearedtobemoreandmorepassivethroughouttheprocessofinstitutionalchange.During the first years, they adopted mostly manipulationanddefystrategiestowardsnewentrantsandexperimentalpractices.Butwhilenewpracticesspreadandgainedlegiti-macywithinthefield,weidentifiedmoreandmorepassivestrategicresponses(avoid, compromise,andevenacquiescestrategies)bytheendoftheprocess.

AnALysis At the fieLd-LeveL, focusing on the diffeRent stAges of institutionAL chAnge

At thefield level, institutional changeaffecting the tradi-tionalpracticesweare studyingcanbeobserved throughthescopeofGreenwoodandal.’s(2002)framework(Table5).Weconsiderthefourinstitutionalizedpracticesasinde-pendent processes that result from common precipitatingjolts. Precipitating jolts were both technological, i.e. theInternetorthemp3technology,aswellassocialwithariseinP2Pusersandanincreasingdemandforunlimitedaccesstoentertainmentgoods.Althoughtheyresultfromthesameprecipitating jolts, theprocessesarenot synchronousandtheydidnotallreachthesamestageofinstitutionalchangeattheendofourstudyin2006.

FIGURE 5

Strategic Responses to Change Pressure toward Copy Control

Co-evolution between Stages of Institutionalization and Agency: The Case of the Music Industry’s Business Model 49

Greenwoodandal.(2002)describethedeinstitutiona-lizationstageas“theentryofnewplayers,theascendanceofexistingactors,orlocalentrepreneurship.Theireffectistodisturbthesociallyconstructedfield-levelconsensusbyintroducingnewideasandthusthepossibilityofchange”(p.60).Duringthisstage,newentrantsdevelopalternativepracticesinspiredbynewtechnologiesthatareavailableinthefield.Sometimestheyevenpurposelyworkforchangeinordertoseekadominantposition.Thedeinstitutionaliza-tionstageinthemusicindustryislinkedtotwoevents,theincreasingnumberofillegitimateP2Pnetworksthatattractmoreandmoreusersandtheadoptionofthemp3formatthatprogressivelybecame thestandard formusicfilesonthe Internet. During the blooming of the Internet, custo-mers,newentrantsandsomeartistsperceivedtheopportu-nitytobenefitfromalternativepracticesandquestionedthetraditionalonesaswellasthecentralpositionofthemajors.

Astraditionalpracticesarebeingquestioned,thelegi-timizationofnewpracticesandthebuildingofnewinstitu-tionsaremoreproblematic.Increativeindustry,legitimacyis mostly related to copyright concerns (Lampel and al.,2008).Becauselabelsownedtheintellectualpropertyrightsof music creation (Dubosson-Torbay and al., 2004), newentrantsstruggledtogainlegitimacyandalternativeorgani-zationofthevaluechaindidnotspread.Alternativeswereeitherillegalintermsofcopyrightinfringementwhichledto legal actions (P2P networks) or concerned exclusivelyindependentmusiccatalogues(E-music,Airtist,Jamendo)whichrepresentedasmallproportionofthemarketintermsof revenues. Consequently, distribution and promotionalternativepracticesdidnotreachthepreinstitutionalizationstage,however traditionalpracticeskeptbeing frequentlychallengeduntil2006.Recently,YoutubeandDailymotionintroduced creative promotion and distribution practicesbased on video sharing and interactive contents but theyalsofacedcopyrightissues.

Regarding the two other processes, we observed thatalternative practices related to the value proposition rea-ched further stages of institutionalization. During thedeinstitutionalizationstage,thealternativeformatandcopycontrolpractices (mp3 format andunlimitedoffers)weremostly initiatedbyP2Pnetworks.Later legitimate actorslikeYahoo,MusicNoworJamendodevelopednewvaluepropositionsbasedonthesealternativepracticesleadingtoanewparadigminthewaymusicwouldbesoldandconsu-med(Tschmuck,2006).Thediffusionofthisnewparadigmdemonstrates the preinstitutionalization stage of change.Bytheendofourobservations,themajorsdevelopednewoffersbasedonthesealternativepracticesbyslowlygivinguptheuseofDRMtechnologiesforspecificoffersandalsoexperimentingunlimitedad-supportedoffers.Incumbents’interestinalternativepracticesshowsthebeginningofthetheorizationstagethatstartedinthelastcoupleyearsofourempiricalstudy.Theinstitutionalizationofthesetwoprac-ticesrelatedtothemusicofferdidnotendin2006.In2008,the majors even accepted to generalize DRM-free offersonmaindistributionplatforms(Itunes,FnacMusic,VirginMusic).Inthemeanwhile,theyalsopartneredwithseveralfirmsfromthetelecommunicationfield(Vodaphone,NeufTelecom),thebankingfield(SociétéGénérale)orthephonemanufacturersfield(Nokia)todevelopjointoffersbasedonunlimitedaccess.

Discussion

Observing the process of institutional change that tookplace in themusicfieldover the lastdecadehelpedus tobetter understand the relationship between actors andchange. Through a multi-level approach, we emphasizedthe interactionsbetween the individual and the collectivelevel.WeillustratedhowUMandBMG,twotraditionalandcentralactorsinthemusicbusiness,activelyparticipatedto

TAblE 5

The Four Processes of Institutional Change in the Music Field between 1998 and 2006.

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

P1

Pre

cipi

tati

ng j

olts

Mp3.comNapsterEmusic

Bleep Jamendo

P2 Mp3.com MySpace Youtube

P3 Mp3.comNapster

Emusic Stream-waves

MusicNowNapster2.0

YahooUnlimited

Buzzmusic

P4Emergenceofthemp3technology

MPAssocMp3.comMpman

BleepNeoMusicStore

JamendoBuzzmusicSpiralFrog

Deinstitutionalization Preinstitutionalization Theorization

50 Management international / International Management / Gestión Internacional, 14 (4)

institutionalchangeinordertopreservetheircentralposi-tioninthefieldandthetraditionalbusinessmodel.Giventhecharacteristicsoftheresearchsettingandofthemethodimplemented,wethinkthatourfindingsmaygiveinsighttounderstandinstitutionalchangeinotherfields,particularlywheretechnologychangemayaffectconsumerspractices,forexampleinmostculturalfieldsaswellasininformationrelatedindustriessuchascomputer,softwareorpharmaceu-ticalindustriesinwhichnewtechnologieshavecreatedtheemergenceofnewpractices,creatingcontroversiesamongactorswithineachfield.Theoutcomesofthisresearchleadto a better understanding of the interactions between theincumbents’actiononthefieldlevel,agency,andtheove-rallinstitutionalchangeprocessatthefieldlevel,coercive pressures(Figure6).

Agency

Whereas neo-institutionalism traditionally underestimatesthe role of actors within institutional phenomenon or, onthecontrary,overlyfocusesontheinfluenceofinstitutionalentrepreneursthatareworkinginfavourofchange,wehavehighlighted that agency can be more complex. The firstcontributionhelpstobetterunderstandtheimpactofincum-bents’actionontheinstitutionalcontextandtheevolutionof institutionalchangeat thefield level.Thisargument isindeedconsistentwithrecentcontributionsthatreintroduceagency in neo-institutional approaches by using concepts

suchasinstitutionalwork(LawrenceandSuddaby,2006).Beyondtheconceptofinstitutionalentrepreneur,weenrichthe understanding of agency by identifying three diffe-rentwaysactorscan interferewith institutionalprocessesdepending on their position towards institutions: alterna-tive practicesselection, alternative practices modification andprocess duration.

Alternative practices selection. Facing institutionalchange,incumbentsadapttheirstrategicresponsesdepen-ding on the alternative practices’ perceived opportunitiesand their legitimacy.Theuseofheterogeneous responsesinterferes with the selection process between competitivealternative practices. For instance, the majors respondednegatively toNapsterbyengaginglawsuitsor toE-musicbynotgivingthemtheauthorizationtodistributetheircata-logue but at the same time the majors signed a distribu-tionagreementwithApple.Incumbentsfacinginstitutionalchangeareneithertotallypassiveneithertotallystubborntochange.Theyseemtorationallymeasurethepossibleout-comesofeachalternativepracticeandthendevelopappro-priatestrategicresponses.

Alternative practices modification. Not only did themajors seem to choose between the different alternativepracticesbuttheyalsomodifiedthecontentofnewpracti-ces.WhenYoutubelaunchedanewvideostreamingserviceonline,customersenjoyedthepossibilitytosharemusicalcontentbutalsotocreativelyinteractwithit.Basedonweb

FIGURE 6

Co-evolution between Agency and Institutional Change.

Incumbent’saction

Institutional change process

- Stategic adjustment

- Traditional practices modification

- Benefiting from alternative practices through legitimization

- Alternative practices selection

- Alternative practices modification

- Duration of the change process

Actor’s level

Field’s level

2.1.

Co-evolution between Stages of Institutionalization and Agency: The Case of the Music Industry’s Business Model 51

2.0 possibilities, they could easily modify the contents.FacingagreatinterestfromcustomersUMperceivedthisasanopportunity topromote theirmusicalcatalogueanddecidedtoco-optwithYoutube.Butthispartnershipinvol-vedapracticemodificationwhileUniversalbroadcasteditscatalogueonYoutube;privateuserswerenolongerallowedtointeractwithit.Thealternativepracticeofpromotionisnowaboutbroadcastingandnolongeraboutcreativity.

Process duration.Dynamicbetweenincumbents’actionandentrepreneurs’institutionalworkhinderedthestabiliza-tionofthefieldandincreasedthelengthoftheprocessofchange. Considering previous innovative disruptions, liketheintroductionofthegramophone,theradio,themagne-ticrecordingtechnologiesortheCD,thesedisruptionsdidnotchallengethecentralpositionofthemajorsinthefield.Indeednewpracticesreplacedformerpracticesinasmoothandrapidchangeprocess.Thecontemporarychangepro-cesswestudiedisalotdifferent;becauseincumbentshavedevelopedactivestrategiesinordertopreserveformerprac-tices,thefieldremainsunstableandalternativepracticestodistributionandpromotionhavenotyetbeeninstitutiona-lizedtenyearsaftertheintroductionofmp3,mp3.comandthefirstCDburner.

coeRcive pRessuRes

Duringtheperiodofinstitutionalchange,somenewentrantsand the alternative practices they defended gained legiti-macy (Apple’s Itunes, E-Music) while others disappea-red (Napster,mp3.com).The evolving set of institutionalpressuresalsohadanimpactontheincumbents’strategicbehaviour; we observed three different ways it impactedthe incumbents’ responses: strategic adjustment, traditio-nal practices modification andlegitimization.

Strategic adjustment. For instance, the progressivepacification of the majors’ responses along the institutio-nal process demonstrates coercive pressures at the fieldlevel.Regardingthevaluepropositionchangeprocess,newpracticesgainedsubstantial legitimacyespecially throughahighrateofadoptionfromconsumersandfirmsevolvinginadjacentfields like thecomputer industryorelectronicdevices industry. Indeed, the majors adopted passive res-ponses towards changeby slowly acceptingnewways tolook at the music business. Initiatives like Buzzmusic,the partnership with Spiralfrog or the later renunciationof DRM technologies in 2008, demonstrate a strategicadjustmentfromincumbentsfacinganewparadigminthemusic field. In order to present the co-evolution betweenagencyandinstitutionalchange,Oliver’s(1991) typologyandGreenwoodandal.’s(2002)frameworkhavebeenusedjointly(Table6).

Traditional practices modification. Beyondthestrategicadjustment,incumbentsalsoreconsideredthecontentoftra-ditionalpracticeswhilefacinganewinstitutionalcontext.For instance, the majors tried to increase the customers’

willingness-to-payforthephysicalsupportbyaddingvideobonus(liveperformance,interviews,videos)orprivilegedaccesstointernetcontent.Thisresponseisparticularlyinte-restingbecausethemajorsperceivedadecreaseinthevalueperceptionofthetraditionalvalueproposition.

LegitimizationThestalemateofthechangeprocessandtheselectionofalternativepracticesoffersopportunityforincumbentstopositionthemselvesinthenewinstitutionalcontext.Because themajorsowned thepropertyrightsofmusiccontents (Lampelandal.,2008), theywereable tonegotiateandreachseveralagreementswithnewentrantsthatdevelopedsuccessfulalternativepractices.Theseagree-mentswithcopyrightholdershelpednewentrantstogainlegitimacy while sharing revenues with incumbents. Forexample,theagreementthatUMreachedwithMicrosoftinordertoreceive$1fromeachmusicplayersoldillustratesthewaynewentrants“buy”legitimacy.Similaragreementshavesincebeensettledwithstart-upcompanies(Youtube),phone manufacturers (Nokia), Internet providers (NeufTelecom)orevenbanks(SociétéGénérale).

Thedeep turbulences thatoccurred in themusicfieldover the lastdecade illustrate the interwoven relationshipbetweenincumbents’actionsandtheevolutionofthechangeprocess,andemphasizethedynamicofthefield.Unlikethetraditionalinterpretationofthe“ironcage”fromDiMaggioandPowell(1983)thatillustratesthecoercivepressureofinstitutionsandtheisomorphicmechanismswhichobstructactorsfromalternativebehaviours,ourresultsdemonstratethatactorsperceivealternativepracticessincetheearlysta-gesofinstitutionalchange.Thiscontributionalsoquestionsmorerecentneo-institutionalresearchfocusingonagency.Wecontend thatnewapproaches introducing theconceptof the institutional entrepreneur, that tend to emphasizethe“heroic”figureofthechallenger,orinstitutionalwork,thatoffersarigidtypology,suggestsimplifiedrepresenta-tionofagencyinwhichactorshaveaspecificroleandusehomogeneous responses in favour or against institutionalprocesses.Ourresearchsuggeststhattheunderstandingofagencyismoresubtlebyconsideringthedifferentstrategicresponsestowardsinstitutionalchange.

This dynamic representation of institutional changeshowsthelimitsofstaticapproachsuchasthetypologyofOliver(1991)orGreenwoodandal.(2002)whichmayfailtofullydepicttherichmechanismsofinstitutionalprocess.Byoverlyfocusingontheactorleveloronthecontraryonthe field level, these approaches suggest a linear and yetstereotyped perspective of both agency and institutionalchangethatremainpermanentlyconnectedandinterdepen-dent.Agencyisgreatlyregulatedbytheoverallinstitutionalcontext that evolves over time; also deinstitutionalisationand re-institutionalisation stages rely on the actions ofmanyindividuals.Theseactionsarenotonlyinfavouroragainstchange;theyalsocontributetotheconstructionofnewinstitutionsthroughacomplexsocialprocess.Inother

52 Management international / International Management / Gestión Internacional, 14 (4)

words, research on institutional change requires a clearunderstandingofinstitutions.

This paper raises also a methodological debate.Stereotypedrepresentationofagencyduringtheinstitutio-nalchangeprocessmaybedirectlyrelatedtomethodologi-calchoices.Mostresearchoninstitutionalchangestudiesan empirical field retrospectively which we believe leadsto bias. Indeed, researchers observe and interpret proces-ses thatoccurred in thepastandofwhich theyknow theoutcome.Webelievethatdependingontheachievementornot of the institutional processes, strategic responses canbe interpreteddifferentlywhich leads tosimplifiedrepre-sentationofagencyandateleologicalanalysisofactions.Unlikemost research,wechosean in situ observationoftheinstitutionalchangeprocessinthemusicindustry.Thusbytheendoftheempiricalworkanddataanalysisperiod,theinstitutionalchangeprocessisnotyetcompletewhichdoesnotallowustotakeintoconsiderationtheoutcomesandtheinstitutionalcontextthatresultsfromchange.Thismethodological approach has its own limits especially tostudyinstitutionsthat takeplaceandarecharacterizedbytheir persistenceover a longperiodof time.However, insituobservationsappeartoberelevanttobetterunderstandinstitutionalprocessandagencyinordertodisconnecttheprocess from the institutional context that result from it.Indeed,webelievethatfurtherresearchonthistopicshouldfocusoncontemporaryphenomenon.

Because of the methodological characteristic that wejust mentioned, the following stages of the institutionalchange process, diffusion and re-institutionalization havenot yet been reached in the specific case of the musicfield but they could be the focus of further research inupcoming years. In order to pursue this work and give atransversal understanding of the process in a multi-levelperspective,observationsofthemusicfieldandinstitutio-nalchangemaybepursueduntilthefieldreachesstability.Upcoming research should not only focus on the majors

butalsoincludeheterogeneousactorsthatperceiveinstitu-tionsdifferently.Forexample,thestrategicresponsesfromchallengerssuchasAmazon,AppleorYahootowardsinsti-tutionalchangewouldbringinterestinginsightsonthewayinstitutions are socially constructed or deconstructed.Wecouldalsoconsiderorganizations thatare involved in thepreservationoftraditionalinstitutionsbutwithothermoti-vations (for instance, organizations in charge of propertyrightsregimeswithinthemusicfield).Takingintoaccountdifferent typesof actors and theirworkon institutions inadynamicperspectivewouldenrichtheoverallunderstan-dingoftheprocessofinstitutionalchangeandthefactorsthattriggereachofitsstages.

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TAblE 6

UM and bMG’s Strategic Responses during the Stages of Institutional Change

Deinstitutionalization Preinstitutionalization Theorization

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Manipulate 31 27 10 15 0 0

Defy 75 65 45 68 18 56

Avoid 6 5 4 6 0 0

Compromise 4 3 4 6 13 41

Acquiesce 0 0 3 5 1 3

Total 116 100 66 100 32 100

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