Caveat emptor: The construction of nonprofit consumer watchdog organizations
Rao's article is an in-depth, historical case-study of the creation of non-profit consumer watchdog organizations in the United States. It is framed as an inductive story about the creation of new organizational forms and a rich description of the role that institutional entrepreneurs play in the creation of new organizations. The question of new organizations remains a core question for organization theory and it is one that had been largely unanswered.
Previous theories included a random variation perspective which, building on Nelson and Winter (1982), suggests a biological inspired model of new forms arising through search-based modifications to existing routines. Also included is a constrained variation perspective which suggests that the environment fosters certain types of variation and which might be more connected to Schumpeter's concept of creative destruction and much of the innovation literature that built upon it. Finally, Rao suggests that there is a cultural frame institutional perspective that suggest that actors will creates new forms when they have sufficient resources to do so and the creation of a form is a way to realize an outcome they hold highly. This final model resembles social movements but, Rao argues, is under-explored and under-theorized.
Connecting to the social movements literature, Rao attempts to use a history of consumer watchdog organizations as a means of exploring the third theory. The paper makes strong connections to the literature on framing (e.g., Benford and Snow (2000)) and focuses particular on the role of multiple competing frames, conflict over legitimacy of a frame (both with the state, and against alternative and competitive frames). The paper is also framed in terms of boundaries of forms and about questions about what a new type of form should or should not include.
Most of Rao's paper is a detailed history of two organizations: Consumers' Research and Consumers Union. Rao shows that standard setting organizations existed but that they did not serve the same role as nonprofit consumer watchdog organizations (CWOs). In particular, changing advertising patterns, a lack of product liability opened the door to impartial consumer testing organizations and agencies.
However, a union drive at Consumers' Research (the first CWO) led to a schism within the organization along labor lines and the creation of a new organization (Consumers Union) which offered a radical change frame associated much more closely with left-wing politics and unions. The radical frame helped insure impartiality but cause some conflict with the CR organization. Over time, CU moved away from its labor connections and eventually rebranded itself as Consumer Reports. According to Rao, "the price of viability for the organization was abstinence from advocacy." In a sense, CR won the framing struggle over what a CWO should be in that CU essentially adopted its form even though it was not the organization that survived.
Rao argues that his case studies connects to the literature on institutionalization in particular. He argues that his story is one about firm boundaries but that bypasses transaction cost based accounts to focus on institutional pressures associated with adopting particular boundaries.