Institutional Arbitrage: How Actors Exploit Institutional Difference

Abstract

In this paper, we explore how actors benefit from bringing together incompatible institutional logics – an activity we call institutional arbitrage – and discuss why they do so despite the challenges it creates. We develop a taxonomy of four basic tactics of institutional arbitrage that are rooted in differences between logics in terms of resource valuation, purpose, practices and legitimacy. These tactics enable actors to create benefits by engaging with actors from fields adhering to different logics or integrating practices from other fields. We also discuss some of the factors that enable actors to deploy these tactics in particular institutional settings. We conclude with a discussion of some of the potential consequences of institutional arbitrage for actors, organizations and the broader organizational field within which arbitrage occurs.

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