Institutional change in real-time: The development of employee stock options for German venture capital

We propose studying institutional change and the role of organizations behind it in real-time as the process unfolds and midstream without knowing the success or failure of the project.Our approach is in contrast to most analyses of institutional change that rely on retrospective accounts of successful institutionalization projects. This past methodology runs the risk of `sampling on the dependent variable,' limiting knowledge of the institutional change process to a narrow slice of successful cases. The context for this new approach to institutional change is the development of ‘American-style’ employee stock options (ESOPs) in German venture capital contracts from 1997 to 2000. We examine the attempts of ‘institutional entrepreneurs’ (German law firms) to alter the existing institutional environment to implement American-style ESOPs for their clients (venture capital firms and entrepreneurs). In contrast to past research on institutional change, our analysis reveals a more complex picture of the process of competition and collective action in leading to change. Our approach highlights the conflicting motives of organizational actors as they battle for and against institutional change.