Why do Firms Adopt Popular Management Strategies?

Introduction

Lean production was implemented in a single factory in a single country in the 1950s. It originated in Toyota’s Japanese factories in the 1950s and, as of 2026, is used by car manufacturers in Germany, hospitals in the UK, tech firms in Silicon Valley, and garment factories in Bangladesh. How did one management idea that started in such a small area spread to some of the largest manufacturing businesses in the world? Why is it that one management principle has spread so universally? A possible explanation for this is that the evidence of productivity and profit gains was proving this management technique right. However, it could also be because firms may have adopted the management technique due to competitive and institutional pressures, making it the default choice regardless of evidence proving the technique effective or not. Therefore, if adoption of this technique is evidence-based, then markets are working efficiently, and resources are being allocated correctly to maximise efficient production. On the other hand, if it is mimetic, firms may be wasting resources on practices that do not suit them. This essay will cover whether firms do indeed adopt popular management practices like lean production because evidence shows they work or they adopt popular management practices simply because everyone else is doing it.

What is lean production?

Lean is the concept of efficient manufacturing/operations that grew out of the Toyota Production System in the 1950’s. It is based on the philosophy of defining value from the customer’s viewpoint and continually improving the way in which value is delivered, by eliminating every use of resources that is wasteful or does not contribute to the value goal. It is the keystone for preserving value with less work; with the number one goal of giving the customer the best value through an absolute value creation process that has no waste. This gets done by permitting every discrete worker to achieve his or her full capability and so make the optimal greatest possible contribution.

Let’s break this down. Lean production is a mix of principles all in one, working together as a system. This includes: Ohno’s principle of waste elimination, Kaizen (continuous improvement), respect for workers, stability, Jidoka, and just-in-time inventory. Taiichi Ohno’s starting point was a single goal: eliminate waste. He identified seven types of waste in the production process: overproduction, waiting, conveyance, processing, excess inventory, unnecessary motion, correction. There are pillars in lean which are essentially designed to tackle each one or more of these wastes. Stability is the keystone because without reliable processes, equipment and supply chains, nothing above it functions consistently. Workers remain key to this foundation, which is why Ohno believed respect for workers is key, as without respect, workers become passive executors rather than active problem solvers. Sitting on stability are three operational principles. Heijunka evens out production quantity and variety, so demand is smooth. Standardised work confirms every task is performed the same way every time. Kaizen ensures workers at each level are always looking for small advances to eliminate waste. Together, these three allow the two pillars to stand. The Just-in-time pillar operates the flow of production. Continuous flow keeps work moving without interruption, which matches up to consumer demand. The pull system ensures nothing is made until it is needed downstream. Pull production is a mechanism inside Just-in-time. The Jidoka pillar controls quality. When any abnormality is detected, the equipment stops immediately, preventing defective products from being produced. This allows for a single worker to visually monitor and efficiently control many machines. Both pillars are necessary. Together, they hold up the roof (the goal of lean production), which is “highest quality, lowest cost, shortest lead time.”

How did Lean production spread around the world?

A book by Womack, Jones & Roos ("The Machine That Changed The World," 1990) made it possible to express Toyota's model in terms understandable to Western managers. First, the American Henry Ford applied the widely accepted idea of mass production to his business activities in America. Mass production was associated with the high volume of manufacturing of standardised products at affordable prices; this contributed to America's prosperity. By the late 70s and 80s, however, this method of production lost its effectiveness.

The expensive nature of capital, the lack of investment in research and development and the demotivated and inexperienced labour contributed significantly to this. The book coined the term “lean production”,describing this as the coming together of new relationships within and without the organisation, as well as a new outlook towards observing the workforce, customers and the natural environment, as well as a new understanding of technology.

“Compared to mass production, lean production means making products cheaper, faster, with less labour, better quality, more variety, and less effect on employee health and the natural environment.”

Lean was embraced by the automobile industry in the Western world in the 1980s and 1990s due to stiff competition from Japan.

In addition to that, management consultancy firms made it global by selling it to other organisations. Management consultancy firms such as McKinsey and Deloitte converted Toyota’s lean practice into a model and sold it to many firms. Management consultancy firms became the profession-based channel for spreading the practice of lean, so much so that it became the standard recommendation irrespective of the situation. Apart from this, business schools also institutionalised the practice.

What popular management practices do firms commonly adopt?

There are many popular management practices that firms adopt to maximise their productivity. Some of these practices aren’t always necessarily with the aim of customer satisfaction, but instead may be focused on other aims, for example, a lower cost of production.

One of these management practices is Scientific Management, developed by Fredrick Winslow Taylor. The core idea of it was that there is an “optimal”/”best” way to perform a task. The fundamental elements of scientific management are standardisation, exact knowledge, functionalization, incentive and selected personnel. For example, if a worker takes 15 minutes to complete assembling something, a superior will study that intricate process and find a way to reduce it, allowing for an improvement. Although this theory was developed in 1910, Taylor’s framework remains relevant, where it has evolved into modern systems like lean manufacturing and Six Sigma, as pure “Taylorism” in its original form is rarely practised today. Yet its building blocks have become so embedded in everyday management. Scientific Management gave organisations ways to analyse workplace productivity and encouraged the theme of systematic organisational design. These are now treated as common knowledge, highlighting how people have adopted Taylorism.

A more recent management theory that has been put into mass practice by firms all over the world due to the high rate of technological advancements is Agile Management. This is described as an iterative approach that breaks large complex projects into small, manageable increments. This is to allow for more flexible and adaptable project changes, which could allow teams to yield outputs specific to customer demands even if circumstances change. This was developed by software engineers who saw the ever-changing evolution of technology. Work is done in short, fixed cycles called sprints. Work is practised by value; the most important things get built first. The planning is continuous and flexible, so you don’t try to plan everything upfront; you adapt as you go. Last of all, teams are self-managing, with usually 5 to 7 people who decide themselves whether they can complete the sprint.

Abrahamson's (1996) fashion management theory provides a vital critique of how and why certain practices, such as Scientific Management and Agile, were able to diffuse so quickly. According to Abrahamson, the diffusion of certain practices is driven more by the creation of compelling rhetoric by fashion setters such as consultancies and business schools than by firms having carefully assessed their effectiveness. For instance, the diffusion of Taylorism in the early 20th century was aided by its scientific rhetoric, legitimising its adoption even if it did not result in any productivity gains. Furthermore, the expansion of the use of Agile beyond software companies to other industries such as education and healthcare shows that there is more to the success of the practice than its proven record; rather, the rhetoric around its adaptability and flexibility appears to carry much more weight in driving adoption. This can be considered a case of mimetic isomorphism as suggested by DiMaggio and Powell (1983).

For – Firms adopt Management practices because evidence shows they work

Firms adopt popular management practices like lean production because rational calculation and competitive pressure make it the logical choice The rational choice theory is the idea that individuals and organisations make decisions by choosing the option that provides them with greater benefit/utility relative to the costs that burden them. In relation to the topic at hand, the idea is that firms will adopt practices that raise productivity and drop those that do not. Product market competition is the degree to which firms selling similar goods or services in a market remain rivalrous. The more firms compete to attract customers, the stronger the product market competition.

Therefore, if lean production reduces wastes, builds better relationships with labourers, maximises effectiveness of the manufacturing process and cuts costs, a rational and logical firm will apply these tactics to enhance their production. There isn’t any logical firm that will look at such an effective method and feel as though they shouldn’t (according to the rational choice theory). Lean manufacturing has proven to give companies advantages like improved quality, increased agility, improved customer service, engaged employees and positive environmental impacts. All these factors are keystone for improve productivity in a firm, leading them to yield greater profits. Furthermore, greater product market competition reinforces this. Firms must survive the competitive market that they produce their goods in, so to rise to the top rather than being eliminated, they may adopt lean production as it has proven to be the most effective and “best” form of production.

Nicholas Bloom from Stanford University and John Van Reenen from the LSE explored why some firms and some countries have way better management than others. In their research, Bloom and Van Reenen found that a big part of the answer to this mystery is just management quality. To examine this, they surveyed over 4,000 firms across 17 countries (as a double-blind test which means the managers being interviewed didn’t know they were being scored). This meant they asked more open questions and scored the answers. Their goal was to measure real adaption patterns of management practices, test whether adoption is rational or “fashion-driven,” and test whether management ideas behave like “fashions” all while reducing bias by making the test double blind.

Their findings were pivotal relative to this argument. They realised better managed firms are more productive, larger, grow faster and survive longer. This directly shows that management practices that are effective and that work well get adopted and deliver results. It supports the rational choice theory as good management practices means better management performance, so firms adopt them to become better themselves. This is rational and efficiency driven. Another one of the results that was yielded from their research was that more product market competition raised the average management quality. This, again, supports the rational choice logic. Competition forces firms to adopt the best practices as they want to be the best in the market for the good/service that they provide. If they do not take on the best management practice that they can, they fail toremain competitive and are forced to exit the market. Every firm’s objective is to not end up in that way. Thirdly, Van Reenen and Bloom discovered that multinational companies (MNC’s) are well managed almost everywhere. Multinational firms tend to have higher quality management practices and that is the standard across all the countries they operate in, not just their home country. They found these MNC’s deliberately adopt good practices across different contexts. They don’t just do what local firms do, instead they actively choose management practices based on performance evidence. Therefore, this illustrates that multinationals have better ability to evaluate evidence and identify which management systems improve performance. They adopt these practices in different countries, and this improves efficiency and productivity, rather than following “fashionable management” trends. An example of this (that was also discovered in their research) is that American firms specialise in incentives, but Swedish firms specialise in monitoring. This conveys how firms are not blindly copying each other but are adapting systems to what works for their context.

Jay Barney introduced the Resource-Based View of the firm, establishing that competitive advantage comes from internal resources that are valuable, rare, inimitable and non-substitutable. Barney argues that firms do not just change their system to lean production because it works, they do it because effective management practices improve internal capabilities. Therefore, firms are likely to adopt popular management practices when they are effective, as it strengthens their resource base and improves long-run competitiveness, which is good for the firm ultimately because it means they won’t struggle and need to exit the market anytime soon. This supports the view that diffusion of management practices is driven by rational evaluation of effectiveness rather than pure fashion effects.

The evidence that good management practices raise firm performance is robust, but whether firms actually adopt them due to that sole evidence is a separate and more complicated question.

Against- Firms adopt because everyone else is doing it

Di Maggio and Powel’s (1983), research on institutional isomorphism gives convincing evidence that most (if not all) firms collectively follow “fashionable” management practices. The core idea argues that organisations in the same industry become increasingly similar over time, not because it is always efficient but because of social and institutional pressures. This is institutional isomorphism. Isomorphism highlights that firms become “similar” in some sort of way to look more “legitimate” or “modern.” There are three types of pressures/mechanisms that firms may face that may cause them to all become increasingly similar.

The first one of these is Coercive Isomorphism. This is where Governments and regulators set out rules and standards that firms must have. In most cases, firms that do not follow these regulations or find loopholes around them are seen as less acceptable than others which can severely affect their performance in the market, regardless of their management technique. There’s a “you must do this,” pressure. In terms of lean production, this means that some firms may adopt lean production because the output from their adoption complies with any regulations the Government has set, not because they evaluated it and saw it as effective.

The second pressure firms may face is mimetic isomorphism. This is when firms are unsure what to do, so they imitate successful firms as they see their plan as optimal, often ignoring other variables. It occurs due to uncertainty of the best strategy specific for them, fear of failure and a lack of enterprise/innovation. For example, a struggling retailer may copy Amazon-style logistics because they see them as successful. They think, “If it works for them, it might work for us.” When Toyota became the most successful car manufacturer in the world (by selling volume), competitors copied its system under uncertainty. They had assumed Toyota knew something they did not and most firms didn’t understand what lean was and whether it suited their context.

Normative isomorphism (the third pressure) is the mechanism that explains lean's spread beyond manufacturing entirely. MBA programmes at leading business schools began teaching lean principles as management orthodoxy. Consulting firms packaged Toyota's system into frameworks they could sell to clients across every sector. The result was a professional class of managers who arrived at hospitals, law firms, universities, and technology companies with lean tools already in their toolkit — not because they had evaluated the evidence for lean in those specific contexts, but because they had been trained to regard it as best practice. The NHS in the United Kingdom adopted lean principles to reduce waiting times and eliminate process waste. Universities have applied lean to administrative functions. These are institutions with fundamentally different structures, incentives, and outputs to a car factory. Rational adoption theory struggles to explain why a methodology designed around physical production flows would be transferred wholesale into knowledge-intensive service environments. Isomorphism explains it straightforwardly: the professional norms of management had already determined that lean was the answer before the question of whether it suited the context was seriously asked.

This point connects naturally to the economic theory of information cascades, developed by Bikhchandani, Hirsh Leifer and Welch (1992). Their argument is that under conditions of uncertainty, it can be individually rational for a firm to discard its own private information and simply follow what most other firms are doing. If enough competitors have adopted lean, the aggregate signal of that adoption may appear to outweigh whatever reservations a firm's internal analysis produces. Each individual adoption decision can be perfectly rational in isolation but yet, collectively the outcome is herding that has no robust evidential foundation. The important insight here is that information cascades and institutional isomorphism produce identical observable outcomes. In both cases you see rapid, widespread adoption. The mechanism is different, one is economic, one is sociological and neither requires the practice to actually work in the adopting firm's specific context.

The most revealing evidence against the rational adoption thesis, however, comes not from DiMaggio and Powell but from Bloom and Van Reenen themselves. The same paper used in Section 3 to support rational adoption contains findings that sit uncomfortably with that argument when examined carefully.

Bloom and Van Reenen find that badly managed firms persist for extended periods even in competitive markets. If competition reliably eliminated poor management in the way rational choice theory predicts, you would not observe this. The market is not selecting as efficiently or as quickly as the model assumes, which implies that the pressure to adopt evidence-based practices is weaker in practice than in theory.

Family-owned firms that appoint a family member, particularly the eldest son, as CEO are on average very poorly managed. This is not a fringe finding; it holds consistently across countries and industries in the data. Crucially, the evidence that this ownership and succession pattern produces worse outcomes is not hidden (it is available to the same firms making these decisions). What overrides it is not a lack of information but social norms, institutional tradition, and the internal politics of family governance. Rational adoption would predict that evidence of underperformance would trigger change. The data shows it frequently does not.

Government-owned firms are systematically the worst managed in Bloom and Van Reenen's dataset, despite having access to the same body of management research as private firms. The explanation is not informational, it is structural. Ownership determines the incentive environment, and the incentive environment determines whether evidence is acted upon. This is precisely the argument that institutional theory makes: the organisational context shapes behaviour more powerfully than the evidence available to decision-makers within it.

Finally, and perhaps most tellingly, Bloom and Van Reenen find that multinationals tend to transplant their home country management practices into their foreign operations regardless of local context. American multinationals in Sweden manage differently to Swedish multinationals in the United States (not because the evidence supports different approaches in each case, but because each firm replicates what it knows from home). This is mimetic isomorphism operating at the level of the multinational corporation: practices spreading through organisational inheritance rather than contextual evaluation.

Bateman and Rich (2003) add a further empirical challenge to the rational adoption case. Their research on lean implementation finds that a significant proportion of lean programmes do not deliver sustained improvements, firms adopt the visible structures and terminology of lean without genuinely embedding the underlying principles. If adoption were driven by rigorous evidence evaluation, you would expect firms to either implement lean properly or not adopt it at all. The prevalence of superficial adoption is more consistent with a fashion dynamic, where the imperative to be seen adopting the practice matters more than the quality of implementation.

Taken together, the against argument is formidable. Institutional isomorphism provides the sociological mechanism through which practices spread beyond their evidential base. Information cascades provide the economic logic through which individually rational firms produce collectively irrational herding. And Bloom and Van Reenen's own data provides the empirical evidence that rational adoption, however compelling in theory, cannot account for the persistence of poor management, the dominance of ownership effects, or the context-blind diffusion of practices across institutional boundaries. The rational adoption model is not wrong;it captures part of what is happening. But it is incomplete, and the gap between what it predicts and what the data shows is precisely where isomorphism and fashion dynamics operate.

Conclusion

Ultimately, firms adopt popular management practices like lean production because of both evidence and imitation, but the balance between these two reasons is more complex than either perspective suggests. The evidence from Bloom and Van Reenen shows that well-managed firms are generally more productive, grow faster and survive longer, providing strong support for the rational view that firms adopt practices because they improve performance. Competitive pressures also encourage firms to seek management methods that reduce costs, improve quality and strengthen long-term competitiveness.

However, this explanation is incomplete. The work of DiMaggio and Powell, Abrahamson and Bikhchandani et al. shows that management practices often spread through institutional pressures, professional norms and information cascades rather than real evaluation of whether they suit a firm's specific circumstances. The widespread adoption of lean manufacturing, alongside evidence of ingenuine implementation and the persistence of poorly managed organisations, suggests that firms imitate successful competitors a lot to gain credibility or reduce uncertainty rather than because the evidence has been independently assessed.

Therefore, the most convincing conclusion is that firms rarely adopt management practices for a single reason. Initial success and credible evidence are often necessary for a practice such as lean production to emerge, but once it becomes recognised as the accepted standard, imitation and institutional pressures become increasingly important drivers of diffusion. In other words, evidence explains why a management practice gains credibility, while trends and popularity explain why it becomes used on a widespread metric. As a result, firms don’t simply adopt lean because it works, nor simply because everyone else is doing it, but because these two forces reinforce one another throughout the diffusion process.

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