In their own words: how hospitals present corporate restructuring in their annual reports

Hospitals operate in an environment with strong institutional pressures, in which legitimacy is critical to an organization's access to resources. In such an environment, organizations can increase their legitimacy by engaging in activities or discussing them in a manner that signals that the organization adheres to values held by its costituents. One important symbol of organizational actions or intentions is the formal organizational structure. When hospitals began to adopt a corporate structure in the early eighties, the way in which they presented this decision to the public was as important as the technical merits of the decision itself. This study investigates, through an analysis of annual reports, what hospitals signaled about their adoption of a corporate structure. The findings suggest that through restructuring, hospitals signaled that they were in line with practices advocated in the industry and literature (e.g., adhering to business values, protection of assets, or increasing patient services). By presenting multiple reasons for restructuring, hospitals could signal their attention to the needs of various constituents, and by touching only briefly on each reason, they could ignore the potential conflict between demands such as lower hospital cost and increased services. The findings also suggest that the first hospitals to adopt a corporate structure sought to educate constituents about restructuring by devoting a greater share of their annual report to the topic than later adopters and by enumerating a larger number of anticipated benefits from the structure, which would have enhanced the innovation's legitimacy in the early years.