Voluntary adoption of International Financial Reporting Standards by large unlisted companies in Portugal – Institutional logics and strategic responses Marta Silva Guerreiro a,⇑ , Lúcia Lima Rodrigues b , Russell Craig c a Superior School of Technology and Management, Polytechnic Institute of Viana do Castelo, Avenida do Atlântico, 4900-348 Viana do Castelo, Portugal b School of Economics and Management, University of Minho, Gualtar, 4709 Braga Codex, Portugal c School of Accounting & Finance, Victoria University, P.O. Box 14428, Melbourne Vic 8001, Australia abstract Common explanations for the voluntary adoption of International Financial Reporting Standards (IFRS) have been based on economic efficiency arguments. This paper introduces new theoretical arguments to explain how institutional pressures influence decisions to adopt IFRS voluntarily. Through recourse to an institutional theory context, we combine the analytical framework proposed by Oliver (1991) with the concept of institutional log- ics, and apply this framework to the financial accounting field for the first time. This com- bined model shows how multiple forms of rationality constrain company responses to pressures to adopt a new accounting regime. We find that companies in a code law country are willing to change from a code-law institutional logic to a common-law institutional logic if they consider such a change will have positive overall benefits to them. Companies assess the net benefits of change after considering the legitimacy they achieve with IFRS, the consistency of IFRS with their goals and institutional context, and the loss of autonomy they believe they are likely to sustain from adopting IFRS. Contrary to predictions in earlier formulations of institutional theory, we find that the acquiescence of companies in adopting IFRS is not a blind response to institutional demands, but is largely predictable by virtue of the inherent nature and importance of such institutional pressures to them. Prevailing institutional logics are shown to provide important insights to the decisions of companies to adopt IFRS voluntar- ily. We draw on our results to contend that a company’s acquiescence to institutional pres- sures to adopt IFRS occurs notwithstanding that they can also contemplate more active strategies (through decoupling). Ó 2012 Elsevier Ltd. All rights reserved. Introduction Globalization of financial and commercial operations has provided strong incentives for the adoption of Interna- tional Financial Reporting Standards (IFRS) throughout the world. Empirically, the principal motives for adopting IFRS have been explained in terms of a quest for economic effi- ciency. Here we investigate whether broader motives have been influential too. Our argument is consistent with a more encompassing view that to survive ‘‘[o]rganizations need to achieve not only technical, operational efficiency but also social legitimacy’’ (Abernethy & Chua, 1996, p. 571). To accommodate this broader view, we use an insti- tutional perspective to examine the voluntary adoption of IFRS by companies. We contend that institutional theory can render useful insights in analysis of decisions by com- 0361-3682/$ - see front matter Ó 2012 Elsevier Ltd. All rights reserved. http://dx.doi.org/10.1016/j.aos.2012.05.003 ⇑ Corresponding author. Tel.: +351 933202410; fax: +351 258827636. E-mail addresses: mguerreiro@estg.ipvc.pt (M.S. Guerreiro), lrodrigues@ eeg.uminho.pt (L.L. Rodrigues), Russell.Craig@vu.edu.au (R. Craig). Accounting, Organizations and Society 37 (2012) 482–499 Contents lists available at SciVerse ScienceDirect Accounting, Organizations and Society journal homepage: www.elsevier.com/locate/aos