Organizational responses to transparency determinants

Abstract

Purpose

Despite considerable evidence of the benefits of organizational transparency, policies to enhance transparency often fail or are met with resistance and unexpected results. In part, this is due to a lack of knowledge about the drivers of organizational transparency and their interrelationships. This study examines the interplay among the forces that influence organizational transparency, and thus answers numerous calls for developing a deeper theoretical understanding of the determinants of organizational transparency. We propose three forces that influence organizational transparency and theorize how they combine in nonlinear ways to form five archetypical transparency regimes that organizations operate within. We then discuss contingencies to organizational transparency within each regime.

Design/methodology/approach

We employ configurational theorizing to capture the complexity of transparency and the nonlinear relationships among the forces of transparency.

Findings

We propose three forces that influence organizational transparency: institutional, societal, and leadership. We identify configurations of the three forces that yield five archetypical transparency regimes. We then discuss contingencies for cultivating organizational transparency within each regime. Vanguard transparency and pioneering transparency represent the desired regimes for fostering organizational transparency. In contrast, hollow transparency and deceptive transparency reveal a combination of determinants that cultivate less desirable forms of organizational transparency. Paradoxical transparency represents a regime in which socially desirable outcomes are associated with undesirable consequences for an organization.

Research limitations/implications

This paper is among the first to theorize the drivers of organizational transparency and to discuss the limits and boundaries of organizational responses to transparency determinants.

Practical implications

Despite the many benefits of transparency, we explain why efforts to enhance organizational transparency often fail or are met with mixed results. By considering the three forces, managers and policymakers can avoid unexpected and undesired organizational responses to transparency regimes.

Social implications

We propose five transparency regimes that place a spotlight on social contingencies to enhance transparency.

Originality/value

This study offers an integrative theory of organizational responses to transparency determinants and develops its theoretical foundations. The model integrates the fragmented empirical findings from previous studies on the determinants of transparency and draws attention to overlooked institutional, societal, and leadership forces that influence organizational transparency.

Citation

Král, P. and Schnackenberg, A. (2024), "Organizational responses to transparency determinants", Management Decision, Vol. 62 No. 13, pp. 309-331. https://doi.org/10.1108/MD-07-2023-1244

1. Introduction

Organizational transparency brings positive societal benefits, such as the prevention of corruption and fraud (e.g. Biggerstaff et al., 2015; Halter et al., 2009; van Zyl and Claeyé, 2019), and a reduction in workplace inequality (Castilla, 2015; Dobbin et al., 2015). Managers are assured that organizational transparency will help build trust with stakeholders (Auger, 2014; Rawlins, 2008; Schnackenberg and Tomlinson, 2016), increase investor confidence (La Rosa et al., 2019; Sapienza and Korsgaard, 1996), and reduce the cost of capital (Hoffmann and Kleimeier, 2021; Lemma et al., 2019). Thus, a strong belief in the value of transparency is a key principle of good governance (Aguilera and Cuervo-Cazurra, 2009; Bushman et al., 2004), one that is incorporated as part of many firms’ strategic communications (Albu and Flyverbom, 2019) and core management practices (Khanchel et al., 2023; Parris et al., 2016). The body of literature discussing organizational transparency has multiplied over the past 2 decades, and growing concern surrounding transparency has made it “one of the great themes in management theory today” (Bernstein, 2017, p. 228).

However, transparency is one of the most challenging governance principles facing organizations. Many organizational transparency efforts fail, and policymakers often encounter resistance from managers confronted with public initiatives to enhance transparency. Managers often hide information, or worse—they pretend to be transparent by warping, orchestrating, or faking information (Crilly et al., 2012, 2016; Heimstädt and Dobusch, 2018). In such cases, neither society nor organizations benefit from the positive outcomes of transparency. Efforts to enhance transparency may even have paradoxical (Albu and Flyverbom, 2019; Bernstein, 2012) or potentially negative (Mironov, 2015) consequences for the organization and its stakeholders.

Currently, a compelling explanation of why organizations fail to achieve positive benefits from transparency does not exist. Extant research has focused on the construct of transparency (e.g. its dimensions, characteristics, boundaries, etc.) and its outcomes (e.g. effects on trust, change management, etc.), but the literature has neglected to theorize the drivers of transparency (Schnackenberg et al., 2024). In absence of theory, studies have empirically examined several antecedents of organizational transparency (e.g. García-Sánchez et al., 2022; Gerged, 2021; Pucheta-Martínez et al., 2016). Though noteworthy, these empirical advancements have yet to be integrated to examine their interdependencies. Thus, they do little to inform policymakers and managers on their combined effects that influence organizational transparency.

This study argues that research on the production of organizational transparency suffers from three inadequate assumptions. First, most studies treat transparency as a unidimensional construct often proxied by information disclosure. However, transparency is a multi-dimensional phenomenon with three distinct dimensions: information disclosure, clarity, and accuracy (Schnackenberg and Tomlinson, 2016; Schnackenberg et al., 2021). These dimensions are formed distinctively and therefore respond uniquely to different drivers of transparency, rendering multiple paths to organizational transparency. Second, research on the antecedents of transparency is fragmented and disjointed, spanning multiple levels of analysis, each viewing their respective constructs as the most important determinants of organizational transparency. Third, most studies have assumed a correlational view of the drivers of transparency; they have focused on the net effects of individual determinants, assuming independent, additive, and symmetrical causality. However, transparency is a complex phenomenon (Albu and Flyverbom, 2019; Bernstein, 2017; Schnackenberg and Tomlinson, 2016), and its determinants interact in nuanced ways that include substitutional effects and asymmetric relationships, which suggest a different approach to theorizing offered by a configurational approach (Fiss, 2007, 2011; Furnari et al., 2021).

This study answers the following research question: What are the core forces that influence organizational transparency and how do they combine to enable and constrain organizational transparency? This study distills the literature to reveal three forces—institutional, societal, and leadership—that drive organizational transparency. Thus, we answer calls for the development of theory that better explains the drivers of organizational transparency across levels of analysis (Albu and Flyverbom, 2019; Baraibar-Diez et al., 2017; Heimstädt and Dobusch, 2018; Schnackenberg and Tomlinson, 2016; Villena and Dhanorkar, 2020). We then develop a configurational model to theorize five archetypical transparency regimes that organizations operate within. We discuss organizational responses within each regime, highlighting the limits and boundaries of enhancing organizational transparency within each. We employ a configurational approach to leverage its capacity for explaining complex organizational phenomena and integrating different constructs with nonlinear relationships (Cornelissen, 2017; Doty and Glick, 1994; Furnari et al., 2021).

The remainder of this paper is organized as follows. First, we analyze the assumptions underlying research on the determinants of transparency and explain several notable inconsistent findings in previous studies. Second, we explain why a configurational approach provides a more robust theoretical understanding of the determinants of transparency. Third, we integrate the literature examining the drivers of transparency into three overarching forces that influence organizational transparency. Fourth, we examine the interactions among the three forces to develop a model of five archetypical transparency regimes. We then discuss the contingencies associated with organizational responses within each regime. Finally, we discuss the theoretical and practical contributions of the proposed model.

2. Challenges in studying the determinants of transparency

2.1 Conceptualization vs measurement of transparency

The concept of organizational transparency is in the theoretical development stage and is undergoing a “definitional expansion” (Bernstein, 2017, p. 228) as studies have continued to uncover the complexity of transparency. Early studies on organizational transparency often evaluated transparency based solely on disclosure scores (e.g. Kundid and Rogosic, 2012; Tremblay-Boire and Prakash, 2015; Zainon et al., 2014). However, scholars have since recognized that increased information disclosure does not necessarily increase transparency (Schnackenberg and Tomlinson, 2016). Organizations react differently to forces that demand higher availability and accessibility of information. Some organizations disclose information that is precise and understandable to their stakeholders. Other organizations disclose information, but this information is obfuscated with small print or legalese (i.e. decoupling; Boxenbaum and Jonsson, 2017; Heimstädt, 2017). Still other firms falsify information or invent information from scratch. Collectively, these contingencies imply that transparency is a complicated phenomenon that presents organizations with a “higher bar” of communication than mere disclosure.

Without embracing a more nuanced definition of transparency, we leave open the possibility that nontransparent organizations can pass as transparent. For instance, Madoff Investment Securities disclosed plenty of information to its investors that inaccurately represented the firm’s financial performance. If transparency is defined as disclosure alone, then Madoff Investment Securities was a transparent organization that simultaneously engaged in financial obfuscation, falsification, and fraud. In the most rigorous conceptual development of organizational transparency so far, Schnackenberg and Tomlinson (2016) summarized existing definitions and defined organizational transparency to include three dimensions: information disclosure, clarity, and accuracy. Studying the effects of the drivers of organizational transparency on all three of these dimensions is important to capture how firms can manipulate information in ways that might satisfy some, but not all, dimensions of transparency.

2.2 The level of analysis in assessments of transparency determinants

Research on the drivers of transparency is fragmented and disjointed, spanning multiple levels of analysis, each viewing their respective constructs as the most important catalysts of organizational transparency. As transparency emerged as a principle of good governance, many studies focused on analyzing determinants using the lens of agency (Arsov and Bucevska, 2017; Pucheta-Martínez et al., 2016), stakeholders (Tremblay-Boire and Prakash, 2015), or resource dependence (e.g. Nie et al., 2016; Zainon et al., 2014) theories. These studies emphasize incentives and external pressures leading to organizational transparency. Other studies have examined individual and group level determinants such as leadership style (Schnackenberg et al., 2024) and leadership team characteristics (García-Sánchez et al., 2022). Such studies highlight the influence of the leader’s authenticity and orientation towards openness as drivers of organizational transparency (Lacey, 2023).

Focusing on only one of these levels of transparency in isolation may be deceptive for three reasons. First, general organizational characteristics produce an administrative capacity for transparency. Each degree of transparency incurs transactional and informational costs (Aguilera et al., 2008). Larger firms have more financial and human resources to simultaneously overcome efficiency challenges and stakeholder pressures (Jeong and Kim, 2019), whereas smaller organizations lack extra staff to complete the additional work connected with offering higher transparency (Ljubownikow and Crotty, 2014). This principle explains the prevailing positive effect of organizational size on transparency (e.g. Arsov and Bucevska, 2017; Fernandes et al., 2019; Nie et al., 2016) and the prevailing insignificant effect of financial performance on transparency (e.g. Arsov and Bucevska, 2017; Fernandes et al., 2019; Lemma et al., 2019). Focusing on a single level, such as social calls for transparency, is insufficient to explain the production of organizational transparency because it neglects other levels, such as the organization’s capacity for transparency.

Second, underlying theories are sometimes based on competing mechanisms, which apply to many organizational and individual level characteristics. For example, various aspects of organizational composition can have a positive effect owing to the presence of greater expertise (García-Sánchez et al., 2022) and better control (Gerged, 2021), a negative effect owing to increased inertia (Fasan and Mio, 2017), or no significant effect (Gerwanski et al., 2019; Král and Cuskelly, 2018). Leadership might prefer openness and specificity to enhance transparency or strategic opacity along one or more of the three dimensions of transparency (Vicente-Lorente, 2001). Similar to administrative capacity, these characteristics build or hinder the organization’s capacity for transparency. However, the relationships among forces for building the organization’s capacity for transparency are not linear or symmetric. Capacity is a problem only when it is absent, and its presence does not necessarily imply greater transparency.

Third, the drivers of transparency might be explained more convincingly by institutional requirements. For example, institutional factors might explain the competing effects of organizational indebtedness and government subsidies better than organizational or individual factors. The explanatory value lies in the requirements of the loans or subsidy providers, which are institutional in nature. Some providers in developing economies have their own non-public reporting, independent of the level of transparency, which explains insignificant (Sanzo-Pérez et al., 2017; Tremblay-Boire and Prakash, 2015) or negative (Král and Cuskelly, 2018; Nie et al., 2016) effects on transparency; whereas, others require higher levels of transparency as a condition for the loan or the subsidy (Zainon et al., 2014). Thus the legal requirements (and not the fact of debts) influence transparency.

2.3 The relationships among the determinants of transparency

Implicit in most studies of transparency is the assumption that the drivers of organizational transparency are independent, additive, and causally symmetrical; that is, the various antecedents have mutually independent additive effects on transparency. However, this approach does not reflect the equifinal paths that often result in organizational transparency or nontransparency. Some drivers have different effects on transparency depending on their conjunction with other drivers, which deny mutual independence of the factor. Other drivers have a substitution effect, and one combination of factors can have the same effect as another one. For example, organizational transparency might result from strong institutional controls or leader authenticity, and the combined effect might look qualitatively different than the presence or absence of either factor. Recent conceptual studies have recognized the complexity of transparency and highlighted the importance of studying its drivers from a multilevel perspective. They have suggested the development of “transparency across levels of analysis” (Schnackenberg and Tomlinson, 2016, p. 1804), suggested greater “design at multiple levels of analysis” (Bernstein, 2017, p. 246), and questioned how “these interact to make organizations’ transparency performative” (Albu and Flyverbom, 2019, p. 287). Thus, care must be taken to assess the connections among different determinants and their interrelationships.

3. The configurational perspective on the determinants of transparency

The previously identified problems suggest employing a configurational approach to better theorize the drivers of transparency. First, the complexity of transparency generates numerous interconnected determinants. Configurational theorizing enables the capture of higher complexity than traditional bivariate or correlational theorizing and incorporates multiple levels (Doty and Glick, 1994, p. 232). The principle of conjunction in configurational theorizing, or the notion that the effect of a single condition unfolds in combination with other conditions, enables theory to explain the complex ways that an outcome emerges (Furnari et al., 2021). This perspective embraces the principle of equifinality, or the idea that many paths exist to an outcome (Fiss, 2011). We use equifinality to explain the substitutional effect of lower-level determinants in creating the overarching forces.

Second, to add explanation to causal complexity, configurational theorizing features core and peripheral elements—or causal factors—so that several peripheral elements surrounding a core element can be interchangeable and equally effective (Fiss, 2007, 2011; Furnari et al., 2021). As we describe in the sections that follow, the overarching forces of transparency constitute core elements, while lower-level determinants within each force present peripheral elements due to their substitutional effects. Configurational theorizing also enables us to examine heterogeneity in organizational responses (Grandori and Furnari, 2013). Various combinations of peripheral elements, such as specific leadership styles, can lead to the same overarching force, but at the same time, different configurations of overarching forces lead to a variety of outcomes of organizational transparency.

Third, the causality of the determinants is not always symmetric. An example elaborated in the previous section pointed out that organizational capacity determines (low) transparency only when it is absent, but other determinants combine to drive organizational transparency when it is present. Moreover, some configurations result from the interplay between two determinants, while a third determinant does not affect the outcome. Such a loose relationship between the determinants of transparency is another typical distinction that enables configurational theorizing (Busenbark et al., 2016). Therefore, this study focuses on the configurations of different determinants, which are elaborated in the next section.

4. Institutional, societal, and leadership forces of transparency

We recognize three forces based on prior studies examining the drivers of organizational transparency. We characterize the determinants of transparency as forces in recognition that lower-level determinants, such as different leadership styles or different levels of organizational resources within leadership forces, combine to generate an overarching force that is not individually deterministic of organizational transparency. Although specific operationalizations of these forces are present in the extant empirical literature, they have yet to be integrated to form an overarching theoretical set. Instead, researchers have elected to study certain drivers in isolation. Upon describing each force, we theorize the interplay among them.

The literature indicates that organizational transparency is influenced by various external and internal factors (Albu and Flyverbom, 2019; Bernstein, 2017; ElGammal et al., 2018). We distinguish external factors by splitting them into the first two forces: institutional forces and societal forces. The logic for separating external factors into two separate forces lies in the distinctions between formal and informal institutions (Casson et al., 2010; Holmes et al., 2013; Minbaeva et al., 2023). Institutional forces stem mostly from formal institutions, such as rules and laws, which can be directly observed, and their compliance can be enforced by responsible institutions (Morris et al., 2023; North, 1991). Organizations can predict the consequences of compliance or non-compliance of these institutions. Societal forces are generated by less formal institutions. Societal forces are usually unwritten and enforced outside of officially sanctioned channels. They cannot be observed directly, but they can be observed heuristically based on stakeholders’ reactions and consequences of organizational actions (Minbaeva et al., 2023; Morris et al., 2023). Societal forces may provide various constraints (North, 1991) and increase the variance in organizational responses to social conventions (Minbaeva et al., 2023; Morris et al., 2023).

The third force comes from internal organizational factors. Empirical studies have shown that compliance with governance practices and transparency depends heavily on organizational leaders (Aguilera et al., 2018; Parris et al., 2016). For example, information decoupling, a form of distorted transparency, is the interplay between individual interpretations and contextual factors within the organization (Boxenbaum and Jonsson, 2017; Crilly et al., 2012). Recent developments in institutionalism (Dobbin et al., 2015; Durand et al., 2019) have recommended considering micro-levels of analysis and organizational agency. The individual-level determinants are rooted in research on the CEO effect (Busenbark et al., 2016), which has posited that leaders manage organizations through the lens of their individual attributes, including their experiences and values. Thus, internal organizational orientations towards transparency are integrated into leadership forces.

As previously mentioned, interactions among various qualities within each force aggregate to produce the overarching force. For example, leadership forces might include aspects of the CEO’s orientation towards transparency and corporate governance constraints, such as CEO compensation, that incentivizes some forms of transparency but not others. These qualities seldom impact the force linearly; substitutional effects are possible within each force. Such substitutional effects are typical features exerted on corporations to motivate them to behave in desired ways (Zajac and Westphal, 1994). For example, multiple formal and informal qualities, such as government policy changes and stakeholder pressures, can be exerted on the organization from different sources simultaneously. In this case, the forces produced are not cumulatively determined. Instead, the organization reacts according to the combination of forces it confronts.

4.1 Institutional forces

Institutional forces characterize the drivers of transparency stemming from formal institutions and are defined as the extent of information sharing that is explicitly required from organizations. Applying the lens of formal institutions, the following section presents the key pressures determining organizational transparency. The presence of institutional forces means the existence of formal rules promoting transparency, and the absence of institutional forces means that no formal rules require transparency.

Legal systems and regulation. Regulatory authorities can influence organizations to exhibit certain desirable behaviors. Their legal power defines regulative organizational governance practices and can affect firms’ compliance or non-compliance (Aguilera et al., 2018). A legal system is the most general concept that can predict an average level of organizational transparency. Existing evidence indicates that common law countries have the highest levels of transparency, while civil law countries have weaker levels of transparency (e.g. Bushman et al., 2004). Transparency requires a foundation in existing democratic structures and the rule of law (Castro and Ansari, 2017).

Laws influence transparency through the requirements for complementary disclosure and reporting (Pevzner et al., 2015), complementary third-party audits (La Rosa et al., 2019; Pucheta-Martínez et al., 2016; Zainon et al., 2014), or rules for investor protection (Sapienza and Korsgaard, 1996). Regulatory or policy systems influence transparency directly through laws requiring transparent behavior and indirectly by providing resources to certain organizations, for example, by preferring a group of organizations that receives subsidies (Král and Cuskelly, 2018; Nie et al., 2016).

Transparency initiatives. Transparency initiatives are usually non-governmental institutions that promote transparency and accountability by building standards and developing explicit policies (Corrigan, 2014). They bring together governments, private sector and civil society organizations, and other formal institutions. They might support governmental activities, but they can also take over the role of governments and be a leading driver of transparency especially in countries whose governmental institutions are weak (Corrigan, 2014; Honig and Weaver, 2019). Organizations that become members of these initiatives commit to disclosing information along the standards as a trade-off for increasing their legitimacy and reputation, thus gaining higher credibility and trust. The process of membership usually requires validation and regular re-validation in order to meet the imposed standards. Transparency initiatives have proven to be effective in extractive industries (Corrigan, 2014), social and humanitarian activities (Honig and Weaver, 2019), or supporting the European Union administrative reforms (Cini, 2013).

Industry and competition. Some industries are more sensitive to transparency than others. Consequently, they yield different standards for transparency under the same conditions (Ringov and Zollo, 2007). Apart from the regulatory contexts in which organizations find themselves in, the differences in transparency vary for several reasons explained by industry and competition. First, formal incentives might exist for firms in controversial industries (e.g. environmentally damaging) when they use transparency to compensate for the harmful effects of their operations (Aqueveque et al., 2018). Second, some industries require organizations to perform certain practices that support transparency (Boxenbaum and Jonsson, 2017), which can produce a spillover effect within the field (Reid and Toffel, 2009). For example, organizations in Central and Eastern European countries generally fail to meet mandatory legal requirements (Arsov and Bucevska, 2017; Bushman et al., 2004), but the banking sector differs. Banks demonstrate high levels of transparency and disclosure due to special requirements found within the banking sector (Kundid and Rogosic, 2012). Finally, a high degree of industry competition, often stemming from formal antitrust laws, pressures organizations to protect intellectual property and conceal their operations for strategic reasons (van Zyl and Claeyé, 2019), undermining their transparency.

4.2 Societal forces

Societal forces include the drivers of transparency stemming from informal institutions and are defined broadly as pressures exerted on organizations based on social expectations for transparent organizational practices. Transparency is often treated as a panacea with many positive consequences for organizations. However, these positive outcomes often only surface in societies that reward transparency. Societies with active stakeholder engagement and deeply embedded expectations about appropriate levels of organizational transparency exert more force. Such societies demand high levels of transparency and reward organizations with greater trust and commitment. However, not all societies require transparent behavior. Some societies perceive transparency as a weakness, and organizations suffer from the negative consequences associated with the belief that transparency reveals implicit secrets (Anand and Rosen, 2008). In such contexts, if sharing information negatively affects the organization, such information is classified as an implicit secret. Hence, the presence of societal forces means that society rewards transparency and the absence of societal forces equates to social sanctioning of organizational transparency.

Whether organizational transparency is sanctioned depends largely on implicit social and cultural dynamics (Bernstein, 2017). Societal forces explain why formal rules and their monitoring are insufficient to bring about fundamental changes in less-developed countries (Price et al., 2011). The following section presents the key informal drivers underlying societal forces.

Stakeholder pressures. Organizations face pressure to conform to the expectations of multiple stakeholders, and transparency is used as a tool to obtain external legitimacy (Jeong and Kim, 2019) or to acquire resources from stakeholders (Král and Cuskelly, 2018; Sanzo-Pérez et al., 2017). Three activities may strengthen stakeholder pressures. First, corporate social responsibility, of which transparency is often seen as a positive attribute, attracts the attention of stakeholders (Fernandez-Feijoo et al., 2014; Khanchel et al., 2023). Absent sufficient organizational transparency, stakeholder pressure can materialize as product boycotts and other forms of collective action. Second, media coverage elicits varying levels of external pressure (Tremblay-Boire and Prakash, 2015) because it seeks clarification and discovery which often leads to higher levels of transparency (Garcia-Sanchez et al., 2014; Jeong and Kim, 2019). Third, investors frequently seek transparency around financial performance, with varying degrees of pressure for transparency around the core strategic activities of the firm. These pressures are not uniformly shared across geographical regions and economies, and organizations often face diverse and conflicting sets of pressures owing to power asymmetries among stakeholders (van Zyl and Claeyé, 2019).

Culture and values. Cultural factors can support or undermine organizational transparency because traditions drive people in complex ways that “help explain why things are as they are” (Haniffa and Cooke, 2002, p. 318). For example, Licht et al. (2005) challenged the alleged general supremacy of governance quality in common-law countries and demonstrated that culture is more important than laws for corporate governance. Some researchers have attempted to apply Hofstede’s cultural dimensions to explain the relationship between culture and transparency, finding that higher power distance (Bachmann et al., 2016; Ringov and Zollo, 2007), higher masculinity (Husted, 2002; Ringov and Zollo, 2007), and higher uncertainty avoidance (Bachmann et al., 2016) may negatively affect transparency. Husted (2002) argues that implementing transparency norms is particularly susceptible to the impact of culture.

While culture and values can support transparency, the opposite is also possible. Negative cultural phenomena, such as acceptance of corruption (Biggerstaff et al., 2015; Halter et al., 2009; Mironov, 2015) and clientelism (Erturan-Ogut and Sahin, 2014) have a negative effect on societal forces, and thus undermine transparency. Thus, specific cultural attributes and values combine to exert pressure on the organization in nonlinear ways, and these pressures are expressed via stakeholders to characterize the overarching influence on organizational transparency from societal forces.

4.3 Leadership forces

Leadership forces stem from leaders’ values and experiences. Although the individual determinants of organizational transparency are under-researched, the available literature suggests that organizational transparency depends on leadership attitudes and orientations (Busenbark et al., 2016; Georgakakis et al., 2022; Král and Kubišová, 2021). Building on this research, we define leadership forces as the extent of inclination of leaders toward cultivating transparency. We recognize that many internal organizational characteristics, such as HR policies related to pay transparency, the structuring of units and teams, and expectations regarding information flows, have a bearing on transparency. Since these characteristics are strongly influenced by organizational leadership, we consider them as internal dynamics that are highly influenced by leadership attitudes and orientations. The presence of leadership forces means that leaders are pro-transparency. The absence of leadership forces means that leaders are against transparency. Importantly, the presence and absence of leadership forces are qualitatively distinct. When leaders support transparency, they virtuously follow the rules. When they are against transparency, they search for ways to avoid the rules and contrive beneficial outcomes by using various tactics to distort, bias, or fabricate information.

In practice, many of the most widely recognized governance scandals stem from a lack of commitment to transparency by leadership. For example, Enron (Sims and Brinkmann, 2003) and more recently, Volkswagen “Dieselgate” (Jung and Sharon, 2019), have been linked to top leaders that cared little about transparency. In most of these high-profile scandals, seemingly good governance principles were usurped by the nefarious interests of key leaders. Similarly, managers’ boundedly rational evaluations limited them from revealing and sharing business secrets (Alexy et al., 2013). Although few empirical studies have investigated the determinants of organizational transparency by focusing on leaders’ ethical values and experiences (Brunner and Ostermaier, 2019; ElGammal et al., 2018), the literature on ethical and moral leadership provides a basis for theorizing these attributes as important underlying components of leadership forces.

Moral leadership. The growing demand for transparency poses moral and ethical challenges for many organizational leaders. Leaders with high moral values can establish ethical and transparent environments by mobilizing others to take actions that benefit their organizations and society (Solinger et al., 2020). Moral leadership embodies principles of authentic leadership, such as relational transparency and having a moral perspective (Walumbwa et al., 2008), or more general principles such as behavioral integrity (Simons, 2002). If a leader is known for their integrity, then integrity has a high likelihood of becoming a corporate norm (Biggerstaff et al., 2015). Consequently, moral leaders can generate positive and desirable outcomes, including organizational transparency.

Education and professional experience. To some extent, compliance with ethical principles is a function of education and experience (Halter et al., 2009). Prominent business schools have taught business ethics as a standalone course for decades, and corporate scandals after 2,000 have increased interest in the subject (Donaldson, 2003). More broadly, previous experiences shape leaders’ perceived value of transparency (Brandes and Darai, 2017). Leaders tend to repeat previous experiences towards transparency because they cannot envisage the consequences of adopting a different approach to transparency. Hence, the experience of working in transparent companies implies having experience with business ethics (Donaldson, 2003). Conversely, leaders with experience working in nontransparent organizations might be more prone to behaving in nontransparent ways (Král and Cuskelly, 2018).

Personality. Studies on transparency have largely neglected the role of personality traits. However, some indices show that personality affects an individual’s general openness. Honest leaders are generally more likely to share information (Ou et al., 2018); thus, a leader’s honesty enhances transparency against opacity of information or outright faking, or decoupling expressions from known facts. Alternatively, highly competitive leaders with inflated self-images are likely to accept higher risks (Chatterjee and Hambrick, 2007), which, in turn, can lead to seeking individual advantages via the hording or obfuscation of information and thus inhibit transparency (Taylor et al., 2015).

5. Transparency regimes

Organizational transparency does not result from a linear relationship between institutional, societal, and leadership forces. Instead, it results from complex patterns of different attributes underlying each force that may be combined in various ways to achieve different transparency regimes. This section further develops the three forces into a framework of five archetypical transparency regimes that organizations operate within. The five regimes are not exhaustive. Rather, they represent common configurations of the drivers of transparency that have an identifiable impact on organizational transparency. Understanding the congruence (fit) or incongruence (misfit) between the three forces helps explain how organizations respond within each regime. Table 1 depicts the five regimes using the conventional depiction of the configurational approach in two parts. The first part explains how the determining forces of transparency build the five transparency regimes. The second part describes the transparency profile based on the values of the dimensions of transparency (i.e. disclosure, accuracy, and clarity) for each transparency regime.

5.1 Hollow transparency

The congruent combination of the absence of institutional forces and leadership forces yields hollow transparency, wherein organizations collectively embrace opaqueness in terms of their structures and actions (Boxenbaum and Jonsson, 2017). Institutional and leadership forces are “congruent” because neither institutions nor leaders strive for transparency, and thus, both external and internal motivations for transparency are missing. Societal forces are immaterial when institutional and leadership forces are absent because the presence or absence of societal forces represents an opportunity cost that can be ignored with little consequence. Leaders are opposed to transparency as their selective attention allows them to see only the negative consequences of transparency. Furthermore, the absence of explicit requirements for transparency enables leaders to enact their negative attitudes towards transparency. The regime of hollow transparency reflects a performative situation in which transparency is simply a label without practical relevance. The absence of institutional forces and leadership forces leads to a deficiency in meaningful information disclosure because organizations face few requirements to share information and lack the internal volition to reveal material information. In such cases, the adequacy of information accuracy and clarity cannot be assessed, and therefore, these two dimensions of transparency are not relevant to organizations operating in the hollow transparency regime.

The key driving mechanism of hollow transparency is ignorance, which surfaces through three observable behavioral practices. The first practice is inertia. Leaders tend to replicate the patterns of their behavior (König et al., 2012), and in an environment lacking institutional and leadership forces, they lack the opportunity to foster transparency. The second practice is the reluctance to share any sort of material information because leaders’ historical experiences are based on secrecy rather than openness, rendering leaders insecure about the consequences of transparency (Christensen and Cornelissen, 2015; Král and Cuskelly, 2018). The third practice is a shortage of knowledge of the principles of good governance and good practices, which is typical of economies lacking institutional forces (Eddleston et al., 2020; Král and Cuskelly, 2018). Consequently, society suffers from the negative consequences of a low level of organizational transparency.

5.2 Deceptive transparency

The incongruence between the presence of institutional forces and the absence of leadership forces challenges the leaders’ preferences for secrecy, resulting in tension (Heimstädt, 2017). This tension makes leaders comply symbolically rather than substantially with transparency requirements without fully implementing the required practices, referred to as decoupling (Boxenbaum and Jonsson, 2017; Fiss and Zajac, 2006; Schnackenberg et al., 2019; Westphal and Zajac, 2001). The central premise of decoupling is that information availability itself does not create transparency, and extensive disclosure may obfuscate understanding (Crilly et al., 2012; Rawlins, 2008; Schnackenberg and Tomlinson, 2016). Institutional forces in favor of transparency are resisted by leadership forces in opposition to transparency, resulting in a distorted form of disclosure and manipulation characterized by organizational opacity (Christensen and Cornelissen, 2015).

Similar to hollow transparency, societal forces do not affect deceptive transparency as well because the presence or absence of societal forces is ignored due to the absence of leadership forces. However, unlike hollow transparency, the regime of deceptive transparency generates a great amount of information disclosure as leaders attempt to appear compliant with institutional demands. These disclosures are deceptive because the absence of leadership forces distorts clarity and accuracy. For instance, clarity might be decreased by employing unfamiliar acronyms and jargon or through the use of exceedingly long disclosures or small print so that otherwise accurate information is rendered unintelligible to its recipients (Heimstädt, 2017; Schnackenberg and Tomlinson, 2016). Accuracy might be reduced by manipulating, biasing, or distorting information to fit external expectations (Heimstädt, 2017). Consequently, disclosure is present, but clarity and accuracy are absent in the practices of organizations operating in a regime of deceptive transparency. On the surface, an organization gives the impression of complying with transparency regulations, but actual practices reveal a deep level of opacity and information distortion (Christensen and Cornelissen, 2015).

5.3 Paradoxical transparency

The incongruence between the absence of societal forces and the presence of leadership forces results in the paradoxical transparency regime. The term “paradoxical” is employed here because transparency often produces unintended negative consequences for organizations. The driving mechanism of this paradox is sanctioned secrets (Anand and Rosen, 2008). Sanctioned secrets encompass hidden organizational practices and information that, if clearly revealed to all stakeholders, would cause backlash and potential harm to the organization. For example, Mironov (2015) found that nontransparent firms with corrupt management significantly outperformed their ethical counterparts in Russia. Similarly, low transparency in Brazil has concealed an extensive network of companies involved in corruption and clientelism (Castro and Ansari, 2017). Implicit sanctions in such societies can be so severe that transparent organizations are blackmailed (Simonova and Rudenko, 2017) because blackmailers have accurate information that they can hold for ransom (Lazareva et al., 2009). Institutional forces are less relevant because corruption and clientelism are often accepted norms (Eddleston et al., 2020), and low levels of transparency help mask institutional dynamics. Thus, institutional forces cannot affect the consequences of revealing sanctioned secrets.

The paradoxical transparency regime generates both information disclosure and information accuracy. Organizations disclose information about their practices which is generally accurate to specific stakeholder groups. However, the overall clarity of the information is missing because the absence of societal forces prevents a clear assessment of whether revealing certain information is a sanctioned or unsanctioned secret. Organizations need to strategically consider how they curate and deliver information across stakeholder groups because revealing certain types of information is a double-edged sword. For example, revealing labor costs can lead to better performance (Shaw, 2015) and reduce workplace inequality (Castilla, 2015); however, it can also negatively affect employee cooperation (Bamberger and Belogolovsky, 2017). A similar situation is found with environmental transparency, where voluntary disclosure attracts attention to negative organizational impacts and may increase organizational capital prices (He et al., 2019). Thus, organizations operating in a paradoxical transparency regime frequently demonstrate disclosure and accuracy; however, the absence of shared expectations and frames for receiving the information across stakeholder groups impedes clarity.

5.4 Pioneering transparency

The presence of societal forces and leadership forces coupled with the absence of institutional forces characterizes a unique regime in which organizations are pioneering transparency. Here, organizations exercise discretionary transparency that represents “commitment beyond compliance” (Bernstein, 2017; Christensen and Cornelissen, 2015, p. 142). Despite the absence of formal institutional laws requiring transparency, societal forces enable organizations to benefit from the transparency of their leaders, as they are frequently rewarded for their openness. Organizations operating within the pioneering transparency regime set new directions and standards, may drive the market toward higher ethical norms and transparency, and inspire other leaders to do the same (Vaccaro and Madsen, 2009).

Organizations adopt practices that radically enhance disclosure and accuracy. The lack of institutional forces leaves ample room for disclosure discretion, enabling leaders to enact a level of disclosure that surpasses norms. Accuracy is seen as a moral imperative to leaders of organizations that are pioneering transparency. Clarity has varied levels, as organizations are placed in the difficult position of educating society by building stakeholders’ expectations and creating frames for sharing and interpreting information. Thus, unlike the paradoxical transparency regime, in which organizations are beholden to stakeholders with specific expectations and frames, the regime of pioneering transparency enables organizations to advance a unified set of expectations and frames as they form an emerging logic for clarity.

Organizations operating within pioneering transparency regime reap the positive benefits of information-sharing. These benefits may pertain to obtaining stakeholder trust (Schnackenberg et al., 2021) or a mechanism for effective collaboration in knowledge-intensive industries (Alexy et al., 2013). Leaders’ openness and integrity drive organizations to boldly take ownership of their performance. Open leaders are credible, truthful, and consistent (Rawlins, 2008). These behaviors match the expectations that stakeholders place on the organization via societal forces. Thus, organizations operating within the pioneering transparency regime can achieve desired results through transparency as they earn the trust of employees and stakeholders through transparency (Tomlinson and Schnackenberg, 2022).

5.5 Vanguard transparency

Vanguard transparency occurs when congruence exists between the presence of institutional, societal, and leadership forces. Transparency is an inherent aspect of organizations operating in the vanguard transparency regime since it is “interweaved with all organizational components and systems of the strategic management process” (Baraibar-Diez et al., 2017, p. 480). Vanguard transparency is part of corporate governance and finance, and it is a key principle for human resource management, marketing, strategy, and culture. Communication openness typically embalms all organizational levels as individuals strive to be receptive and responsive to the information others provide (Norman et al., 2010). The presence of societal forces enables positive effects such as building stakeholder trust, reducing workplace inequality, and limiting societal corruption.

Disclosure is enhanced via strong institutional guidelines and leadership interests aimed at sharing the most relevant information with stakeholders. Clarity is bolstered as opportunities for mutual understanding are enacted by organizations and stakeholders following strong guidelines established by government institutions and agencies, such as through corporate earnings calls to shareholders. Accuracy is elevated through standards found in laws and regulations as well as stakeholder expectations and leadership objectives.

Importantly, although disclosure, clarity, and accuracy are generally enhanced, vanguard transparency does not guarantee intersubjectivity and mutual accord. Organizations need to balance transparency and the individual need for privacy (Bernstein, 2012), while considering the costs of transparency in their competitive environments (Aguilera et al., 2008). Rather, the congruence among the three forces within vanguard transparency affords the greatest possible organizational and social benefits from transparency.

6. Discussion

The study expands current theoretical developments related to the construct of organizational transparency (Albu and Flyverbom, 2019; Bernstein, 2017; Schnackenberg and Tomlinson, 2016; Schnackenberg et al., 2021, 2024) by offering a novel perspective on how the dimensions of transparency are formed. Researchers have yet to propose a theory of the determinants of transparency, and this study is the first to provide a theoretical understanding of how transparency emerges. We argue that transparency is not formed by several independent individual determinants incrementally adding to overall transparency, but through a combination of processes founded on three core determinants: institutional forces, societal forces, and leadership forces. The three forces combine in nonlinear ways to form archetypical transparency regimes that organizations operate within. We propose five such regimes and discuss the nature and boundaries of organizational transparency within each.

6.1 Theoretical implications

This study responds to recent calls for the development of transparency across levels of analysis (Albu and Flyverbom, 2019; Baraibar-Diez et al., 2017; Heimstädt and Dobusch, 2018; Schnackenberg and Tomlinson, 2016). Notably, we contribute to transparency theory in three ways. First, the configurational approach helps overcome the challenges of the established views on the determinants of organizational transparency by embracing the causal complexity unfolding across levels of analysis. By adopting this approach, we are able to theorize transparency regimes that help us understand the effects of different determinants on all three dimensions of organizational transparency (Schnackenberg and Tomlinson, 2016; Schnackenberg et al., 2021). For instance, while institutional forces are sufficient to ensure disclosure, societal and leadership forces are important to foster clarity and accuracy, and thus mitigate the risks of symbolic noncompliance, decoupling, and paradoxical transparency. The study also integrates fragmented determinants across different levels of analysis and explains the interdependencies between separate antecedents. We argue that lower-level determinants within each force can have complementary or substitutional effects that are more peripheral, while the combinations of the overarching forces explain the complexity of responses to transparency determinants.

Second, our study attempts to explain why achieving transparency is so difficult for many organizations. The regimes help us understand why some organizations do not exploit the benefits of transparency, others remain intentionally opaque, and still others go beyond obligatory requirements in pursuit of transparency. By examining why organizations often fail to achieve transparency, we also contribute to the literature on decoupling (Boxenbaum and Jonsson, 2017; Fiss and Zajac, 2006; Schnackenberg et al., 2019; Westphal and Zajac, 2001) by identifying various ways that decoupling can occur. Boxenbaum and Jonsson (2017) suggest that decoupling is the interplay between individual interpretations and contextual factors. Deceptive transparency, as a form of decoupling, emerges when present institutional forces confront missing leadership forces.

Third, our study contributes to a variety of reference literature that hinge on organizational transparency, such as the literature on organizational deviance (Aguilera et al., 2018; Witt et al., 2022). Deceptive transparency is an example of a lack of conformity to institutional forces, and might accompany more sophisticated forms of organizational deviance than corporate misconduct occurring under other regimes. On the other hand, pioneering transparency and paradoxical transparency present over-conformity to institutional forces. Thus, the construct of leadership forces presents a new factor differentiating various degrees of organizational deviance. The three forces of transparency contribute to corporate deviance literature by explaining how multi-level determinants affect organizational deviance in a wider context (Aguilera et al., 2018; Durand et al., 2019).

6.2 Practical implications

Policymakers can use insights from our study to predict the effects of new laws by considering a wider swath of forces that influence different dimensions of transparency. The absence of such considerations leads to ineffective regulations that might have unintended consequences. Indeed, across many parts of the world we have seen a general inability of laws alone to fundamentally enhance organizational transparency. Our theory posits that focusing on institutional forces alone is insufficient to achieve transparency because of the risk of deceptive transparency or adverse outcomes through the paradoxical transparency. As regulations are enacted, societal forces must also be considered. Additionally, the pace of changing legal requirements should factor in social readiness (Castro and Ansari, 2017). The establishment of non-compulsory norms, codes, and education may influence societal forces.

Policymakers may also influence organizational transparency through the requirements imposed on leaders, although the effects of imposing such requirements are difficult to assess. For example, after several allegations of corruption across some of the most prominent international sport governing bodies, requirements on moral integrity were recommended as a part of their governance reform process (Pielke Jr, 2013). These attempts might facilitate education, resulting in stronger leadership forces. Finally, as overestimating the administrative capacity for transparency may hinder organizational responses to transparency interventions, policymakers should consider the period and amplitude of new requirements. Large organizations respond more slowly than small organizations; however, their reactions are more stable over time because of their greater administrative capacity (Miller et al., 2017). Hence, under normal circumstances, implementing a new requirement for transparency should be slow and gradual.

In addition to policymakers, organizations may benefit from applying this model to assess the consequences of different approaches to information sharing. Specifically, we see merit in considering different approaches to enacting transparency by considering the presence and absence of forces in the organization’s environment. Regarding leadership forces, organizations can use our model to predict whether transparency will yield pioneering or paradoxical outcomes depending on the presence or absence of other forces. Our model emphasizes that the outcomes are context-specific and relate to countries and industries. Similarly, the morality of CEOs affects organizational transparency; however, its overall effect on the organization may differ depending on other forces. Although appointing highly moral leaders may have positive organizational consequences under the presence of societal forces, the effects may be paradoxical when societal forces are absent.

6.3 Boundaries and limitations

The configurational approach enables embracing the inherent tensions between complexity and simplicity (Furnari et al., 2021). The five regimes are based on combinations of the three overarching forces, which are distinctive and independent. However, in the long term, the incongruence between any dyad of the overarching forces produces instability. For example, the incongruence between the presence of institutional forces and the absence of leadership forces yields deceptive transparency but also invokes instability. Over time, it is possible that strong institutional forces may generate leadership forces, which implies that the forces themselves might be interrelated. For example, codes of good governance have improved governance practices in many countries where they were issued (Aguilera and Cuervo-Cazurra, 2009), including emerging countries (Tilcsik, 2010). The codes spread knowledge about transparency and remove uncertainty about the outcomes of being more transparent, which is crucial for leaders to form positive attitudes towards transparency (Král and Cuskelly, 2018). Strong institutional forces might also generate pressure for additional degrees of ethics education. Studies have indicated that ethics can be taught, and ethical training (e.g. teaching business ethics at universities) positively impacts ethical decision-making in the long term (Parks-Leduc et al., 2021).

The opposite effect is also possible, as the absence of leadership forces may negatively impact institutional forces. Powerful leaders might emerge as political leaders and use various means to set higher or lower standards for transparency via new laws and regulations. In this case, powerful leaders might influence the nature and extent of information to be disclosed in a particular business sector or industry to aid them in concealing information they are unwilling to share in their own organizations (Christensen and Cornelissen, 2015). Given that influential leaders may use their power to impose laws that restrict competitors (and vice versa), we see the temporality of change as a boundary condition of the configurations we present, as our framework is cross-sectional in nature. However, we also see an opportunity for future research to examine the pace of change in regimes and how they influence organizational transparency over time.

6.4 Future research

Beyond these boundary conditions, we see numerous opportunities for future research. First, individual-level determinants may affect organizational transparency more than researchers and practitioners acknowledge. Empirically testing the influence of leaders’ characteristics on transparency provides promising avenues for future research. Second, empirical studies of the transparency determinants use regression models as variance-based approaches. However, this study identified that the configurational approach is more appropriate for studying determinants, and using it in future empirical studies would be ideal for empirically verifying the proposed theoretical model or future propositions. Third, Western countries with well-developed corporate governance dominate research on transparency, so the research is biased toward more transparent countries (Morris et al., 2023). In future studies, overcoming the challenges of data unavailability in nontransparent countries could yield in-depth knowledge about deceptive, paradoxical, and pioneering transparency regimes. Finally, new streams of research on transparency-sensitive subjects such as pay, environmental, and social transparency could utilize our framework for developing a unifying theory of transparency.

Table 1

Typology of transparency regimes: their determining forces and the dimensions of transparency