This article examines how social identity links institutional pressures and audit quality. Combining institutional theory and social identity theory, we theoretically argue that the interaction between social and institutional forces shapes audit quality. Through an analysis of Chinese audit firms from 2000 to 2007, we show that isomorphic imitation has a more significant effect on firms belonging to the same-identity group than firms across cross-identity groups; foreign-affiliated audit firms are more willing to conform to normative pressure from professional networks than local firms; and foreign-affiliated firms are coerced to adapt to the local government’s expectation, particularly when they have a geographically concentrated customer base. We further reveal that a larger customer base attenuates within-identity group imitation but strengthens cross-identity group imitation. The results shed light on the role of social identity in shaping conformity in the audit industry, thus contributing to international convergence–divergence literature and institutional theory.
International convergence of structures, processes, and practices has been suggested by a small but increasing stream of literature in the field of management, such as human resource management (HRM) (e.g., Rowley, Benson, & Warner, 2004; Zhu & Warner, 2000), business ethics and corporate governance (e.g., Brandau, Endenich, Trapp, & Hoffjan, 2013; Davis & Greve, 1997; Long & Driscoll, 2008), internationalization (e.g., Brown, 2011; Davis, Desai, & Francis, 2000), and marketing (e.g., Brouthers, O’Donnell, & Hadjimarcou, 2005; Deligonul, Elg, Cavusgil, & Ghauri, 2013; Hillebrand, Nijholt, & Nijssen, 2011). Mainly based on institutional theory, various studies have shown that coercive, normative, and mimetic pressures generally lead organizations to become convergent in their practices around the world (e.g., Ahlstrom & Bruton, 2001; Björkman, Smale, Sumelius, Suutari, & Lu, 2008; Brandau et al., 2013; Farndale & Paauwe, 2007; Huo, Han, Zhao, Zhuo, Wood, & Zhai, 2013), the process of which is defined as isomorphism (DiMaggio & Powell, 1983, 1991).