Reconciling institutional theory
with organizational theories
How neoinstitutionalism resolves five paradoxes?
Ms.Chanatip Dansirisanti (陳美清)
MA2N0204
Purpose of study:
 Review and compare traditional and new institutional in
order to address some of the criticism that this theory
has received
Introduction*
Neoinstitutional theory possesses strong sociological origin
 Organizations are socially rewarded by legitimacy and
resources
 Survival based on acceptance of coercive, normative, and
institutional pressure
“Neoinstitutional theory can be linked with streams of research
in sociology, economics, and political science”
Introduction*
Aims of this paper:
 Growing body of literature dealing with institutional
theory
 Addressing criticism that this theory has received; by
means of 5 paradoxes and confront with more rational
 Defending the utility and power of the theory by
showing its ability to inform managerial behavior by
combining institutional account with others
Literature Review*
Paradoxes in Neoinstitutional theory:
 These modifications have resulted in a theory that
address change, competitive advantage, and innovation
in organization
 Paradoxes was motivated in part by several articles that
have proposed the integration of this theory
Literature Review*
Conformity versus Differentiation
Conformity
 Improves the social support of stakeholders and
legitimacy of the firm
 Reduces risks associated with the loss of legitimacy and
helps in resource acquisition
 Make all organizations similar, competitive pressures are
stronger
Literature Review*
Conformity versus Differentiation
Differentiation
 Increase the possibilities of creation a competitive
advantage through resources and capability
 Reduce rivalry, increasing the possibility of building
competitive advantage
 Reducing competitiveness and fight for scare resources
 Create benefits and dominant positions that will last until
competitor imitate a firm’s key resources
“Both alternatives have an effect on performance, creation and
maintenance of dominant market positions”
Literature Review*
Isomorphism versus Heterogeneity
Isomorphism linked with Conformity
 Resulting from the interrelations between the
institutional context and organization
 Provide better access to resources, legitimacy, and
competitive advantage of firm
 Reducing competition and differentiation
Literature Review*
Isomorphism versus Heterogeneity
Heterogeneity linked with Differentiation
 Support better competitiveness
 Creating competitive positions in business environment
“Institutional theory can explain not only homogeneity and
isomorphism in organization, but also heterogeneity and
variability of generates profits”
Literature Review*
Legitimacy versus Efficiency
Legitimacy
 Provides firm better access to resources, reputation, and
advantages in situations involving rivalry
 Consequence of institutional embedded, encourage the
development of research into strategic content
Efficiency pursues legitimacy as result of the relationship with
stakeholders
Literature Review*
Legitimacy versus Efficiency
In recent years, more attention has been paid to social
dimension of performance. The stakeholders and symbolic
management has encouraged firm to try to achieve an economic
and social fit. Therefore, firm seek to obtain not only efficiency
but also legitimacy
“Legitimacy not only efficiency, it is emphasized as a resource
that explains the behavior of organization”
Literature Review*
Change versus Inertia
Change
 New lines of institutional thinking emphasize, strategic
management action and interplay
 Allow firm to continuously changing their structures and
practices to fit a dynamic environment
 High risk of being different, High return of being market
leader
Inertia
 Traditional institution pressure that many firms has been
associated
 Conformity and acceptance, a fact that make the
organizations turn into “Iron cage”
Literature Review*
Change versus Inertia
The institutional pressure are always changing, the
constant interaction among institutions and organizations.
This is mean that “there is a process of adaptation to new
institutional requirement”
“The institutional changed consequences from organization's
action and dynamic”
Literature Review*
Institution versus Organization
 Institutional has traditionally been applied to non-profit
and social organization such Education and Health
sector
 Growing interest on the part of organizations in
attaining social status emphasize the applicability of
institutional analysis
Literature Review*
Institution versus Organization
 Social responsibility and symbolic management have
increased the degree of accountability that firms must
show to their agent, who must be informed about their
management in order to provide social support
 Development of institutional analysis has transferred
organizational principles and management technique from
the private to the public sectors
“All organizations are institutions to a larger or smaller degree”
Implication*
 Legitimacy and institutional embeddedness with respect
to stakeholders and institutions offer ways to reduce
transaction costs and create positions of competitive
advantage
 Competitive advantage can be obtained not only
through differentiation, heterogeneity and change, but
also through social, stakeholders, and accommodation
of institutional pressures that provide legitimacy,
resources and competitive position
Conclusion*
 This study applying institutional principle to different
types of industries and firm
 It implies the new streams of institutional with more
rational and strategic theories of change
 Define definition of Neoinstitutional theory toward more
realistic approach with new environment requirements
 Classic institutional principles such Inertia, Conformity
and Determinism have been disputed
Conclusion*
 Considers the institutional explanation of:
1) Change
2) Competitive advantage
3) Organizational behavior
“Neoinstitutional theory presents a dynamic perspective by
which to explain CHANGE. This apparently breaks away from
the previous deterministic view of conformity”
Future research area*
 Continue to focus on the integration of strategic and
institutional theories in order to explain change in a
processual and longitudinal way
 longitudinal studies must be undertaken “conformity and
acceptance”; studies in combination with strategic action
 Technical and institutional changes must be analyze together
Future research area*
 Strategic side of institutional responses must be taken
into account
 Studies should evaluate the impact of the institutional
context on performance
 How to combining contradictory theories to improve our
understanding of how organizations should behave?