Institutional theory
Elena Raviola
Foundations in Management
Lecture 3
In the ’60s and ’70s
• A growing interest and louder voice for the
rational man:
– Bounded rationality and decision making
– Agency theory and strategy
– Transaction cost economics
ORGANIZATIONS AS RATIONAL SYSTEMS
WITH RATIONAL MEN TAKING RATIONAL
DECISIONS
So in the ’80s came…
• New Institutional Theory
– Reaction to organizations as rational
• 3 observations
– Many irrational decisions
– A lot of organizations look very similar
– Stability rather than change
• Link to old institutionalism (Selznick)
Seminal works in new institutionalism
• Meyer, J.W., and Rowan, B. (1977) Institutionalized
Organizations: Formal Structure as Myth and Ceremony.
American Journal of Sociology, 83(2), 340.
• DiMaggio, P. J. and Powell, W.W. (1983) The Iron Cage
Revisited: Institutional Isomorphism and Collective Rationality
in Organizational Fields. American Sociological Review
48:147-160.
…and the Book
Institutions in new institutionalism
• Institutions are patterns for collective action
• Creates order, stability and predictability
• Newcomers are taught ’how things have always been
done here’
• Opposite to ’habit’ (local, often individual)
• Institutions are long lasting
6
Examples of institutions
• Collective patterns of actions that have been
called ‘institutions” (examples):
– Marriage, sexism, the contract, wage labour, the
handshake, insurance, the formal organization,
the army, presidency, the vacation, the
corporation, voting.
• Jeppson, 1991: 144
Key concepts in new institutionalism
• Institutionalized myths
– Legitimacy vs technical rationality
• Decoupling
• Isomorphism
– Coercive, normative and mimetic
• Organizational field:
– Those organizations that, in the aggregate, constitute a
recognized area of institutional life (DiMaggio and Powell, 1983:
148)
IN GROUPS
20 MINUTES
THINK ABOUT A SOCIAL
PHENOMENON:
- WHAT CAN INSTITUTIONAL THEORY
EXPLAIN ABOUT IT?
- WHAT CAN IT NOT EXPLAIN ABOUT IT?
AND WHAT CONCEPT WOULD YOU
NEED INSTEAD?
Recent developments
in institutional theory
• Institutional logics
• Institutional work
• Scandinavian institutionalism
ALL ACCOUNTING FOR
CHANGE, VARIATION AND PRACTICE
Institutional logics
Lounsbury, M. (2007) A Tale of Two Cities: Competing Logics and
Practice Variation in the Professionalizing of Mutual Funds.
Academy of Management Journal, 50: 289-307
Institutional logics (cont’ed)
• Institutional perspective on diffusion:
– Spread of unitary practice through a field
– Two-stage model
– 1 dominant logic shaping the field
• Institutional logics = institutionalized guidelines for actions and
beliefs
• Institutional logics as a reaction to this:
–
–
–
–
Fragmented and contested institutional environments
Technical logic also institutionally embedded (rather than decoupling)
Multiple logics provide different kinds of rationality
Important to look at history to account for different logics
Institutional work
(New) institutional
theory
Ethnomethodology
Practice theory
Lawrence, T., Suddaby, R. and Leca, B. (2009) Introduction: theorizing
and studying institutional work. In Lawrence, T., Suddaby, R. and Leca,
B. (eds.) Instituional Work. Actors and Agency in Institutional Studies of
Organizations. Cambridge: Cambridge University Press.
Institutional work (cont’ed)
• Institutional work = ”the purposive action of individuals and organizations
aimed at creating, maintaining and disrupting institutions” (Lawrence and
Suddaby, 2006:215)
• Focus on practices: what people do!
• Inspiration from institutional entrepreneurship – changing institutions
• Three types of institutional work: creating, maintaining, disrupting
• Work:
– Effort
– Intention
– Unintended consequences
Scandinavian institutionalism
New
institutional
theory
Science and
Technology
Studies (ANT)
Czarniawska, B. and Sevón, G. (2005) Introduction. In Czarniawska and
Sevón (eds.) Translating Organizational Change. Berlin: De Gruyter.
Scandinavian Institutionalism (cont’ed)
• New institutionalism focuses on stability
– Change as an exception
• Inspiration in Science and Technology Studies
– Constructionism: everything, humans and non-humans, is constructed
• Re-definition of two concepts:
– Diffusion
• Introducting the concept of translation
– Power
• Result of associations
• Consequences:
– Isomorphism does not mean IDENTICAL organizations
– Distinction between micro and macro actors revised
Reading workshop
DiMaggio, P. J. and Powell, W.W. (1983) The Iron
Cage Revisited: Institutional Isomorphism and
Collective Rationality in Organizational Fields.
American Sociological Review 48:147-160.
Assignments to hand in at reading
workshop 1
• To review for reading workshop 1 (Tuesday
September 8, 14-17):
– Lounsbury (2007)
– Czarniawska and Sevón (2005)
– Lawrence, Suddaby and Leca (2008)
– Tsoukas and Chia (2002) by email to
elena.raviola@handels.gu.se and
jenny.helin@fek.uu.se