Institutional Theory

The institutional analysis of organizations has a long history (Parsons, 1956; Selznick, 1948, 1949, 1957).  Selznick focused on empirical analysis of organizations and their institutional environment and Parsons discussed how institutions integrate organizations in society by the use of authority, rules, and contracts (Powell, 1991; Scott & Davis, 2007). Often referred to as “old institutionalism,” scholarly work was focused on the importance of vested interests, informal structures, as well as values, norms, and attitudes (Powell, 1991; Selznick, 1996).

A new approach to the study of institutions and organizations, called “new institutionalism”, emerged with the work of Meyer and Rowan (1977). Their work emphasized the role of culture and rules leading organizations to look alike. Later, DiMaggio and Powell (1983) elaborated on this idea and by defining the three kinds of pressures on organizations to be similar to one another. These pressures, referred to as isomorphic forces, include coercive, normative, and mimetic. Coercive or regulative pressures make organizations adopt similar structures or rules. Normative pressures force organizations to adopt particular forms. And mimetic pressures compel organizations to copy one another, often due to uncertainty (DiMaggio & Powell, 1983).

Key concepts put forward by institutional theory include the definition of institutions, the role of institutional environments, and the importance of legitimacy. Institutions provide stability and meaning to social life, and are composed of “cultural-cognitive, normative, and regulative elements” (Scott, 1995). The institutional environments are the formal systems that shape and constrain an organization’s behavior. In addition, they “are characterized by the elaboration of rules and requirements to which individual organizations must conform in order to receive legitimacy and support” (Scott, 1995). Legitimacy allows organizations to gain acceptance in their institutional environments and survive.

Institutional research, then, has been focused on learning about conformity pressures and legitimacy building as mechanisms that lead to organizations to be uniform, and how this impacts their survival (DiMaggio & Powell, 1983; Meyer & Rowan, 1977; Powell, 1991; Tolbert & Zucker, 1983; Zucker, 1977). A criticism of the emphasis on legitimacy emerged when Friedland and Alford (1991) claimed that the current explanations did not address the success and failure of institutionalization.

Key papers include:

• Meyer & Rowan 1977
• Fligstein 1985
• DiMaggio & Powell 1983
• Kraatz & Zajac 1996
• Tolbert & Zucker 1996

Related topics include:

• Institutional Entrepreneurship (Greenwood & Suddaby 2006)
• Institutional Logics (Thornton)

(Adapted from course notes and my research paper)

(Flashcards and other resources here)