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Rack BI (Institution Theories): Old Institutionalism | New Institutionalism | Institutional Work | Institutional Logics | Scandinavian Institutions | World Society Theory
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What is Institution Theory and Why is it Important?
The concept of an “institution” is an enduring one. Over the years, the idea that there were social structures transcending organizational boundaries that carried great weight among people was strong. Marriage. Schools and education. Religions and religious orders. These generally provided senses of accepted and desired behaviors to foster collective action. For example, the institution of marriage provided stability in male-female relationships to enable the raising of children and build familial bonds that in turn strengthened communities.
The definition of an “institution” broadened over time as scholars recognized how other patterns of behavior that were not as large or recognizable as educational institutions or marriage still took on rule-like form and were shared or simply spread on their own. The emergence of institution theory thus took two closely related paths — one in political science and one in organization studies, and in fact some of the foundational ideas and classic texts in this field contribute both ways. We will obviously concentrate on organization studies here.
Institution theory as understood today emerged from “new institutionalism” in the late 1970s as scholars like John Meyer, Brian Rowan, Paul DiMaggio, and Walter Powell began questioning why organizations in the same field often look and act so similarly. Before this theory, most people thought organizations primarily made rational decisions based on efficiency and performance. But institutional theorists noticed something interesting: organizations often adopted practices not because they were the most efficient, but because they were seen as legitimate or appropriate in their social environment.
Institutional theory is an important field in organization studies because it contributes to greater understanding of behaviors in and across organizations. It explains how organizational decisions are not always just about efficiency – they’re also about legitimacy and survival in a social context, which purely economic theories could not adequately explain. Second, it reveals how social and cultural forces shape organizations, often in ways that organizational members themselves do not fully recognize. And third, it offers new ways to understand how organizational practices spread across cultures, and why such practices may manifest differently in different places or contexts.
Some Leading Institution Theories & Concepts
Institution theory has become very broad. Various literature streams have emerged that focus on how institutions form, change, and disappear, along with how organizations and industries respond to these dynamics. This has helped with guiding researchers toward feasible and defensible projects. Here is a sample of some of these streams — it is not intended as a comprehensive list, suggestions for additions are welcome.
Old Institutionalism. This stream focuses on the historical and sociological aspects of institutions. It emphasizes the role of institutions in shaping social behavior and the importance of understanding the historical context in which institutions develop. Scholars like Thorstein Veblen and John R. Commons contributed to this perspective by examining how institutions evolve over time and influence economic behavior (Bisultanova, 2023).
New Institutionalism. This is a broad literature stream that pioneered by the likes of Philip Selznick (see Episode 75) in the mid-20th century and then developed and formalized through the works of John Meyer, Brian Rowan (see Episode 107), Paul DiMaggio, and Walter Powell (see Episode 120), W. Richard Scott, and many others. This stream fundamentally transformed scholarly understanding of organizations by highlighting how they are shaped by cultural and social pressures rather than just technical demands. They introduced the crucial concept of institutional isomorphism (see Episode 120) – the tendency of organizations in a field to become more similar over time through three mechanisms: coercive pressures (from regulators and powerful organizations), mimetic pressures (copying successful peers when facing uncertainty), and normative pressures (from professional standards and education) (DiMaggio & Powell, 1983).
Institutional Work Perspective. This stream was developed by Thomas Lawrence, Roy Suddaby, and others. It shifted attention to how individuals and organizations actively shape institutions. This stream examines how actors create, maintain, and disrupt institutions through daily practices and strategic actions. For example, institutional work scholars study how professionals establish new practices as legitimate, how organizations maintain their status in fields, or how activists challenge existing institutional arrangements.
Institutional Logics Perspective. This stream is associated with Patricia Thornton, William Ocasio, Roger Friedland and others who explore how different belief systems and organizing principles shape behavior. This perspective also parallels institution theory as applied in political science (highlight some of the works) in which there are several logics discussed in the literature – the market logic of efficiency, the state logic of equality of access and treatment, the professional logic of competency and effectiveness, plus the corporation, the family, and religions (Friedland & Alford, 1991). Research in this stream pursues understanding of how organizations navigate multiple, often competing logics along with the organizational responses to institutional complexity and hybrid organizations that combine different logics.
The “Scandinavian Institutionalism stream”. This can be viewed as a substream of the Institutional Work Perpsective based on what Boxenbaum & Pedersen (2009) term a “particular Scandinavian approach to organization studies” that is a “distinctive and identifiable variant of institutionalism” due its emphasis on organizational variation and distinctiveness rather than isomorphism and standardization. This helps explain why seemingly similar practices can look quite different across organizations and countries. A short list of scholars associated with this stream include Barbara Czarniawska, Kerstin Sahlin-Andersson, Lars Engvall, and Kristian Kreiner.
The “World Society Theory” stream. This stream is associated with John Meyer (2010) and his colleagues at Stanford. It examines how global cultural models shape organizations and nation-states worldwide. They demonstrate how educational systems, environmental policies, and human rights practices become remarkably similar across countries through global institutional pressures, even when these practices might not fit local conditions well.
Contemporary Research Areas
Institution theory research is highly active and there are many practical applications and concerns, with some of these also referenced in the contemporary topics in Aisle C.
Institutional Change. Institutional theorists have become increasingly interested in institutional change. While early work focused on how institutions create stability and conformity, contemporary research examines how institutions change and how organizations can innovate while maintaining legitimacy — for example, institutional entrepreneurship theory (e.g., Hoogstraaten, Frenken, & Boon, 2020; Garud et al., 2013). This has led to rich studies of institutional entrepreneurship and institutional change processes.
Organizational Response to Institutional Pressures. Scholars have also developed more sophisticated understandings of how organizations respond to institutional pressures. Rather than seeing organizations as passive recipients of institutional pressures, research now examines strategic responses ranging from compliance to defiance, and how organizations might selectively couple with institutions – adopting their formal structures while maintaining different internal practices (e.g., Pache & Santos, 2010; Holm et al., 2017).
Related TAOP Episodes, Events, and Notes
121: Rhetoric vs. Reality — Mark Zbaracki
120: Institutional Isomorphism — DiMaggio & Powell
107: Institutionalized Rules and Formal Structures — Meyer & Rowan
75: Institutionalization – Philip Selznick
67: Professions & Professionalism — Andrew Abbott
31: Process Studies, PROS and Institutional Theory LIVE
23: Influence of Institutions and Factor Markets — Mike Wright
Related Resource Pages
Rack BA — Classic Organization and Management Theory
Rack BB1 – Organizational Behavior (Micro-Individual)
Rack BB2 — Organizational Behavior (Meso-Groups and Teams)
Rack BB3 — Organizational Behavior (Macro-Org/System)
Rack BC — Contingency Theory
Rack BD — Organizational Design
Rack BG — Organizational Development and Change
Rack BH – Human Dimension – Culture, Climate, Identity
Rack BI — Institution Theory
Rack BL — Leadership Theories
Rack BM – Modern Management Theories
Rack BQ — Postmodern and Critical Theories
Rack BS — Sociology & Anthropology
References
Anthropic. (2024). What is institution theory in organization studies and why is it important; What are the major theoretical streams in institution theory. Claude (March 2024 version) [Large Language Model].
Bisultanova, A. (2023). The History of the Institutionalism Inception. In SHS Web of Conferences (Vol. 172, p. 06007). EDP Sciences. https://www.shs-conferences.org/articles/shsconf/abs/2023/21/shsconf_shcms2023_06007/shsconf_shcms2023_06007.html
Boxenbaum, E., & Pedersen, J. S. (2009). Scandinavian institutionalism: A case of institutional work. In Institutional work: Actors and agency in institutional studies of organizations (pp. 178-204). Cambridge University Press.
Czarniawska, B. & Sevón, G. (eds.) (2003) The northern lights: Organization theory in Scandinavia. Copenhagen: Copenhagen Business School Press.
DiMaggio, P. J., & Powell, W. W. (1983). The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields. American sociological review, 48(2), 147-160.
Engwall, L. (1995) The Vikings vs. the world: An examination of Nordic business research. Proceedings of the 13th Nordic Conference on Business Studies, 1, 303–312.
Friedland, R., & Alford. R. R. (1991). Bringing society back in: Symbols, practices, and institutional contradictions. In Powell, W. W. & DiMaggio, P. J. (eds.), The new institutionalism in organizational analysis (pp. 232-266). Chicago: University of Chicago Press.
Garud, R., Hardy, C., & Maguire, S. (2013). Institutional entrepreneurship. In Carayannis, E.G. (ed.), Encyclopedia of creativity, invention, innovation and entrepreneurship. New York: Springer. https://link.springer.com/referenceworkentry/10.1007/978-1-4614-3858-8_421
Holm, A. E., Decreton, B., Nell, P. C., & Klopf, P. (2017). The dynamic response process to conflicting institutional demands in MNC subsidiaries: An inductive study in the sub‐Saharan African e‐commerce sector. Global Strategy Journal, 7(1), 104-124.
Hoogstraaten, M. J., Frenken, K., & Boon, W. P. (2020). The study of institutional entrepreneurship and its implications for transition studies. Environmental Innovation and Societal Transitions, 36, 114-136.
Kreiner, K. (2007) A Scandinavian way in organization theory: what is the evidence, and does evidence matter? Nordiske Organisasjionsstudier 9(1), 83–92.
Lawrence, P. R. & Lorsch, J. W. (1967). Organization and environment: Managing differentiation and integration. Boston: Division of Research, Graduate School of Business Administration, Harvard University.
Lawrence, P., & Lorsch, J. (1967). Differentiation and integration in complex systems, Administrative Science Quarterly, 12(1), 1-47.
Lawrence, T. B., & Suddaby, R. (2006). Institutions and institutional work (Vol. 2, pp. 215-254). In Clegg, S. R., Lawrence, T. B., & Hardy, C. (eds), The Sage handbook of organization studies. Sage.
Metcalf, H. C., & Urwick, L. (1943). Dynamic administration: The collected papers of Mary Parker Follett. Harper Brothers. Chapters 1, 3-5.
Pache, A. C., & Santos, F. (2010). When worlds collide: The internal dynamics of organizational responses to conflicting institutional demands. Academy of management review, 35(3), 455-476.
Sahlin-Andersson, K. & Söderholm, A. (2002) The Scandinavian school of studies. In Sahlin-Andersson, K. & Söderholm, A. (eds.), Beyond project management: New perspectives on the temporary–permanent dilemma. Malmö: Liber.
Scite. (2024). What are the major theoretical streams in institution theory; Where does deinstitutionalization fit in the streams of institution theory. Scite (April 2024 version) [Large Language Model].
Selznick, P. (1953). TVA and the grass roots: A study in the sociology of formal organization. Univ of California Press.
Thornton, P. H., & Ocasio, W. (2008). Institutional logics. The Sage handbook of organizational institutionalism, 840(2008), 99-128.
Thornton, P. H., Ocasio, W., & Lounsbury, M. (2012). The institutional logics perspective: A new approach to culture, structure and process. OUP Oxford.
The inclusion of external links is for informational purposes only and does not necessarily constitute endorsement by TAOP or any of its members.
Jump to: Importance | Theories | Research Areas | TAOP Episodes | References
Rack BI (Institution Theories): Old Institutionalism | New Institutionalism | Institutional Work | Institutional Logics | Scandinavian Institutions | World Society Theory
Aisle B (Major Theories): Classical Theories (BA) | Org. Behavior – Individual (BB1) | Org. Behavior – Groups & Teams (BB2) | Org. Behavior – Systems & Culture (BB3) | Contingency Theories (BC) | Org. Design (BD) | Org. Development & Change (BG) | Human Relations Theories (BH) | Institution Theories (BI) | Leadership Theories (BL) | Modern Management Perspectives (BM) | Postmodern & Critical Theories (BQ) | Sociology & Anthropology (BS)
Resources: Main Page | Research Methods (A) | Major Theories (B) | Issues and Contemporary Topics (C) | Professional Community (D)