Institutional Theory Essay

6106 words - 25 pages

Institutional Theory Part One

Introduction of Institutional Theory What are institutions? The general understanding of institutions can be defined as a set of formal and informal rules of conduct, made by humans that facilitate coordination or govern relationships between individuals, organizations or

government. Examples of institutions include laws, regulations, customs, social and professional norms, culture, and ethics. Selznick (1949) notes that "the most important thing about organizations is that, though they are tools, each nevertheless has a life of its own". While he acknowledges rational view that organizations are designed to attain goals, he notes that the formal ...view middle of the document...


Sociological research on organizations arose through the mid-1970s. This overview is intended the links between institutional theory and previous traditions of sociological work on organizational structure, and to provide some contextual understanding of the receptivity of theorizing and both to clarify organizational researchers in the late 1970s to institutional theory as an explanatory framework. Institutional theory research underwent a significant change in the late 1970s and early 1980s. Much of modern institutional theory arose from the work of Berger and Luckman (1967), who argue that social reality is a human construction created through interaction (from Scott,1995).

Scott (1995) belief that the organizational procedures become valued as ends in themselves. Organization strikes bargains with the environment that can restrict the current goals or limit future possibilities. Organizational structures adapt based on individual actions and environmental pressures. He states that the overriding need for systems "is the maintenance of the integrity and continuity of the system itself". The process by which actions are repeated and given similar meaning by self and others is defined as “institutionalization". Institutional theory addresses the central question of why all organizations in a field tend to look and act the same (DiMaggio & Powell, 1983). The core concept of institutional theory is that organizational structures and processes tend to acquire meaning and achieve stability in their own right, rather than on the basis of their effectiveness and efficiency in achieving desired ends, such as the mission and goals of the organization (Lincoln, 1995). In the initial stages of the organizational life cycle, there is considerable variety in organizational forms. Over time, however, there is startling homogeneity in organizational structures and practices. Scott (1995 and 2004) has given posits definition of institutional theory as institutions are a critical component in the environment. Therefore, institutional theory focuses on the deeper and more resilient aspects of social structure. It considers the processes by which structures, including schemes, rules, norms, and routines, become established as authoritative guidelines for social behaviour.


Institutional theory posits that institutionalized activities occur due to influences on three levels: individual, organizational, and inter organizational (Oliver, 1997). On the individual level, managers follow norms, habits, customs, and traditions, both consciously and unconsciously (Berger and Luckmann, 1967). On the organizational level, shared political, social, cultural, and belief systems all support following traditions of institutionalized activities. On the inter organizational level, pressures from government, industry alliances, and expectations from society define what is socially acceptable and expected organizational behaviour, which pressures organizations...

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