How institutional theories explain and fail to explain organizations

Abstract

PurposeThis essay raises a concern about the trajectory that new institutionalism has been following during the last decades, namely an emphasis on heterogeneity, change and agentic behavior instead of isomorphism and conformist behavior. This is a crucial issue from the perspective of the philosophy and methodology of science since a theory that admits both change and stability as a norm has less scientific weight then a theory that predicts a prevalence of passivity and isomorphism over change and strategic behavior. The former provides explanations and predictions while the latter does not.Design/methodology/approachThe paper offers an analysis of the nature, characteristics, functions and boundaries of institutional theories in the spirit of philosophy and methodology of science literature.FindingsThe power of the former institutional theory developed by Meyer, Rowan, DiMaggio and Powell lies in its generalization, explanation and prediction of observable and unobservable phenomena: as a typical organizational theory that puts forward directional predictions, it explains and predicts the tendency for organizations to become more similar to each other over time and express less strategic and interest-driven behavior, conforming to ever-increasing institutional pressures. A theory of isomorphism makes scientific predictions while its modern advancements do not. Drawing on Popper's idea of the limit of domains of explanation and limited domains of theories we present two propositions that may direct our attention towards the strength or weakness of institutional theories with regard to their explanations of organizational processes and behavior.Practical implicationsThe paper draws implications for further theory building in institutional analysis by suggesting the nature of institutional explanations and the place of institutional change in the theoretical apparatus. Once institutional theory explains the tendency of the system towards equilibrium, there is no need to explain the origins and causes of radical change per se. Institutional isomorphism theory explains and predicts how even after radical changes organizational fields will move towards isomorphism, that is, institutional equilibrium. The task is, therefore, not to explain agency and change but to show that it is natural and inevitable processes that organizational field will return to isomorphic dynamics and move towards homogenization no matter how much radical change occurred in this field.Originality/valueThe paper discusses the practical problems with instrumental utility of institutional theories. In order to be useful any theory must clearly delineate its boundaries and offer explanations and predictions and it is only the former 1977/1983 institutional theory that satisfies these requirements while modern advancements merely offer ambiguous theoretical umbrellas that escape empirical tests. For researchers therefore it is important to recognize which theory can be applied in a given limited domain of research and which one has little or no value.

Proposal of a temporality perspective for a successful organizational change project

“…Moreover, these change initiatives arise out of (Al-Ali et al, 2017;Boulagouas et al, 2020): (1) external pressures that influence the performance of the companies to comply and preserve the health and safety of their employees, their legitimacy and sustainability; or (2) desire to stop with old practices deemed unsatisfactory and dangerous to health and safety and develop new skills that propel safer and promising situations. Aksom and Tymchenko (2020) confirmed that these first triggers of organizational change (OC) have been evoked by the institutional theory while the normalization theory has thoroughly addressed the second ones.…”

Exploring the institutional pressures that affect international new ventures

“…The institutional theory remains the dominant theory to explain organizations' relations to their environment (Suddaby et al, 2010, Aksom & Tymchenko, 2020. Institutions define social reality by the rules, a taken-for-granted social and cultural meaning system (Scott 2014, Urbano, Aparicio, & Audretsch, 2019.…”

Reconciling conflicting predictions about transience and persistence of management concepts in management fashion theory and new institutionalism

“…We argue that when considering the life cycle of management fashion through the lenses of institutional theory it becomes apparent that the logic of institutional dynamics favors fashionable concepts and prevents them from deinstitutionalization. It is a master hypothesis in institutional theory which constitutes a key causal relationship (DiMaggio and Powell, 1983; Scott, 1991; Kraatz and Zajac, 1996; Aksom et al , 2020; Aksom and Tymchenko, 2020). Following the institutional line of reasoning, we would recall that in organizational fields a trend that is clearly observed at the macro level is isomorphism, that is, once organizational practice achieves such a degree of popularity that a bandwagon-like diffusion occurs, a threshold is reached when organizations begin imitate each other, and this intensive diffusion wave results in complete institutionalization when practice becomes taken-for-granted (Tolbert and Zucker, 1983; DiMaggio and Powell, 1983).…”