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Organisation Theory (Fach) / Institutional Theory (Lektion)
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- Intellectual roots roots primarily in sociology why organizations with diverse structures operating in the same organizational field gradually tend to look and act alike
- Research questions How do organizational forms and structures develop over time Why do organizations become increasingly similar To hat extent is this process of homogenization motivated by efficiency or legitimacy seeking behaviors? What is the role of institutional pressures in driving homogenization How can organizations shape their institutional environment
- Research approach Examination of diffusion of structures, strategies and practices at the field level Study of within-field homogeneity of organizational structures, strategies and practices Development of reaction-to-external pressures models of organizations Adpotion of macro and micro perspectives in firm-institution interactions
- Key assumptions Bounded rationality and cognitive limitations Beneddedness of organizations in institutional environments Institutional environment creates expectations regarding appropriate and desirable organizational structures, strategies and processes Organizations as repsondents to institutional pressure (macro) and shapers of institutional environment (micro perspective)
- Organizational legitimacy Organizational survival depends primarily on legitimacy (social fitness) To obtain and maintain legitimacy organizations conform to institutional pressures Institutional pressures originate from institutions such as the state, the law, the profession, norms, cultures Conformity to institutional pressures triggers a process of homogenization in organizational structures, strategies and practices
- Organizational efficiency Efficiency (economic fittness) is less essentail for organizational survival Organizations can obtain and maintain legitimacy (and survive) by adopting prevailing structures, strategies and practices irrespective of their effectiveness Homogenization in organizational structures, strategies and practices can be better explaines by institutional isomorphismthan by competitive isomorphism
- The three constitutive pillars of institutions Regulative Regualtive rules, Legal obligation, coercive, instrumentality, rules and law, legally sanctioned Normative Binding expectations, social obligations, normative, appropriateness, certification, morally governed Cognitive Constitutive schema, taken-for-grantedness shared understanding, mimetic, orthodoxy, common beliefs shared ligics of action, comprehensible recognizable culturally supported Basis of order, basis of compliance, mechanisms, logic, indicators, basis of legitimacy
- Attributes of legitimacy Subjects of legitimation include individuals, teams, organizations and their specific structures, strategies, and practices Sources of legitimacy include the state, regulatory authorities, accreditation agencies, the media or the general public Types of legitimacy include pragmatic moral and cognitive legitimacy
- Definition legitimacy Legitimacy is a generalized perception or assumption that the actions of an entity are desirable, proper, or appropriate within some socially constructed sstem of norms, values, beliefs, and definitions (Suchman)
- Contrasting Macro and Micro Perspective Macro perspective (institutional diffusion) Institutions are exogenous and exert pressure on organizations within a field Assumption of institutional determinism Organizations are passive respondants Organizations conform to external expectations and norms by adopting socially accepted structures, strategies and practices Micro perspective (institutional entrepreneurship) Institutions are endogenous and shaped by the behavior of organizations within a field Assumption of organizational agency Organizations are active shapers Organizations define external expectations and norms thereby creating, maintaining and repairing institutions
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- Description of Isomorphism describes ideal-typical response of organizations to institutional pressure triggers organizations within a certain organizational field to conform to socially accepted structures, strategies and practices irrespective of theri effectiveness leads to homogenization of the organizational field is motivated by the need for legitimacy rahter than effiency
- Determinants of isomorphism Organizational level degree of resource dependence uncertainty about means-end links ambiguity of organizational goals reliance on academic credentials participation in trade associations Organizational field level centralization of resources transactions with the state variety of organizational models technological uncertainty degree of professionalization
- Three types of isomorphism Coercive isomorphism conformity to expectations of powerful entities such as the state, regulators or dominant partners motivated by need to maintain endorsement Perceived as force or act of persuasion salient due to political control and dependencies Normative isomorphism Conformity to professional norms and methods as defined by educational and trade institutions Motivated by need to keep professional standards perceived as a professional obligation salient due to education and socialization Mimetic isomprphism imitation of observable features of organizational models perceived as successful or legitimate Motivated by need to overcome uncertainty Perceived as a decision making heuristic Salient du to visibility of peer behavior
- Institutional arbitrage refers to the expoitation of institutional differences between home and host country environments by organizations tension between maintaining legitimacy and pursiuing efficiency goals usage of institutional differences to overcome tensions Decoupling of non-compliant activities by outsourcing the to other institutional environments Maintain legitimacy and efficiency
- Range of strategic responses to institutional pressure Acquiesce Compromise Avoid Defy Manipulate