Reconciling institutional theory with organizational theories How neoinstitutionalism resolves five paradoxes? Ms.Chanatip Dansirisanti ( 陳美清 ) MA2N0204

Purpose of study: Review and compare traditional and new institutional in order to address some of the criticism that this theory has received

“Neoinstitutional theory can be linked with streams of research in sociology, economics, and political science” Introduction* Neoinstitutional theory possesses strong sociological origin Organizations are socially rewarded by legitimacy and resources Survival based on acceptance of coercive, normative, and institutional pressure

Introduction* Aims of this paper: Growing body of literature dealing with institutional theory Addressing criticism that this theory has received; by means of 5 paradoxes and confront with more rational Defending the utility and power of the theory by showing its ability to inform managerial behavior by combining institutional account with others

Literature Review* Paradoxes in Neoinstitutional theory: These modifications have resulted in a theory that address change, competitive advantage, and innovation in organization Paradoxes was motivated in part by several articles that have proposed the integration of this theory

Literature Review* Conformity versus Differentiation Conformity Improves the social support of stakeholders and legitimacy of the firm Reduces risks associated with the loss of legitimacy and helps in resource acquisition Make all organizations similar, competitive pressures are stronger

Literature Review* Conformity versus Differentiation Differentiation Increase the possibilities of creation a competitive advantage through resources and capability Reduce rivalry, increasing the possibility of building competitive advantage Reducing competitiveness and fight for scare resources Create benefits and dominant positions that will last until competitor imitate a firm’s key resources “Both alternatives have an effect on performance, creation and maintenance of dominant market positions”

Literature Review* Isomorphism versus Heterogeneity Isomorphism linked with Conformity Resulting from the interrelations between the institutional context and organization Provide better access to resources, legitimacy, and competitive advantage of firm Reducing competition and differentiation

Literature Review* Isomorphism versus Heterogeneity Heterogeneity linked with Differentiation Support better competitiveness Creating competitive positions in business environment “Institutional theory can explain not only homogeneity and isomorphism in organization, but also heterogeneity and variability of generates profits”

Literature Review* Legitimacy versus Efficiency Legitimacy Provides firm better access to resources, reputation, and advantages in situations involving rivalry Consequence of institutional embedded, encourage the development of research into strategic content Efficiency pursues legitimacy as result of the relationship with stakeholders

Literature Review* Legitimacy versus Efficiency In recent years, more attention has been paid to social dimension of performance. The stakeholders and symbolic management has encouraged firm to try to achieve an economic and social fit. Therefore, firm seek to obtain not only efficiency but also legitimacy “Legitimacy not only efficiency, it is emphasized as a resource that explains the behavior of organization”

Literature Review* Change versus Inertia Change New lines of institutional thinking emphasize, strategic management action and interplay Allow firm to continuously changing their structures and practices to fit a dynamic environment High risk of being different, High return of being market leader Inertia Traditional institution pressure that many firms has been associated Conformity and acceptance, a fact that make the organizations turn into “Iron cage”

Literature Review* Change versus Inertia The institutional pressure are always changing, the constant interaction among institutions and organizations. This is mean that “there is a process of adaptation to new institutional requirement” “The institutional changed consequences from organization's action and dynamic”

Literature Review* Institution versus Organization Institutional has traditionally been applied to non-profit and social organization such Education and Health sector Growing interest on the part of organizations in attaining social status emphasize the applicability of institutional analysis

Literature Review* Institution versus Organization Social responsibility and symbolic management have increased the degree of accountability that firms must show to their agent, who must be informed about their management in order to provide social support Development of institutional analysis has transferred organizational principles and management technique from the private to the public sectors “All organizations are institutions to a larger or smaller degree”

Implication* Legitimacy and institutional embeddedness with respect to stakeholders and institutions offer ways to reduce transaction costs and create positions of competitive advantage Competitive advantage can be obtained not only through differentiation, heterogeneity and change, but also through social, stakeholders, and accommodation of institutional pressures that provide legitimacy, resources and competitive position

Conclusion* This study applying institutional principle to different types of industries and firm It implies the new streams of institutional with more rational and strategic theories of change Define definition of Neoinstitutional theory toward more realistic approach with new environment requirements Classic institutional principles such Inertia, Conformity and Determinism have been disputed

Conclusion* Considers the institutional explanation of: 1) Change 2) Competitive advantage 3) Organizational behavior “Neoinstitutional theory presents a dynamic perspective by which to explain CHANGE. This apparently breaks away from the previous deterministic view of conformity”

Future research area* Continue to focus on the integration of strategic and institutional theories in order to explain change in a processual and longitudinal way longitudinal studies must be undertaken “conformity and acceptance”; studies in combination with strategic action Technical and institutional changes must be analyze together

Future research area* Strategic side of institutional responses must be taken into account Studies should evaluate the impact of the institutional context on performance How to combining contradictory theories to improve our understanding of how organizations should behave?