1. Elena Raviola Foundations in Management Lecture 3
Institutional theory
Elena Raviola
Foundations in Management
Lecture 3

2. In the ’60s and ’70s
A growing interest and louder voice for the rational man:
Bounded rationality and decision making
Agency theory and strategy
Transaction cost economics
ORGANIZATIONS AS RATIONAL SYSTEMS
WITH RATIONAL MEN TAKING RATIONAL DECISIONS

3. So in the ’80s came… New Institutional Theory 3 observations
Reaction to organizations as rational
3 observations
Many irrational decisions
A lot of organizations look very similar
Stability rather than change
Link to old institutionalism (Selznick)
Roots bourdieu, weber and old institutionalism

4. Seminal works in new institutionalism
Meyer, J.W., and Rowan, B. (1977) Institutionalized Organizations: Formal Structure as Myth and Ceremony. American Journal of Sociology, 83(2), 340.
DiMaggio, P. J. and Powell, W.W. (1983) The Iron Cage Revisited: Institutional Isomorphism and Collective Rationality in Organizational Fields. American Sociological Review 48:
Ask students what they say.

5. …and the Book

6. Institutions in new institutionalism
Institutions are patterns for collective action
Creates order, stability and predictability
Newcomers are taught ’how things have always been done here’
Opposite to ’habit’ (local, often individual)
Institutions are long lasting
Put limits on how individuals and organizations can act, at the same time as they enable acting
Create and monitor rules of the game
Make organizations and individuals adapt to its ’institutional surrounding’ (and thus can make things that seem irrational)
Save energy: easier to do other things. Double headed.

7. Examples of institutions
Collective patterns of actions that have been called ‘institutions” (examples):
Marriage, sexism, the contract, wage labour, the handshake, insurance, the formal organization, the army, presidency, the vacation, the corporation, voting.
Jeppson, 1991: 144
Ask key concepts in new institutional theory

8. Key concepts in new institutionalism
Institutionalized myths
Legitimacy vs technical rationality
Decoupling
Isomorphism
Coercive, normative and mimetic
Organizational field:
Those organizations that, in the aggregate, constitute a recognized area of institutional life (DiMaggio and Powell, 1983: 148)

9. In groups 20 minutes think about a social phenomenon: - what can institutional theory explain about it? - what can it not explain about it? And what concept would you need instead?

10. Recent developments in institutional theory
Institutional logics
Institutional work
Scandinavian institutionalism
What is IT good for?
What is missing and how would you support this? Break
ALL ACCOUNTING FOR
CHANGE, VARIATION AND PRACTICE

11. Institutional logics
Lounsbury, M. (2007) A Tale of Two Cities: Competing Logics and Practice Variation in the Professionalizing of Mutual Funds. Academy of Management Journal, 50:
Definition of logics

12. Institutional logics (cont’ed)
Institutional perspective on diffusion:
Spread of unitary practice through a field
Two-stage model
1 dominant logic shaping the field
Institutional logics = institutionalized guidelines for actions and beliefs
Institutional logics as a reaction to this:
Fragmented and contested institutional environments
Technical logic also institutionally embedded (rather than decoupling)
Multiple logics provide different kinds of rationality
Important to look at history to account for different logics
Technical and then institutional reasoning
Separate logics
Professional firms. Mutual funds with performance or trustee logic. Adopting contracting to professional money management firms in different ways for different logics.

13. (New) institutional theory
Institutional work
(New) institutional theory
Ethnomethodology
Definition of inst work
Practice theory
Lawrence, T., Suddaby, R. and Leca, B. (2009) Introduction: theorizing and studying institutional work. In Lawrence, T., Suddaby, R. and Leca, B. (eds.) Instituional Work. Actors and Agency in Institutional Studies of Organizations. Cambridge: Cambridge University Press.

14. Institutional work (cont’ed)
Institutional work = ”the purposive action of individuals and organizations aimed at creating, maintaining and disrupting institutions” (Lawrence and Suddaby, 2006:215)
Focus on practices: what people do!
Inspiration from institutional entrepreneurship – changing institutions
Three types of institutional work: creating, maintaining, disrupting
Work:
Effort
Intention
Unintended consequences

15. Scandinavian institutionalism
New institutional theory
Science and Technology Studies (ANT)
Czarniawska, B. and Sevón, G. (2005) Introduction. In Czarniawska and Sevón (eds.) Translating Organizational Change. Berlin: De Gruyter.

16. Scandinavian Institutionalism (cont’ed)
New institutionalism focuses on stability
Change as an exception
Inspiration in Science and Technology Studies
Constructionism: everything, humans and non-humans, is constructed
Re-definition of two concepts:
Diffusion
Introducting the concept of translation
Power
Result of associations
Consequences:
Isomorphism does not mean IDENTICAL organizations
Distinction between micro and macro actors revised

17. Reading workshop
DiMaggio, P. J. and Powell, W.W. (1983) The Iron Cage Revisited: Institutional Isomorphism and Collective Rationality in Organizational Fields. American Sociological Review 48:

18. Assignments to hand in at reading workshop 1
To review for reading workshop 1 (Tuesday September 8, 14-17):
Lounsbury (2007)
Czarniawska and Sevón (2005)
Lawrence, Suddaby and Leca (2008)
Tsoukas and Chia (2002) by to and