RISE publishes a summary of the most important findings of its monthly literature workshops (link to wiki) on the RISE.blog. On April 19th and 27th, the RISE researchers discussed a selection of literature on (new) institutional theory. The following presents an extraction of the workshop findings and its implications for RISE management research.

Institutional theory, and neoinstitutional theory in particular, has been one of the most influential approaches to sociology in the past 30 years. Being prominent representatives of this body of literature, Walter Powell and Paul DiMaggio represent the “social constructionist” as opposed to the “rational-choice” version of neoinstitutionalism. As the editors of the seminal book “The New Institutionalism in Organizational Analysis”, they bring together some of the foundational articles in the field and place them in context of the wider organization and sociological theory. In reviewing the book, a number of observations become particularly salient.

Key Finding 1: Core Phenomena and Theoretical Building Blocks
Institutional theory, from a sociological perspective (neoinstitutional theory), emphasizes the role of institutionalized contexts and fields in gaining legitimacy for a firm’s activities from external bodies (Meyer & Rowan, 1977). As such, literature on institutionalism explores the relationship between the organization and its environment. From a institutionalist perspective organizations adopt environmental structures which enables them to conform to the expected behaviour of an organizations within a specific field. Expected institutional behaviours and practices are labelled “rationalized myth”, since their efficacy depends on a collective belief which cannot be objectively evaluated. According to Meyer and Rowan (1977), organizational structures are thus not necessarily designed based on the needs of internal technical operations but derived from the environmental beliefs about the features of a rational and efficient organizational design.
Isomorphism is thereby the umbrella term (DiMaggio & Powell, 1983) that describes a number of fundamental mechanisms of how firms, as a consequence of field-level institutions, incorporate institutionalized rules to facilitate resource attraction, ensure stability, and enhance survival prospects (Meyer & Rowan, 1977). DiMaggio and Powell (1983) identify three isomorphic processes: coercive, mimetic, and normative. Based on these findings, institutional theory not only describes how firms gain legitimacy, but also why they become more similar and homogenous over time with respect to their organizational structures.
At the same time, while in “old institutionalism” researcher tried to explain organizational or institutional change, “new institutionalism” strives for the opposite, in fact, to explore the reasons for stability of organizational design and structure (Powell & DiMaggio, 1991).
However, new institutional theory’s unambiguous focus on homogenity and similarity, leaves open the questions of the role of heterogenity in the process gaining legitimacy. Institutional theory could strongly benefit from insights developed in Actor Network Theoy (ANT) in the version of Bruno Latour and Michel Callon.

Key Finding 2: Sharing the Axiomatic Core or Protecting what is not there?
Based on a set of highly influencial antropologists associated with phenomenology (e.g. Parsons, 1960), ethnomethodology (Garfinkel, 1967; Goffman, 1959, 1977), and also with practice research (Giddens, 1984; Bourdieu, 1990), DiMaggio and Powell suggest a role for the actor within an institutionalized field. However, the inclusion of these authors, and the theory of action itself, appear somehow disconnected from what they present in their book (1991) as the seminal works in new institutional analysis. A positive critique would argue that institutionalist really share the axiomatic core of the theory of action and the respective authors on which it is based. Powell and DiMaggio (in chapter 1 of their book of 1991) complement the early studies of Meyer and Rowan (1977) and DiMaggio and Powell (1983) with a promising layout of a theory of action which cannot be found until that time and which is, unfortunately, hardly taken into focus in today’s research on institutional theory.
The (not entirely) negative account would say that the role of Powell and DiMaggio’s theory of action was to apply in a self-reflective (or maybe unconcious) way what Meyer and Rowan (1977) suggested as the core mechanism to gaining legitimacy: to decouple the technical core (the macro-institutional theory) from the institutionalized and taken-for-granted formal behaviours (the necessity of a micro-foundation within a theory). This allowed them to protect their body of research from being questioned since it took a clearly opposite view on organizational behaviour relative to rational choice theories and intentionality, and also relative to the growing literature on competitive differentiation and variation. This argumentation could explain the enormously comprehensive research program which integrates a number of (commonly perceived as incompatible) positions such as evolutionary theory (Nelson & Winter, 1982), behavioural theory (Cyert & March, 1963), or cognitive theory (Weick, 1995).
In terms of future research, institutional theory still lacks a precise theory of action which elaborates the role of the actor in an institutionalized field. Overcoming the difficulties of combining different levels of analysis would release a number of contradictions in research on institutional theory.

Key Finding 3: Intersections of Institutional Theory with Related Concepts
Stability (and change), as a central and common interest across major theories such as economics, evolutionary theory, knowledge-based views, institutional theory, or cognitive theory and dominant logic, is explained clearly different by these theories. As an example, and in a very generalized form, evolutionary theory is clearly distinct from processes of institutionalization. While evolutionary theory builds on the sequence of variation, selection and retention, strongly framing it as a learning process, institutional theory conceptualizes stability as a conforming, partially mimetic, coercive, or normative behaviour with reference to both the broader environment, and the institutionalized other – thereby pointing to the convergence and similarity of organizations in an institutional field, but also to the aspect of diffusion of institutionalized practices.
Another difference between the two theories can be identified with regard to the levels of analysis. Institutional theory, in particular the new institutionalism based on DiMaggio and Powell (1991) remains clearly on a macro and interorganizational level (and cements its origins in sociology), while evolutionary theory applies the three-phased process on any level, including the cognitive (although such arbitrariness is not a helpful guidance for a researcher).
As a conclusion for relating one theoretical body with another, it is important to distinguish between the central mechanisms proposed by a theory, and its associated terms and labels. The prime interest is not in the vocabulary of a theory (e.g. routines, which doesn’t equal evolutionary theory, or knowledge, which is not equated with a knowledge based view). Rather, the focus lies on the mechanisms based on which the phenomena of interest are explained and discussed.