Institutional Theory

Infusion of Value

Institutional theory is premised on the observation that abstract social structures—such as family, organization, church—tend to acquire meaning and significance that extends beyond their original purpose. Institutionalization is the process by which, over time, routine tasks, organizational structures, or functional positions acquire surplus meaning or value beyond their intended function. Phillip Selznick first articulated this core idea. Selznick was an American sociologist who, in his 1949 study of the Tennessee Valley Authority (a large federal government organization designed to promote conservation as part of the Roosevelt administration’s New Deal) observed that the organization’s survival came at the expense of its original purpose. Selznick’s study offered two key insights that form the foundation of institutional theory. First, he concluded that organizations become infused with significance (meaning and value) that extends beyond their bare functional utility. Second, he observed that as a result of this infusion of meaning and value, there are often unintended consequences to purposive action. Selznick’s work, thus, separated organizational activity into two distinct realms—the technical and rational realm of purposive action and the symbolic and institutional realm of meaning and value.

Diffusion

A related idea is the understanding that new practices are often adopted, not because of their technical outcomes but because they resonate with social and community values. This observation emerged in 1962 through the publication of Everett Rogers’s book The Diffusion of Innovations. Rogers was a professor of rural sociology interested in understanding why some innovations successfully spread and others did not. He observed that adoption of an innovation often depends less on the objective or technical attributes of the innovation and more on the subjective interpretations of the innovation by the adopter. So for example, an indigenous community may refuse to adopt modern health practices (e.g., boiling drinking water) if the reasons for adoption are not communicated in a way that is consistent with the traditional beliefs of that community. Rogers’s identification of different motives for adoption (i.e., technical versus social) and patterns of diffusion of new innovations has been influential in institutional studies of organizations. Researchers have extensively studied the movements of managerial innovations across groups of organizations with the key insight that the adoption of practices often depends on subjective perceptions of conformity to shared values in the broader social or institutional environment within which adoptive organizations exist.

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