Institutional Theory

Institutional theory examines the processes and mechanisms by which structures, schemas, rules, and routines become established as authoritative guidelines for social behavior. It asks how such systems come into existence, how they diffuse, and what role they play in supplying stability and meaning to social behavior. It also considers how such arrangements deteriorate and collapse, and how their remnants shape successor structures.

One of the dominant theoretical perspectives at the end of the nineteenth century, institutional theory was eclipsed by other approaches during the first half of the twentieth century. In recent decades, however, institutional theory has experienced a remarkable recovery, entering the new century as one of the most vigorous and broad-based theoretical perspectives in the social sciences.

Institutional theory is not a single, unified system of assumptions and propositions, but instead a rather amorphous complex of related ideas—a broad theoretical perspective or family of approaches. Older, nineteenth-century versions built on and incorporated contributions from economists, political scientists, and sociologists. Contemporary versions have drawn renewed energy from developments in cognitive psychology, ethnomethodology, the new cultural studies within anthropology and sociology, evolutionary and transaction-cost economics, and recent advances in social history.

Although diverse, institutional arguments cohere around the central tenet that “institutions matter” in accounting for social behavior. Institutional arguments exhibit a lean common core of assumptions: (1) institutions are governance structures, embodying rules for social conduct, (2) groups and organizations conforming to these rules are accorded legitimacy, a condition contributing to their survival, (3) institutions are characterized by inertia, a tendency to resist change, and (4) history matters, in the sense that past institutional structures constrain and channel new arrangements. Built on this bedrock are diverse approaches that vary along important dimensions: individual actor versus structural approaches, debates over the bases of institutional stability, the role of rational choice versus more relaxed theories of decision making, the relative importance of interests and ideas, and divergent views concerning the appropriate level of analysis.

Contemporary approaches can be roughly categorized into three clusters based primarily on which aspects of governance structures are privileged. Rational-choice theorists emphasize the regulatory aspects of institutions and focus attention on the design and construction of institutional frameworks to support collective action. Normative theorists attend to the ways in which values and commitments generated in interaction shape, undermine, and augment [Page 409]formal and official regimes. And cultural-cognitive theorists stress the importance of widely shared assumptions and beliefs and the construction of social identities as the underpinnings of social order.

Many substantive arenas have been informed by institutional analysis, including modernization processes at the global level, emergence of international regimes, structuring of organizational fields, competition among organizational forms (or populations), design of organizational structures, and the diffusion of innovations among social entities.