Institutional Theories of Organization

Institutional theories of organizations provide a rich, complex view of organizations. In these theories, organizations are influenced by normative pressures, sometimes arising from external sources such as the state, other times arising from within the organization itself. Under some conditions, these pressures lead the organization to be guided by legitimated elements, from standard operating procedures to professional certification and state requirement, which often have the effect of directing attention away from task performance. Adoption of these legitimated elements, leading to isomorphism with the institutional environment, increases the probability of survival. Institutional theories of organization have spread rapidly, a testimony to the power of the imaginative ideas developed in theoretical and empirical work. As rigor increases, with better specification of indicators and models, it is likely to attract the attention of an even larger number of organizational researchers. Institutional theory is inherently difficult to explicate, because it taps taken-for-granted assumptions at the core of social action. The main goal of this review, then, is to make institutional theory more accessible. The review begins with a brief summary of the two current theoretical approaches to institutionalization in organizations, moves to identification of indicators of central concepts, and then progresses to a review of empirical research. It concludes with two short sections, one on points of intersection with other theories of organization, the other on the new institutionalism in economics and political science.