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Is the New Institutionalism a Theory? Donald Palmer, Nicole Biggart and Brian Dick 31 INTRODUCTION The new institutionalism (NI) developed in the 1970s at a time when an increasing number of scholars studying organizations began to embrace the notion that much of what happened inside organizations had little to do with the objective tasks in which organ- izations were engaged and much to do with the social relationships in which they were embedded. This focus on the larger social structure in which organizations are situated was a huge intellectual leap over the manage- rialist engineering approach to organizations that accompanied the post WWII economy. Dominated by industrial engineers, organiza- tional analysts had difficulty conceptualizing social elements of organizing beyond the psychological traits of workers and the orga- nizational structures that conditioned their interactions. While some organizations- environments scholars, such as resource dependence theorists and population ecolo- gists, focused on the resource environment of organizations (e.g., Pfeffer and Salancik [1978]/2003; Hannan and Freeman 1977; Aldrich and Pfeffer 1976), proponents of the new institutionalism focused their attention on norms and mandates such as laws and reg- ulations, belief systems, cultural pressures and social comparison processes (e.g., Meyer and Rowan [1977]/1991; Powell and DiMaggio [1983]/1991). The new institution- alism helped to explain why organizations often looked alike, even if they were engaged in quite different activities in varied contexts, and why managers would adopt administra- tive practices developed in dissimilar indus- tries. It recognized that organizing is not only about reaching for technical efficiency in get- ting the job done, but also about presenting one’s organization and management as ‘informed,’ ‘up-to-date,’ and ‘compliant.’ In the 1980s W. Richard Scott wrote an assessment of the new institutionalism, an approach that was very much in ascen- dance at the time. In ‘The Adolescence of Institutional Theory,’ Scott (1987) appraised a theoretical teenager, albeit one with a distinguished ancestry, to assess the NI’s contributions thus far and the potential for further development and intellectual gifts. In concluding his assessment, Scott (1987: 510) wrote that ‘[t]hroughout, I have 9781412931236-Ch31 5/19/08 4:20 PM Page 739

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Page 1: Is the New Institutionalism a Theory? - SAGE Publicationsstudy.sagepub.com/sites/default/files/31 Palmer, Biggart & Dick.pdf · IS THE NEW INSTITUTIONALISM A THEORY? 741 LITCHFIELD

Is the New Institutionalism a Theory?

Donald Palmer, Nicole Biggart and Brian Dick

31

INTRODUCTION

The new institutionalism (NI) developed in the 1970s at a time when an increasingnumber of scholars studying organizationsbegan to embrace the notion that much ofwhat happened inside organizations had littleto do with the objective tasks in which organ-izations were engaged and much to do withthe social relationships in which they wereembedded. This focus on the larger socialstructure in which organizations are situatedwas a huge intellectual leap over the manage-rialist engineering approach to organizationsthat accompanied the post WWII economy.Dominated by industrial engineers, organiza-tional analysts had difficulty conceptualizingsocial elements of organizing beyond thepsychological traits of workers and the orga-nizational structures that conditioned theirinteractions. While some organizations-environments scholars, such as resourcedependence theorists and population ecolo-gists, focused on the resource environment oforganizations (e.g., Pfeffer and Salancik[1978]/2003; Hannan and Freeman 1977;Aldrich and Pfeffer 1976), proponents of the

new institutionalism focused their attentionon norms and mandates such as laws and reg-ulations, belief systems, cultural pressuresand social comparison processes (e.g., Meyerand Rowan [1977]/1991; Powell andDiMaggio [1983]/1991). The new institution-alism helped to explain why organizationsoften looked alike, even if they were engagedin quite different activities in varied contexts,and why managers would adopt administra-tive practices developed in dissimilar indus-tries. It recognized that organizing is not onlyabout reaching for technical efficiency in get-ting the job done, but also about presentingone’s organization and management as‘informed,’ ‘up-to-date,’ and ‘compliant.’

In the 1980s W. Richard Scott wrote an assessment of the new institutionalism, an approach that was very much in ascen-dance at the time. In ‘The Adolescence ofInstitutional Theory,’ Scott (1987) appraiseda theoretical teenager, albeit one with a distinguished ancestry, to assess the NI’s contributions thus far and the potential for further development and intellectual gifts. In concluding his assessment, Scott(1987: 510) wrote that ‘[t]hroughout, I have

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attempted to sound an optimistic note.Institutional theory is at an early stage ofdevelopment. Adolescents have their awk-wardness and their acne, but they also embodyenergy and promise. They require encourage-ment as well as criticism if they are to channeltheir energies in productive directions andachieve their promise.’

Some twenty-five years later, institutionaltheory is still very much with us. No longeran adolescent, it is reaching adulthood (Scottforthcoming) and has become part of theorganization theory community alongsideresource dependency, population ecology,the resource-based view of strategy, and afew other stalwart conceptualizations thathelp us to understand the dynamics of aworld organized into firms, NGOs, agencies,and industries. Indeed, the new institutional-ism is arguably now the dominant paradigmin organization studies (Mizruchi and Fein1999; Gmür 2003). But has its adolescentpromise been realized? Although Jenningsand Greenwood (2003: 201) consider thenew institutionalism to be ‘a mature theory,’they contend that it still ‘relies more on richness and relevance than rigor.’ A morecynical appraisal might be that the new insti-tutionalism represents merely an umbrellafor a diverse array of theory and researchseeking a legitimate pedigree. There aremany ways to assess a theoretical program’sprogress. In this essay we assess the extent towhich the new institutionalism has become a ‘theory’ as opposed to a more loosely organized perspective or framework. Weadopt this metric, because arguably the mostfrequently stated goal of work in our field isto develop theory about organizations ratherthan simply adding to our knowledge ofthem. Indeed, in many journals, the absenceof a theoretical contribution is grounds for asubmitted manuscript’s rejection (cf. thenotice to contributors for AdministrativeScience Quarterly).

We use a conception of theory building ‘in use’ by organizational studies scholars asour benchmark against which to evaluate the new institutionalism. Concrete in-use

conceptualizations are more relevant to practicing organization studies scholars thanare abstract normative models (cf. Cohen1968). We use the conception of theory building advanced by Edward Litchfield andJames D. Thompson, two influential figures inthe emergence of the field of organizationstudies, as our in-use theory building bench-mark. We think that most organization studies scholars have been guided by theirimplicit affinity for this framework. Further,we think it represents the kind of theory building that some contend holds the mostpromise. DiMaggio (1995) has recently identified three types of theory in use, covering law theories, narrative theories, andenlightenment theories, each of which hasstrengths and weaknesses. Covering law theories consist of generalizations thatdescribe the world as we see and measure it; that is, they explain what the world is like. Narrative theories consist of accountsthat explain the way the world works; that is, they explain how and why the world is like it is. Enlightenment theories are complex, defamiliarizing and rich in paradox aimed at clearing away conventio-nal notions to make room for artful and exciting insights; that is, they are ‘surprisemachines.’ DiMaggio contends that the besttheory building approaches tend to be hybrids,which draw on different types of theories in combinations where the strengths of one counterbalance the weaknesses of theothers. Litchfield and Thompson’s suggested mode of theorizing represents a hybrid of the covering law and narrative approaches. We recognize, though, that the Litchfield and Thompson characterization of theory is open to question. Thus, we conclude ourchapter by examining conceptions of theorythat have been offered in opposition to thedominant view: social mechanism, postmod-ernism, and critical realism. In each case, we inquire into the extent to which the new institutionalism has come to resemble a theory in that particular conception’s sense and how these alternatives mightenlighten the NI.

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IS THE NEW INSTITUTIONALISM A THEORY? 741

LITCHFIELD AND THOMPSON’SVISION OF ORGANIZATION THEORY

The first issue of Administrative ScienceQuarterly contained essays by two of thejournal’s founders, Edward Litchfield (1956)and James Thompson (1956). In theseessays, Litchfield and Thompson laid out acommon vision of organization theory thatcontained four elements. Organizationtheory, first, should be composed of abstractconcepts that can be operationalized and pos-tulated relationships that can be empiricallyevaluated. Second, it should be general, tran-scending different types of organizations andcontexts. Third, organization theory shouldbe comprehensive, pursuing multiple levelsof analysis, drawing on a wide array of thesocial sciences, and apprehending the fullrange of behavior in and of organizations.Finally, it should be cumulative, growing inexplanatory power over time.

Concepts and relationships

Litchfield and Thompson complained thatorganization theory in their time was charac-terized by a plethora of vague concepts thatwere ambiguously related to one another andthat researchers often documented empiricalregularities without providing a theoreticalframework within which they could be inter-preted. They contended that organizationtheory should aspire to develop a coherent setof abstract constructs that could be opera-tionalized and postulated relationships thatcould be empirically verified. An examina-tion of Thompson’s ([1967]/2006) classicintegration of contemporary organizationtheory suggests that he at least also envi-sioned organization theory to include not just‘covering laws’ but causal explanations ofsuch relationships. Almost forty years later,Sutton and Staw (1995) presented a strik-ingly similar conception of organizationtheory as a logical framework that explained‘why variables or constructs come about orwhy they are connected’ (1995: 375).

ConceptsThe new institutionalism is characterized bya growing number of concepts. These con-cepts can be grouped into three categories:institutional structures, attributes, andprocesses. We review what we believe areseveral key new institutional concepts, withan eye to indicating the extent to which theyare well elaborated and operationalized. Wedo not aspire to completeness. There aremany more new institutional concepts thanthose we consider in this section of the chap-ter. Rather we aspire to representativeness,with respect to the level of precision withwhich the concepts have been elaborated andoperationalized.Structures The most fundamental NI struc-tural concept is the ‘institution,’ which corre-sponds to a way of organizing human activitythat is stable, resilient, and hence relativelyenduring because it is considered appropriateby relevant actors, in particular powerfulones. Institutions can have a sense of perma-nence that makes it almost unimaginable thatthey could ever be different or might at onetime not have existed. The taken-for-grantednature of institutions is part of their power –they are often not called into question orexamined for their efficacy or appropriate-ness (Meyer and Rowan ([1977]/1991: 44–5;Scott forthcoming). According to Scott(2001: 47–70), there are three broad classesof institutional structures. Regulative struc-tures are generally formal and explicit,legally sanctioned, and indicated by rules andlaws, often enforced by the state. Normativestructures are based on the value or moralexpectations associated with roles and, in the contemporary world, are generally associated with processes of professionalaccreditation and certification. Finally, cultural-cognitive structures are based on theshared understandings of actors, which aregenerally taken-for-granted and legitimatedby the larger cultural and institutional milieu(e.g., what a ‘good’ person should do in a sit-uation, or what a ‘just’ solution is in a dis-pute). Specific institutional structures, suchas ‘conceptions of control,’ ‘myths,’ ‘logics,’

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and ‘recipes’ occupy an ambiguous relation-ship with respect to these three categories,seemingly spanning two or all three cate-gories. For example, a particular conceptionof justice can find expression in culturalforms and be codified in law.

There is a considerable amount of researchthat measures the regulative dimension of institutional structures. For example,research on the proliferation of the financeconception of control examined the spread ofthe multidivisional form (Fligstein 1990).There is also much work that taps the norma-tive dimension of institutional structures. Forexample, research on the evolution of thenormative framework that underpins themodern market for corporate control exam-ined changes in the language used in thebusiness press to describe hostile takeoversand their principal players (Hirsch 1986).There is even research that attempts to mapboth the regulative and normative dimen-sions of institutional structures. For example,research on the proliferation of the share-holder model of governance in Germanyexamined the use of language that privilegedstock holder interests in corporate annualreports and tracked the adoption of governance structures and accounting sys-tems that reflect those interests (Fiss andZajac 2004). But work that explores the cognitive expression of institutions is justbeginning. One interesting study in this veinexamines the emergence of the cognitiveconstruct ‘nanotechnology’ that accompa-nied the emergence of the industry that wenow know by this name (Grodal 2006; alsosee George, Chattopadhyay, Sitkin, andBarden 2006).

Another fundamental NI structural con-cept is the ‘field,’ which corresponds to thedomain within which a particular institutionoperates. It consists of a group of organiza-tions that interact with one another and thatare subject to the same regulative, normative,and cognitive institutional constraints. Fieldsdiffer from ‘populations’ and ‘industries,’which are composed of organizations that aresimilar to each other (importantly, with

respect to their relations to other organiza-tions). Fields are also different from ‘networks,’ which are composed of organiza-tions that are not necessarily subject to thesame institutional constraints. Early propo-nents of the new institutionalism distin-guished between two types of fields:‘technical’ and ‘institutional’ (Scott andMeyer [1983]/1991). While in technicalenvironments rewards are accrued by organ-

izations for ‘effective and efficient control of their production systems,’ institutional environments require that organizations conform to rules and regulations ‘to receivesupport and legitimacy’ ([1983]/1991: 123).However, as we note below, it is noteworthyof the new institutionalism’s expanding com-prehensiveness that, later on, this distinctionwas put into question.

Many proponents of the NI consider thefield to be a unique and crucial concept ofthis approach. DiMaggio has argued that ‘theorganization field has emerged as a criticalunit bridging the organizational and the societal levels in the study of social and com-munity change’ (quoted in Scott 2001: 148).Davis and Marquis (2005a) contend that it isthe level of analysis most likely to give rise toimproved understanding of modern organiza-tions. Thus it is ironic that fields are seldomcharacterized precisely. To the best of ourknowledge, most NI studies do not go togreat lengths to establish the boundaries ofthe fields they study. More often than not,fields are defined as coterminous with moretraditional aggregates such as industries (cf. Thornton and Ocasio 1999) or groups oforganizations listed in standard annuals suchas the Fortune 500 (Fligstein 1990).Attributes The most fundamental NI attributeis ‘legitimacy,’ which corresponds to theextent to which a structure or practice resem-bles an institution. The more legitimate astructure or practice is considered by actorsin general and powerful actors more specifi-cally, the more reasonably the structure orpractice can be called an institution. Theextent to which structures and or practicesare considered legitimate have been for the

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most part only measured indirectly by theextent to which the structure or practice isprevalent in a field (cf. Fligstein 1990) or bymeasuring the extent to which organizationsthat adopt the structure or practice receiveresources from powerful actors (Baum andOliver 1991, 1992). However, a few scholarshave attempted to measure legitimacy moredirectly, by assaying explicit endorsementsof organizations that conform to institutionalexpectations by key gatekeepers such as regulators and media representatives(Deephouse 1996).Processes The most fundamental NI processis ‘institutionalization,’ which roughly corre-sponds to the mechanisms through which away of organizing becomes accepted asappropriate by numerous and/or powerfulactors. DiMaggio and Powell ([1983]/1991)have formulated a series of concepts thatdescribe the way institutionalized elementsproliferate (coercive, normative and mimeticisomorphism). Following Berger andLuckman (1966), Tolbert and Zucker([1996]/1999) identify three processesinvolved in institutionalization. The firstprocess, ‘habitualization,’ results in the formalization of new structural arrange-ments. ‘Objectification’ refers to the devel-opment of a social consensus with regard tothe value of these new arrangements. And,finally, ‘sedimentation’ (or full institutional-ization) ‘is characterized both by the virtually complete spread of structures acrossthe group of actors theorized as appropriateadopters, and by the perpetuation of structures over a lengthy period of time’([1996]/1999: 178). The related concepts of ‘institutional reproduction’ and ‘de-institutionalization’ signify mechanismsthrough which institutions are maintainedand undermined. Oliver (1992) has elabo-rated a series of conditions that she contendsundermine institutional regimes. Jepperson(1991: 152) also recognizes the process of‘reinstitutionalization,’ which is illustratedby the ‘exit from one institutionalization, andentry into another institutional form, organ-ized around different principles.’

A variety of historical and quantita-tive empirical studies have examined how strategies and practices become institu-tionalized. For example, researchers haveshown that actors, both collective and individ-ual (Battilana 2006; Garud, Jain, andKumaraswamy 2002; Greenwood, Suddaby,and Hinings 2002; Macguire, Hardy, andLawrence 2004), can play the role of ‘institu-tional entrepreneur’ (DiMaggio 1991;Fligstein 1997; Greenwood and Suddaby2006; Leca and Naccache 2006) advocatingand disseminating a particular structure.Business schools, for example, have taughtorganizational practices as ‘appropriate’ or‘modern’ and encouraged their adoption.Individuals have championed structural inno-vations and sometimes have been successful(Selznick 1957; Hirsch, 1975; Garud andKumaraswamy 1995). Actors, however, differin their capacity to bestow legitimacy on away of organizing. High status actors, in par-ticular those who enjoy high performance andmaintain affiliations with other high statusactors (such as top business schools) andpowerful actors who occupy positions informal hierarchies (such as government offi-cials) or who possess valuable and scarceresources (such as Chief Financial Officers),play particularly important roles in institu-tionalizing ways of organizing (Rao, Greve,and Davis 2001). More recently, social move-ment theorists have also used these ideas tounderstand the success and failure of thoseseeking to promote or undermine institutions(Davis, McAdam, Scott, and Zald 2005).

RelationshipsThe new institutionalism is characterized bytwo types of relationships: tendencies andcausal relations.Tendencies Proponents of the NI recognizetwo kinds of tendencies. The first type of ten-dency refers to developments that tend tounfold over time. For example, proponents ofthe new institutionalism postulate that organ-izations tend, over time, to become moresimilar to one another. That is, they tend tobecome ‘isomorphic’ even when these

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changes do not increase organizational effi-ciency. DiMaggio and Powell ([1983]/1991)have identified three types of isomorphicpressures. Coercive isomorphism ‘resultsfrom both formal and informal pressuresexerted on organizations by other organiza-tions upon which they are dependent and bycultural expectations in the society withinwhich organizations function’ ([1983]/1991:67). Regulative structures may demand,through the force of law for example, thatorganizations adopt affirmative action prac-tices. Very different organizations will thushave similar sorts of human resources unitsand practices in response to this outside reg-ulatory pressure (Sutton, Dobbin, Meyer, andScott 1994). While changes in organizationsresulting from coercive isomorphism gener-ally arise from controls placed on organiza-tions by the state, ‘normative isomorphism’typically arises from professionalization,similarities in formal education and profes-sional networks, which results in the stan-dardization of organizational responses.Accounting firms and hospitals in differentmarket settings, and with different special-izations, may end up looking much like other accounting firms and hospitals becausethat is what is sanctioned by their profes-sional certification bodies (Abbott 1983;Greenwood et al. 2002; Gendron, Suddaby,and Lam 2006; Scott, Ruef, Mendel, andCaronna 2000). Finally, ‘mimetic isomor-phism’ occurs when organizations face environmental uncertainty and so mimic oneanother, conferring on one another a degreeof legitimacy, as a solution to this condition.Copying the structure and practices of other organizations allows organizationsto be mutually understood, as well as under-stood by outsiders when there is cognitiveuncertainty. Adopting the symbols, language,structures and practices of other organiza-tions allows new or transforming organiza-tions to identify themselves institutionally as a college textbook publisher (Levitt andNass 1989), museum (DiMaggio 1991) or school (Meyer and Rowan 1978; Meyer 1977).

New organizational forms developing out-side of institutionalized norms, for examplefor-profit higher educational systems, mustorient themselves in regard to accepted formsand practices. All three processes are impor-tant for understanding how institutionalizedcomponents proliferate. A large number ofempirical studies have charted the emergenceof institutions over time (see citations in thesection immediately above). However, thesestudies have disproportionately focused uponmimetic processes as the mechanism drivingisomorphism (Mizruchi and Fein 1999).Furthermore, while one could imagine thedegree of isomorphism to vary across organi-zational fields, proponents of the new institu-tionalism have not identified variables thatregulate the extent to which these tendenciesare exhibited.

The second type of tendency designatescharacteristics that are time invariant. Forexample, the NI postulates that when institu-tional elements are incorporated into anorganization, they tend to be ‘loosely cou-pled’ with the organization’s technical core(Meyer and Rowan [1977]/1991; for a cri-tique see Tyler 1987). While one could imag-ine the degree of loose coupling betweeninstitutional and technical elements to varyas a function of other conditions, proponentsof the new institutionalism have rarely exam-ined this potential problematic (cf., however,Orton and Weick 1990). Early studies onloose coupling focused on the not-for-profitsector, looking at, for example, educationorganizations (Meyer 1977; Meyer andRowan 1978; Weick 1976; for criticism seeLutz 1982) and the criminal justice system(Hagan, Hewitt, and Alwin 1979).Subsequently, the new institutionalism beganto look at the for-profit sector. Someresearchers have examined what might beconsidered the ceremonial adoption of legiti-mate practices, such as the employment ofnew accounting standards (Mezias 1990) orstock buy-back programs (Westphal andZajac 2001). Others, though, have examinedthe adoption of substantively significantstructures and practices in the for-profit

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sector, such as the adoption of the multidivi-sional form and diversifying acquisitions(Fligstein 1985, 1987; Fligstein and Dauber1989; Fligstein and Freeland 1992; Palmer,Barber, Zhou, and Soysal 1995). For a while,the concept of loose-coupling appeared todwindle in importance. In the process, theconcept looked like it would be transformedfrom a largely explanatory framework to amore strategic one, which offers managerspractical insights for managing their environ-ments, as evinced in research on the relation-ship between entrepreneurial firm linkagesand IPO success (Stuart, Hoang, and Hybels1999). However, there has recently been anoutpouring of studies that have examinedloose-coupling as an explanatory concept inthe for-profit sector (e.g., Brandes, Hadani,and Goranova 2006; Christmann and Taylor2006; Fernandez-Alles, Cuevas-Rodriguez,and Valle-Cabera 2006; Fiss and Zajac 2006;Stevens, Steensma, Harrison, and Cochran2005), indicating that the concept will con-tinue to play more than just a strategic role.Causal relationships The new institutional-ism’s most fundamental causal relationshipis that between institutionalization, legiti-macy, and beneficial organizational out-comes (birth, the acquisition of resources,high performance, and survival). The rela-tionship between institutionalization andlegitimacy is often treated as definitional (seeSuchman 1995 for a critical discussion).Indicative of this, the many grammaticalforms of institution (institutional, institution-alized, institutionalization) are used inter-changeably with the various forms oflegitimacy (legitimate, legitimized, legiti-mating, etc.). However, one study of commercial banks demonstrated that theadoption of institutionalized practices (the adoption of asset strategies prevalent inthe industry) leads to increased legitimacy(Deephouse 1996). The predicted relation-ship between being institutionalized andlegitimate on the one hand and enjoying ben-eficial organizational outcomes on the other,though, has been examined in considerabledepth. And a substantial body of research

testifies to the fact that the more institution-alized and thus legitimate an organizationalstructure or process is, the more beneficialoutcomes organizations enjoy by embracingthem (see, for example, Baum and Oliver1991; Baum and Oliver 1992; Human andProvan 2000; Ruef and Scott 1998; Singh,Tucker, and House 1986; Zucker 1987).

Another important causal relationship pertains to the moderating effects of uncer-tainty on the relationship between institutional conformity, legitimacy, andorganizational outcomes. Proponents of thenew institutionalism believe that the moreuncertainty there is about the efficiency char-acteristics of alternative forms of organizing,the less impact those efficiency characteris-tics will have on the choice of organizingform and the more impact that institutionalforces will have on this choice (Powell andDiMaggio [1983]/1991). This postulatedrelationship is arguably one of the new insti-tutionalism’s most novel aspects, one whichsets it apart from economic and functionalistsociological explanations of organizationalbehavior. It suggests that the adoption ofinstitutionalized elements can benefit organi-zations, even if it does not increase the effi-ciency and/or effectiveness of (indeed, evenif they inhibit the efficiency of) the genera-tion of products and services, because theefficiency and/or effectiveness characteris-tics of alternative modes of organizing areoften unknown (and partly because institu-tional elements tend to be loosely coupledwith an organization’s technical core). A number of studies presented evidence sug-gestive of the moderating impact of uncer-tainty (cf. Haunschild and Miner 1997).

AssessmentThis discussion suggests that the new institu-tionalism has come a long way with respectto the articulation of measurable concepts(pertaining to structures, attributes, andprocesses) and the elaboration of empiricallyverifiable postulated relationships. This con-clusion is echoed by Scott (forthcoming) inhis stocktaking of the new institutionalism.

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He argues that the new institutionalism hasmoved ‘from looser to tighter conceptualiza-tions.’And he argues that the new institution-alism has moved from elaborating simple tomore complicated relationships; specifically,‘from determinant to interactive arguments.’And he contends that this has happenedpartly by moving ‘from assertions to evi-dence.’ While we identify specific gaps inconceptual development and empirical vali-dation, we suspect that progress towards fill-ing these gaps will be made in the comingdecades.

Still, we think that at least one questioncan be raised about this dimension of the newinstitutionalism’s development as a theory.More than a few of the concepts and relation-ships that the new institutionalism posits areborrowed from other theories. Indeed, theconcept of ‘legitimacy’ is central to manyother theories, going as far back as MaxWeber’s ideas on systems of imperative coor-dination (1968: vol. 1) and Parsons’s elabora-tion of what substantively became known asstructural functionalism (e.g., 1951: 348–59,1956a, 1956b, 1961), and as recently asmodern management theories such as Pfefferand Salanciks’s ([1978]/2003) resourcedependence perspective. Similarly, the con-cept of ‘uncertainty’ is central to decisiontheory (March and Simon [1953]/1993;Cohen, March, and Olsen 1972), contin-gency theory (Thompson [1967]/2006;Lawrence and Lorsch 1967), and (again) theresource dependence perspective. The newinstitutionalism also borrows postulated rela-tionships from other theories. For example, itis difficult to distinguish between coerciveinstitutional pressures and resource depend-ence-based power. Similarly, it is difficult todistinguish mimetic isomorphism from inter-organizational learning and other diffusionprocesses. The argument that uncertaintyincreases the salience of institutionalprocesses parallels arguments that uncer-tainty enhances the salience of status andsocial comparison processes. Finally, therehave been attempts to borrow other concepts,such as ‘power’ from other theories (for a

discussion of power in organization studiessee Hardy and Clegg [1996/1999]). Thisraises the question of the extent to which thenew institutionalism in some cases representsa new bottle for old wine.

General theory: organizational type, time, and space

Litchfield and Thompson complained thatorganization theory in their time was frag-mented into separate theories for differentkinds of organizations: military organiza-tions, educational organizations, governmen-tal organizations, and business organizations.They advocated the development of generaltheory, by which they meant theory that wasapplicable to multiple types of organizationsand presumably in multiple times and places.

The new institutionalism began as abehavior- and context-specific theory. It wasdeveloped to explain the ceremonial adop-tion of structures and practices by organiza-tions situated in non-market environments,contexts in which such inefficient structuresand practices could survive. Thus itexplained why public schools adopted educa-tional reforms in which teachers wererequired to develop elaborate lesson plans, anorganizational practice that was both rationaland legitimate, but these lesson plans borelittle relation to what teachers actually did intheir classrooms (Meyer 1977; Meyer andRowan 1978). Proponents of the new institu-tionalism at this time surrendered analysis ofnon-ceremonial forms in market contexts toeconomists. Over the years, proponents ofthe new institutionalism have continued toexamine adoption of organizational elementsthat are not tied to an organization’s technicalcore (e.g., charitable giving) in non-marketcontexts (e.g., the corporate philanthropyfield). However, it has also become increas-ingly more general in several ways.

Perhaps most important, the NI hasincreasingly been employed to analyze the adoption of more pragmatic structuresand practices by for-profit organizations.

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The new institutionalism expanded its scopeby developing arguments that characterizedmarkets as fundamentally (albeit, variably)uncertain and by characterizing legitimacy asan attribute that can increase a firm’s accessto valued resources and thus improve its per-formance, in the process transforming theconcept of efficiency (cf. Fligstein 1990).Two important theoretical pieces summarizethe generality of the new institutionalism inthis respect. In his stock taking of the thenadolescent neo-institutional approach, Scott(1987) jettisoned the distinction betweentechnical (market) contexts and institutionalones and embraced a perspective that viewedmarket and non-market contexts simply asdifferent institutional spheres. More recently,Biggart and Delbridge (2004) developed aclassification scheme of different kinds ofmarket institutions. In their typology marketsare not a single institutional type. Rathermarkets have four qualitatively differentinstitutional expressions, depending onwhether they emerge in social environmentswhere instrumental or value-based substan-tive rationality dominates decision makingand where social action is particularistic oruniversalistic (oriented towards individualcharacteristics or supra-individual princi-ples). Social environments vary along theinstrumental-substantive rationality dimen-sion and the universalistic-particularisticdimension and result in four logically differ-ent institutional settings: price, communal,moral, and associative economic orders withvery different hypothesized structures anddynamics. Rather than seeing the market asone historically developed institutional formfor organizing exchange, Biggart andDelbridge argue that economic exchangerelations can be institutionalized in quite different ways. This classification systemopens up the possibility of economic theorytesting, and also for seeking other forms ofinstitutional types, for example of health caresystems or educational structures.

Ruef and Scott’s (1998; Scott et al. 2000)empirical analysis of health care systems further expanded the generality of the new

institutionalism by explicitly taking intoaccount the temporal dimension. They exam-ined how the institutional context in thehealth care sector evolved over time, makingdifferent kinds of governance arrangementsmore or less advantageous. Similarly,Thornton and Ocasio (1999) demonstratedhow the institutional context in the publish-ing industry changed over time from a familylogic to a market logic, altering the condi-tions that made corporate acquisitions desir-able. And Dobbin (1997, 2000) documentedhow the institutional context in the US railroad industry changed as the result ofalterations in anti-trust policy, shifting theconditions that made railroad foundings andacquisitions in that industry more or lesslikely.

Finally, there is now a growing body ofresearch that expands the generality of thenew institutionalism along the spatial dimen-sion. This work examines different nationalcontexts, which can vary with respect to thetypes of sectors that dominate society (state,market, and mixed) and with respect to thecharacteristics of those sectors (types of mar-kets). Works by Orrù, Biggart, and Hamilton(1997) and Biggart and Guillén (1999)demonstrate how variation in the institutionalcontext of Asian economies has generateddifferent market structures and performance.Guillén and his associates (Guillén 2000;Guler, Guillén, and Macpherson 2002) haveshown how variation in the institutional con-text of developing economies has generateddifferential rates of adoption of work processreform and hostile takeovers.

AssessmentWe think that the new institutionalism is nowa truly general framework, in that it can beused to explain both ceremonial and substan-tive behavior in complex organizations of alltypes (i.e., in both non-market and marketenvironments, and in different types ofmarket environments) in virtually all timesand places. This is an impressive achieve-ment. With this said, we discern a tensionbetween the forces seeking to make the new

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institutionalism more general (identifiedabove) and those seeking to preserve its sen-sitivity to context.

A major appeal of the NI is its rejection ofthe often abstract character of much organi-zation theory (Davis and Marquis 2005a).Early organization theorists aspired to char-acterizing organizations according to con-structs such as technology, size, andcentralization, irrespective of environmentalcontext. A subsequent wave of organizationtheorists aspired to characterize organiza-tions according to their environments, butthey characterized organization environ-ments in categories such as ‘munificence’and ‘dynamism’ that ignored more fine-grained dimensions of context. Many modernorganization theorists have continued thistendency (Hannan and Freeman 1977; Burt1980). The proponents of the NI have takeninto account the context in which organiza-tions are situated to a much greater extentthan the advocates of other theoreticalapproaches; considering not just the materialrelationships in which organizations areembedded but the normative and cognitiveenvironment as well. But characterization ofan organization’s normative and cognitiveenvironment requires non-positivist modesof analysis, such as historical and interpreta-tive methods, which Ventresca and Mohr callthe ‘new archival project’ (2002). Suchmodes of analysis tend to produce conclu-sions that are highly industrially, historically,and spatially specific. Exemplary studies inthis vein include Mohr and Duquenne(1997), DiMaggio and Mullen (2000),Spicer, McDermott, and Kogut (2000) andKogut and Spicer (2002). Thus, the morecontext-specific NI’s analyses are, the lessgeneralizable its insights tend to be.

Comprehensive theory: disciplines,levels, and substantive areas

Litchfield and Thompson argued that organi-zation theory should aspire to comprehen-siveness. By this they meant three things.

First, Litchfield and Thompson argued thatorganization theory should draw on the fullrange of social science disciplines. This argu-ment laid the foundation for the two addi-tional contentions. Second, they thought thatorganization theory should operate at threelevels of analysis – the individual, the organization, and the environment. Third,they thought organization theory shouldapprehend the many dimensions of theadministrative process – decision making,implementation, and learning.

DisciplinesProponents of the new institutionalism, likethe proponents of many other theoretical per-spectives in organization studies, have drawnheavily on sociological theory. Scott (2005)recently located the roots of new institution-alism in the works of classic social theoristsMarx, Durkheim, and Weber. The notion thatorganizations operate on an institutional levelhas its modern origins in Selznick’s (1948,1949) path-breaking study of the TennesseeValley Authority, which showed how theauthority’s environment influenced the goalsit pursued, shifting them from a progressiveto a more conservative agenda. Parsons’s(1956a, 1956b) explicitly theorized the insti-tutional level of analysis in his early outlineof a theory of organizations. Stinchcombe(1965) exploited this basic model when hedetailed how organizations are constructed ofelements in their surrounding social structureand that this imprinting is resistant to change.

The new institutionalism also has roots inthe work of Berger and Luckmann’s TheSocial Construction of Reality (1966),which, put crudely, advanced the notion thatthere is no reality beyond what we manufac-ture and agree upon together. This notion hadwide-ranging effects in social thought, butonly in macro-units of analyses among newinstitutionalism scholars. The notion of insti-tutions as inter-subjectively meaningfulsocial constructions permeated NI studies at the levels of the organization, field, and global systems, but few NI scholars have elaborated the implications of this view

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at a micro-level. Institutions are by definitionconstructs that are only visible when enactedby individuals in social settings, includingorganizations. However, those interested inmicro-processes in organizations such asdecision-making and identification processes(Elsbach and Kramer 1996) have largelyapproached these dynamics from the per-spective of individual psychology.

In what ways can we think of individualsenacting institutions? Biggart and Beamish(2003: 257) argue that conventionalizedactivities, for example routine ways ofmaking and justifying decisions, are actually‘institutions writ small.’ Conventions aretaken-for-granted and socially efficient waysof enabling actors to coordinate with andevaluate each others’ actions, not only in themoment, but over time as a socially legiti-mate pattern. According to Palmer andBiggart (2002), because organized ‘action iscollective, situations must be interpreted iteratively in mutually intelligible ways,therefore developing and utilizing institu-tionalized conventions’ may be a solution toindividuals’ uncertainty in ambiguous set-tings. Institutionalized organizations are infact bundles of conventions about decision-making rules and other organizational routines that have congealed into structuralforms.

Social construction as both a concept andas a process for study has had far more devel-opment in other areas of the social sciences,including anthropology and communica-tions. The analysis of micro-social processeshas traditionally been the purview of tradi-tions rising out of pragmatism, particularlysymbolic interactionism, but also the Frenchconventions school (also known as the neweconomics of conventions), and in theScience and Technology Studies tradition ofthe dynamics of scientific discovery andpractice (Latour and Woolgar [1979]/1986;Latour 1987; Pickering 1992). These relatedperspectives have found their way into orga-nizational studies recently through the analy-sis of technological artifacts in organizedsettings, artifacts that become imbued with

collective meanings that allow socialprocesses to develop, stabilize, institutional-ize, and change in organized settings, forexample Barley’s (1986) study of the intro-duction of CT scanners into radiologydepartments demonstrated the disruption ofestablished interactional and authority patterns. New machines demanded new prac-tices and created opportunities for subordi-nates to become experts and reverse roleswith superiors. With time, new practices androles were institutionalized. Similarly,Bechky (2003) examined how occupationalcategories and boundaries are negotiatedthrough material technologies. She foundthat engineering prototypes and technicaldrawings used by a semiconductor firm wereimbued with meanings. Artifacts symbolizedand structured relations between groups ofassemblers, technicians, and engineers.

Although they do not claim to be part ofthe new institutionalism, there are logical andtheoretical links between these scholars andinstitutional theory. When meanings crystal-lize in objects and communities of practicesuch as radiologists and hardware designersthey are in the process of becoming institu-tionalized (Biggart and Beamish 2003). Tothe extent that the new institutionalism wantsto claim to be a comprehensive theory thatcan operate at all units of analysis, it mustdevelop a micro-logical orientation thatshows the emergence of meaning, its devel-opment into inter-subjectively agreed-uponclassifications, definitions, and values, andthe development of structures that emergefrom these understandings. Psychology and economics, by themselves, predicated asthey are on methodological individualism,cannot conceptualize the shared and taken-for-granted meanings that are central to newinstitutionalism.

One can imagine five lines along which amicro-NI might develop. First, a micro-NIcould look at traditionally psychologicalareas of investigation such as employeeselection, work design, training and leader-ship to examine how differently institutional-ized firms develop conventional solutions

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around these issues. Second, it could theorizethe role of individuals as institutional entre-preneurs to develop a truly institutionaltheory of leadership (cf. Biggart andHamilton 1987; DiMaggio 1991; Hargadonand Douglas 2001). Third, a micro-NI couldexamine the cultural-cognitive componentsinvolved when decision makers attempt to‘read’ the institutional environment forstrategic opportunities and threats (George et al. 2006). This line of research, whilerooted in the psychology of decision making,opens the door to incorporating interpretiveprocesses that decode social meanings.Fourth, it could pursue a comparative analy-sis of conventions in different institutional-ized fields that might suggest ways in whichorganizational actors find solutions to prob-lems of organizing, for example, how archi-tects in state-directed building programsconstruct building plans in comparison tothose in industrialized arenas of the same era(Guillén 2006). Finally, a micro-NI coulddevelop a more active understanding of institutionalization processes (cf. Zucker[1977]/1991). At present institutional theoryis relatively static, assuming the processesfrom which structures emerge (see Barleyand Tolbert 1997 for a discussion of thisproblem). An interactive NI offers the prom-ise of seeing how institutions emerge out ofnegotiation, conflict, and collaboration.

There is also work in economics uponwhich new institutionalists might draw.Institutional thinking in economics datesback to the work of Veblen, Commons,Mitchell and Coase, who looked at the indi-vidual to see how socialization and organiza-tional arrangements shape the choices he orshe makes (see Hodgson 1998 andRutherford 2001 for more on institutionaleconomics). These new economists differedfrom neoclassical economists in not assum-ing that actors have fixed preferences, butargued that their preferences may be sociallyformed and influenced by the context inwhich they find themselves – for example ina newly emerging middle class (Veblen[1899]/1979). This strain was developed by

Coase (1937) and extended and codified byWilliamson (1975, 1981). The central idea inthis line of inquiry is that economic transac-tions (not producers [the source of supply] orconsumers [the source of demand]) are thefundamental unit of analysis in economics.The institutional structures through whichtransactions are governed are the fundamen-tal variables. Put bluntly, institutional struc-tures persist to the extent to which they areefficient means of governing transactionsunder particular conditions (which pertain touncertainty, asset specificity, etc.). Nelsonand Winter (1982) have developed a morenuanced brand of institutional economicswhich emphasizes the path-dependentprocess through which institutional changeoccurs, a path in which new forms emergefrom existing ones.

This work adds an important caveat to ear-lier institutional economics: while institu-tional structures persist to the extent to whichthey are efficient, a structure’s efficiencycharacteristics are only evaluated withrespect to concrete alternative structures inthe market at the time. Thus, persisting insti-tutional structures are not optimally efficient,but only relatively so. As such, it brings eco-nomic institutionalism in closer correspon-dence with sociological institutionalism.Perhaps the best example of this line of workis the simultaneously historical and gametheoretic comparative analyses of economistAvner Greif (1994). Greif examined two premodern trading societies with differentinstitutional structures, the 11th-centuryMaghribi traders living in a Muslim worldand the 12th century Genoese traders whichwere part of the Latin world. The Maghribisociety was a collectivist one, with informa-tion shared and punishments collectivelyenforced, and the Genoese society wasdecidedly individualist. Both faced thedanger of embezzlement when using over-seas agents but resolved this principal–agentproblem with different institutional meansand each society created practices and sanc-tions consonant with their cultures. Greifgoes on to argue that differently efficient

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solutions cannot be changed because of theeffects of path dependence. The work ofMilgrom and Roberts (1992) also approachesissues of interest to the NI. They ask whyorganizational forms take the shapes thatthey do. This is a fundamental theory of thefirm question posed by Coase (1937) andWilliamson (1975) but like Greif they findthe answer in the structure of social relation-ships between firms, not assuming that allcontracts are arms-length but may bealliances or relational contracts.

The new institutionalism in organizationstudies, though, has not much benefited fromthe resurgence of institutional thinking ineconomics. Economic institutionalism regis-tered an impact within organization studiessoon after it experienced its resurgence ineconomics (cf. Walker and Weber 1984). Andit has had a substantial impact in the strategyarea in recent years (cf. Mayer and Salomon2006). However, economic institutionalismis typically presented as a stand-aloneapproach, rather than as a component of thenew institutionalism as we have character-ized it here. We suspect that this is becausethe long-standing antagonism between eco-nomics and sociology (the primary founda-tion of NI) has spilled over into the field oforganization studies. Indeed, many lamentthe growing influence of economic thinkingin organization science (Pfeffer 1993, 1995;Hirsch, Michaels, and Friedman 1987;Hirsch, Friedman, and Koza 1990). However,as economists ‘relax’ assumptions of individ-ual omniscience and rationality, some bor-rowing from NI is likely as well.

Proponents of the new institutionalismhave also drawn on work in political science.The earliest political scientists focused pri-marily on the institutional structure of politi-cal life; in particular, the structure ofgoverning bodies of the state, political par-ties, and trade unions. This institutional focuswas rejected by what might be called modernpolitical science, which to a large extentfocuses on voter behavior and which recentlyhas drawn on micro-economics in the formof rational choice theory. Recently, though,

institutional thinking is enjoying somethingof a renaissance in political science, in part asa critique of the methodological individual-ism of rational choice. Robert Lieberman’s(2002) reconciliation of ideational and insti-tutional approaches with economicallyinspired ones was one of the ten most down-loaded articles in political science between2002 and 2004 (APSA 2005: 13). New col-lections of work are appearing that competewith rational choice approaches (Lecours2005; Mahoney and Rueschemeyer 2003).Institutional analysis in political sciencenever disappeared from European thoughtwhere historical and ideational approacheshave always been important. Many of thesepolitical science analyses are using new insti-tutionalism to account for the possibilitiesand difficulties for institutional change insettings such as post-colonial multiculturalCanada and the formation of the EuropeanUnion.

The NI approach in organization studieshas benefited from the resurgence of institu-tional thinking in political science. Indeed,one might say that the regulative pillar ofinstitutional theory is to a large extent builtupon the theoretical foundation of the institu-tional wing of political science. Certainly thework of several new institutionalists is heav-ily influenced by institutional thinking inpolitical science (cf. Campbell 1998;Clemens 1993). And some new institutional-ist scholars have done more than simplyborrow from institutional scholarship inpolitical science; they have developed ideasthat suggest the limitations of that scholar-ship. Perhaps most important, Edelman(1992) has shown how regulative structurescan be considered endogenous products ofinstitutional development in the area of equalopportunity legislation and policy. With thissaid, the new institutionalism’s incorporationof institutional thinking in political science isfar from complete. This is perhaps most evi-dent in the failure of the new institutionalismto develop a unique understanding of power,despite the repeated exhortations of leadingfigures in the field to do so (DiMaggio and

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Powell 1991: 30–1; Hirsch 1997; Perrow1985). We think that new institutionalistsmight make headway in addressing this deficiency by drawing on radical analyses of power within political science and political sociology that characterize it as amultifaceted phenomenon that includes sym-bolic and cognitive elements (cf. Gaventa1982; Lukes 2005).

Levels of analysisProponents of the new institutionalism haveclearly focused primarily on the environmen-tal level of analysis, viewing the environmentas the source of rationalized myths that couldbe used as building blocks by new organiza-tions or as material for change by existingones. Soon thereafter, proponents of the newinstitutionalism advanced a new level ofanalysis within the broader environment, the‘field’ (DiMaggio and Powell [1983]/1991).As indicated above, fields group organiza-tions according to their tendency to establishrelationships with one another and accordingto their regulation by a common set of insti-tutional constraints. New institutionalistsalso recognize another level of analysis sim-ilar to the organizational field but operatingat a higher level of aggregation: the societalsector. Scott and Meyer ([1983]/1991: 117)define the societal sector as: ‘(1) a collectionof organizations operating in the samedomain, as identified by the similarity of their services, products or functions, (2) together with those organizations thatcritically influence the performance of thefocal organizations ... The adjective societalemphasizes that organizational sectors inmodern societies are likely to stretch fromlocal to national or even international actors.’The concepts of field and societal sectoremerged out of role-set theories in sociologywhere individuals are seen in terms of theroles and relationships they have with eachother, not just as a collection of individuals.Organization fields and sectors are similarlycommunities of interconnected firms or otherforms of organization such as suppliers orregulatory agencies.

Subsequently, however, some proponentsof the new institutionalism began to theorizean even higher level of analysis: the global orworld system. These theorists, most notablyJohn W. Meyer and his associates (Boli,Ramirez, and Meyer 1985; Meyer andJepperson 2000; Ramirez and Boli 1982;Ramirez and Meyer 1980) contend that insti-tutionalized forms and practices may developand disseminate above the field, sector, andnation-state levels. Ideas, imageries, andfunctions may emerge in one setting butmigrate globally, being incorporated in regu-lative, normative, and cognitive systemsoperating at the world system level. Forexample the notion of what constitutesprogress may be encapsulated in measuressuch as the Gross National Product (GNP)which diffuses through the world polity,which is composed of international bodiessuch as the World Bank, the United Nations,and the International Monetary Fund. Thisresults in common measurements and poli-cies in very different settings. Ideas such asfinancial transparency and practices such asaccounting rules, initially alien in non-Western societies, are carried across nationalboundaries by consulting firms and Westerneducational institutions that attract interna-tional students who eventually return homewith new constructs. Ideas, concepts, andpractices are thus rationalized as ‘normal’and become embedded in organizations globally (cf. Drori, Jang, and Meyer 2006).

Proponents of the new institutionalism,though, have also pursued lower levels ofanalysis. The earliest proponents of the newinstitutionalism implicitly theorized dynam-ics within organizations when they con-tended that the institutional elements drawnfrom the environment were not tightly cou-pled with the organization’s technical core.Subsequently, Fligstein (1996) developedwhat he referred to as a ‘political/cultural’theory of the firm, which considers the interplay between regulative, normative, andcognitive structures within the organization.He contended that different coalitions ofmanagers that embrace dissimilar norms and

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cognitive models, which are derived from theenvironment, vie for power within the firm.The coalitions that rise to power adopt struc-tures and pursue strategies and tactics thatare consistent with their cognitive models.Fligstein argued that executives with financebackgrounds rose to power in the 1960s and1970s, replacing marketing and productionexecutives. Finance executives embraced thefinance conception of control, which under-stood the firm to be a portfolio of invest-ments. The finance conception of control hadits origins in agency theory, which was dis-seminated by the major US business schools.It was consistent with the adoption of themultidivisional form and the pursuit of diversification via mergers and acquisitions,a policy that was also consistent with recentdevelopments in anti-trust law and federalgovernment policy. Others have also devel-oped new institutional arguments at the levelof the organization, such as Ocasio’s (1999)analysis of the institutionalization of normsand rules regulating executive succession inlarge corporations.

More recently, some proponents of thenew institutionalism have migrated to theindividual level of analysis. For example,Zbaracki (1998) has examined managers’adoption of Total Quality Management(TQM), analyzing how managers conceptu-alize and in the process transform this inno-vation as they adopt it. Elsbach (1994) haslooked at how the cattle industry respondedto a health crisis, examining how managersemploy legitimated logics to protect them-selves from potentially damaging criticisms.In both articles, managers are drawing oninstitutional elements in the environment toconceptualize and solve managerial prob-lems. Finally, George et al. (2006) haveattempted to develop the cultural-cognitivepillar of the new institutionalism by engagingwith behavioral theories of decision making.

Substantive areasThe earliest new institutionalist analyseswere geared towards debunking rational andfunctionalist accounts of organizational

change. These analyses portrayed changejustified on rationalist or functionalistgrounds as primarily symbolic in character,geared not to alter the way organizationsconducted their business but rather towardswinning approval from important con-stituents of their environments (Meyer andRowan [1977]/1991). Some recent new insti-tutionalist analyses continue this debunkingtradition (Drori, Jang, and Meyer 2006). Soonafter the new institutional lens was ground,though, it was adopted by organization stud-ies scholars as a tool with which they couldply their trade. In the early years of the field(long before the new institutional frameworkwas fashioned), organization studies scholarsembraced Litchfield and Thompson’s exhor-tation to focus attention on the administrativeprocess, which they characterized as a ‘cycleof action,’ consisting of decision making,programming, communicating, controllingand reappraising (Litchfield 1956: 12). As the field developed, the conception of theadministrative process broadened. Mintzberg(1971) discovered that the administrativeprocess consisted of a wide range of activi-ties that were divorced from decisionmaking, programming, etc. And Pfeffer(1976) identified the institutional level as animportant and largely ignored domain ofmanagerial action. When it emerged in thelate 1970s, the new institutionalism became anew theoretical resource from whichhypotheses could be drawn for deductivework and to which new ideas could be addedvia inductive work on virtually every substantive topic of the day. It is now hard tothink of a substantive topic within organiza-tion studies where the new institutionalismhas not left its mark; from the hiring of workers (Dobbin and Sutton 1998), thechoice of accounting systems (Mezias 1990),the adoption of innovations (Westphal,Gulati, and Shortell 1997), the implementa-tion of innovations (Zbaracki 1998), to thepromotion of top managers (Ocasio 1999),the pursuit of particular strategies and structures (Fligstein 1990), the adoption ofparticular growth tactics (Palmer et al. 1995);

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and the understanding of temporal and spa-tial variation in all of the above (Guler,Guillen, and Macpherson 2002; Schneperand Guillén 2004).

AssessmentThis discussion suggests that new institution-alism is now an extremely comprehensivetheory. Proponents of the new institutional-ism have drawn upon several of the socialsciences for their insights, although theycould range further from their largely socio-logical base to incorporate the work of polit-ical scientists, economists and, in particular,the work of psychologists to a greater extent.The proponents of the new institutionalismhave also plied their trade at multiple levelsof analysis, although they could certainlystray further from the highest levels to exam-ine organizational and even more individuallevel phenomena. Finally, proponents of thenew institutionalism have used their theoret-ical lens to examine a wide range, perhapsthe full range of organizational phenomenarecognized by contemporary organizationstudies scholars.

With this said, we wonder whether someof the NI’s most penetrating insights are atrisk of being lost as it expands to incorporatemultiple disciplines, operate at multiplelevels of analysis, and address a cornucopiaof substantive topics. We think that such arisk is exacerbated by the fact that organiza-tion studies scholars have increasingly beenconcentrated in graduate schools of manage-ment and business and that their scholarshipis influenced by managerial and businessconcerns (Augier, March, and Sullivan 2005;Perrow 2000). The unique insight of the new institutionalism, an insight that it shares with few if any other organization theories, is that organizations and organiza-tional participants are products of the largersocial structure; in particular, the cognitiveelements of that structure. As a result, organ-izations and the people who inhabit them actin ways that are taken for granted as appro-priate and even presumed to be rational,despite the fact that these ways of being are

fundamentally arbitrary. In the hands of con-temporary organization studies scholars,these fundamental insights have increasinglybeen used to develop theories, analyses, andeven prescriptions about how organizationalleaders can obtain legitimacy and attendantbenefits for their organization. And in theprocess, a theoretical perspective that viewsorganizational action as fundamentally non-rational and non-functionalist becomes a toolfor analyzing behavior in and of organiza-tions in such a way that it is seen as evenmore self-consciously instrumental.

Cumulative theory

If a general theory explains organizations inmultiple settings and a comprehensive theorydraws on many disciplines to explain a widerange of organizational phenomena at multi-ple levels of analysis, a theory that is cumu-lative is one that grows better with additionalstudies that expand its scope, strengthen itspowers, and reveal and diminish its limita-tions. For a theory to grow, researchers mustself-consciously tackle the theory as anobject of study, growing and pruning it asevidence and argument support. From a the-oretical standpoint, it must refine existingconcepts, clarifying and perhaps in theprocess bifurcating existing concepts. It mustrefine existing relationships, identifyingscope conditions and moderating and mediating mechanisms, and, of course, itmust add new concepts and relationships.This can be accomplished deductively, byexamining logical gaps, limitations, andinconsistencies in the corpus of ideas thatcompose the theory. And it can be accom-plished inductively, by conducting researchto examine the adequacy of existing conceptsand relationships.

There are signs that proponents of the new institutionalism self-consciously attemptto build on one another’s work. Perhaps most notably, and discussed above, the con-cept of institution has become increasinglymore multidimensional. Scott and Meyer

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([1983]/1991) distinguished between techni-cal environments, in which organizationscompete with one another on the basis oftheir efficiency and effectiveness of opera-tion, and institutional environments, in whichorganizations vie for legitimacy. Later, Scott(1987) contended that all environments areinstitutional, but differ in their institutionalcharacter. Importantly, in Scott’s formula-tion, the market is one type of institutionalsetting, in which organizations follow thelogic of competition and compete on thebasis of efficiency and effectiveness. Morerecently, Biggart and Delbridge (2004) elab-orated a typology that distinguishes betweendifferent types of market settings on the basisof their institutional structure.

Similarly, the concept of loose-couplingwas initially conceived as a baseline assump-tion of the new institutionalism, allowingproponents of this perspective to analyze theadoption of innovation in market contexts.For-profit organizations could more easily beunderstood to incorporate institutionalizedelements that increased their legitimacy butnot their efficiency if those elements wereintegrated in a way that left them loosely-coupled with their technical core. However,Westphal and Zajac (2001) reinvigorated theconcept of loose-coupling by characterizingit as a variable attribute of organizationswhich could be analyzed like other innova-tions. They contended that stock buy-backprograms became legitimate as agencytheory became widely accepted, becausethey promised to reduce the separation ofownership and control which generatedagency costs. They argued, however, thatfirms typically announced but did not imple-ment such programs so that they could obtainthe legitimacy benefits from them withoutactually changing corporate policy. Theydemonstrated that firms adopted suchloosely-coupled stock buy-back programs tothe extent that they were linked to other firmsthat had already pursued them.

Certainly, though, there are areas wherethe new institutionalism appears to be spinning its wheels more than it is making

forward progress. Perhaps no area is definedby the spinning of wheels more than the newinstitutionalist work on the diffusion of inno-vation. Early work in this new institutionalistdomain generated evidence that issues ofefficiency and effectiveness became lessimportant in the adoption of new innovationsas new practices proliferated (Tolbert andZucker 1983). Subsequent work built on thisearly research by showing how normativeprocesses (the incorporation of professionalswho championed innovations) and mimeticprocesses (linkage to other organizationsalready embracing the innovations) stimu-lated adoption at the late and early stages of a new practice’s proliferation (Palmer,Jennings, and Zhou 1993). Additional workadded precision to this research, focusing onhow the characteristics of adopters, objectsof social comparison, and the innovationsthemselves shaped diffusion (Davis andGreve 1997). However, research on the diffu-sion of innovation typically failed to considerthe operation of coercive processes(Mizruchi and Fein 1999). Instead, a plethoraof studies proliferated that evaluated essen-tially the same hypotheses as applied to dif-ferent kinds of organizations and differentkinds of innovations.

AssessmentThe new institutionalism has exhibited signsof growth, as concepts become differentiatedand refined and relationships become elabo-rated, partly as the result of empiricalresearch. To this conclusion, though, we addone caveat. As the NI might predict, organi-zations studies scholars seeking legitimacyfor their own work often cast their work asfalling under the protective umbrella of theo-retical perspectives in vogue at the time. Wethink that too often the new institutionalismhas served as a shade tree under which organ-ization studies scholars, some of whom areonly peripherally connected to the new insti-tutionalist project, have found company andsupport with little in the way of self-criticismand self-improvement. This was perhaps tobe expected in the theory’s adolescence, as

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scholars promoted new institutionalism assuperior to alternative theories such as eco-nomic perspectives. However, for theoreticaldevelopment the NI community is obliged toconsider issues of validity, paradigmaticpurity, application, methodologies, and othermatters that reveal the strength and limits ofthe NI.

ALTERNATIVE MODELS OF THEORY

Our assessment of the theoretical status ofthe new institutionalism uses Litchfield andThompson’s model of theory as they devel-oped it 40 years ago as a benchmark. Weadopted this yardstick because we believe themost contemporary organization theoristsdevelop their ideas with this model of theorybuilding in mind. However, there are compet-ing models of doing organization studies. Inthis section we briefly review three alterna-tive conceptions of what constitutes a ‘good’theory: the social mechanism approach, postmodernism, and critical realism.Furthermore, we assess their suitability fordeveloping the new institutionalism as a theoretical enterprise.

The social mechanism approach

Recently Hedström and Swedberg (1998)proposed the articulation of cause and effectrelationships called social mechanisms thatoccupy a position between pure descriptionand universal laws. These postulated middle-range relationships do not hold in all contextsand cannot be used to predict social develop-ments. Rather, they can only be drawn on toexplain social developments in specific con-texts after the fact. Davis and Marquis(2005a; see also Davis 2006) are the fore-most proponents of the social mechanismapproach in organization studies. They con-tend that this approach is particularly appro-priate in the contemporary period becausesocial mechanism reasoning is particularly

useful in explaining organizational changeand because current organizational realitiesare in flux. Further, they argue that the newinstitutionalism is a particularly fruitfularchive from which to draw social mecha-nisms, because the new institutionalismoperates at the field level of analysis andorganizational fields are in flux. Thisapproach to organization theory differs fromthe Litchfield and Thompson approach inimportant ways. It eschews general theoryand cumulative theoretical development. Italso eschews prediction, which is inherent inthe L&T view. Importantly, Davis andMarquis contend that organization theorists,at least macro-organizational behavior theo-rists, have already largely embraced thisapproach. Davis (2005) reports a survey ofthe last 10 years of Administrative ScienceQuarterly that reveals that the vast majorityof macro-organizational behavior articles are‘problem-driven’; that is, motivated by adesire to explain events in the world ratherthan by a desire to test a particular theoreticalidea. Furthermore, most of these problem-driven articles drew on multiple theories todevelop possible (sometimes alternative)explanations of these events.

Davis and Marquis (2005a) review a vari-ety of studies that use the social mechanismsapproach and draw on institutional theory toimplement this approach, one of which isDavis and Marquis’s (2005b) own study ofthe causes and consequences of convergencein corporate governance form, as evinced inthe listing of foreign firms on the New YorkStock Exchange (NYSE) and Nasdaq. Davisand Marquis drew on institutional theory toidentify several social mechanisms thatmight explain these listings. Foreign firmsmight list on the NYSE and Nasdaq afterthey turned American, presumably suggest-ing the operation of the institutional mecha-nism known as mimetic isomorphism. Orfirms might turn American after they havebeen listed on the NYSE and Nasdaq for awhile, perhaps suggesting the operation ofcoercive mechanisms. Or foreign firms mightturn American to the extent that they are tied

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via interlocking directorates to Americanfirms, presumably suggesting the operationof normative mechanisms. Or foreign firmsmight remain inert, while new firms are bornAmerican, suggesting the operation ofimprinting. According to Davis and Marquis,the new institutionalism could not provideresearchers with an a priori definitive expla-nation of why foreign firms listed on theNYSE and Nasdaq. But it could provide anumber of possible explanations of whyfirms listed on the NYSE and Nasdaq thatcould be tested for post hoc plausibility.Their empirical analysis provided support forthe imprinting mechanism.

This use of institutional theory as a com-pendium of causal arguments that can bedrawn upon to explain organizational phe-nomena seems sensible. There are many con-crete historical developments that haveorganizational dimensions and that cry outfor adequate explanation. For example, theemergence and proliferation of terrorism,especially state-sponsored and religion-inspired terrorism, throughout the world is animportant phenomenon, perhaps most obviously because it is responsible for con-siderable political instability and muchhuman suffering. Yet our understanding ofterrorism is infantile (Stampnitzky 2006) andterrorism is certainly an organizational phenomenon, requiring complex coordina-tion. We think an analysis of terrorism thatdraws on organization theory, including thenew institutionalism, could be exceptionallyinsightful (cf. Perrow 1999).

With this said, we think that adopting thesocial mechanism approach to theory build-ing to the exclusion of the L&T approachwould be worrisome. Perhaps most impor-tant, a single-minded application of thesocial mechanism approach would by defini-tion bring the creation of new theory to ahalt. If we only borrowed social mechanismsfrom existing theory to develop explanationsof observable phenomena, the store of socialmechanisms available to explain observablephenomena would not grow. In order fortheory to grow, proponents of the social

mechanism approach would also have toembrace the process called ‘reappraisal,’which Litchfield and Thompson consideredfundamental to the scientific method.Specifically, proponents of the social mecha-nisms approach would have to view efforts tovalidate one as opposed to another possiblesocial mechanism explanation of an organi-zational development as an opportunity toevaluate and thus confirm, reject, or refineexisting social mechanisms arguments.

Postmodernism

Postmodernism has a variety of expressions(cf. Weiss 2000; Deetz 2000). One can distin-guish four thrusts of postmodernism inorganization studies. A substantive thrustcharacterizes contemporary organizations as qualitatively different (i.e., as postmodern)from previous (modern) organizations. A methodological thrust advocates the use ofdeconstruction to reinterpret dominantunderstandings of organizations. Perhapsmost importantly, deconstruction provides ameans to read scientific understandings oforganizations as value-laden and biasedaccounts that are but one of many possibleinterpretations. An epistemological thrust,referred to as the skeptical postmodernism by Kilduff and Mehra (1997), calls into question the enterprise of attempting to uncover the truth about organizations, by calling into question the independent existence of organizational reality and main-taining the existence only of multiple inter-pretations of a presumed reality. Finally, atheoretical thrust, characterized as the affir-mative postmodernism by Kilduff and Mehra(1997), attempts to develop new, interesting,and exciting understandings of organiza-tions, at the same time holding in reserve various degrees of skepticism about the inde-pendent existence of organizational reality. Itis this theoretical thrust that is most relevantto our analysis here.

The types of understandings that the affirmative postmodernism develops about

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organizations have a number of definingcharacteristics, some of which they sharewith understandings produced by other alter-native modes of inquiry, such as feministtheory, critical theory and post-structuralism(Agger 1991). Postmodern understandingstend to explicitly acknowledge the point ofview from which they are developed. Further,the points of view from which postmodernunderstandings are developed tend to bethose of constituents who are typicallyignored (e.g., subordinates, women, minori-ties, etc.). Postmodern understandings tendto be conveyed through a more personal lan-guage. They tend to be less definitive, invit-ing leeway for audience interpretation. Andthey may aid in stimulating practical actionon the part of the constituency from whosepoint of view they are formulated. There arerelatively few studies that include all of thesecharacteristics, although there are a fewexemplary studies, perhaps most famouslyMartin’s (1990) analysis of a male top man-ager’s utterances about a pregnant femaleemployees’ devotion to the firm.

While the new institutionalism does notexhibit any of the above four specific charac-teristics, it does tend to exhibit a generalpoint of view that resonates with postmod-ernism. Postmodernism takes seriously theidea that reality (to the extent that we canspeak of reality as an independent state) onlycomes into practical existence insofar as it isencoded in representations of social actors.Thus, postmodernism considers representa-tions of reality (and the relationships amongthem), rather than reality itself (and the rela-tionship of representations to it), as the cru-cial objects of study. The earliest proponentsof the new institutionalism called into ques-tion the independent existence of the techni-cal realities of organizational structures andpractices. They considered many organiza-tional structures and practices to be rational-ized myths that took on the appearance ofreality and were taken for granted as such.Thus, educational organizations adoptedstructures and practices prevalent in businessorganizations because they were assumed to

be efficient. Insofar as the adoption of thesestructures and practices facilitated their sur-vival, by bringing adopting organizationslegitimacy and resources, they acted as ifthey were efficient.

With that said, the proponents of postmod-ernism tend to eschew the pursuit of theoriescomposed of precise constructs and formalrelationships that apply across contexts andgrow cumulatively independent of the phe-nomena that they are designed to apprehend(Van Maanen 1995). Thus, to the extent thatnew institutionalists embrace a postmodernsensibility, they will likely impede the development of the new institutionalism as atheory in the Litchfield and Thompson sense.We do not by any means intend this assertionto imply a critique of the postmodern perspective. We merely wish to note what webelieve is the obvious; that the pursuit of thepostmodern perspective, like the pursuit ofthe social mechanisms approach, is funda-mentally incompatible with theory buildingin the Litchfield and Thompson sense.

Critical realism

Critical realism (CR) is a largely British philosophy developed by Roy Bhaskar([1975]/1997, [1979]/1998, 1986) and others(e.g., Archer 1995; Collier 1994; Sayer[1992]/1997, 2001) that offers a ‘third way’between positivism and postmodernism. Incontrast to both approaches, it begins withthe ontological nature of the objects understudy, which then determines their properepistemology (i.e., how they can be known),rather than the other way around (termed the‘epistemic fallacy’). CR has become increas-ingly popular among social theorists andpractitioners. However, it has only recentlybegun to make headway into the organizationstudies and management literature (e.g.,Ackroyd and Fleetwood 2000; Ekström1992; Reed 2005).

Similar to the social mechanismsapproach, CR provides an explanatoryframework based upon the identification of

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the mechanisms that produce the organiza-tional phenomena observed by researchers.In contrast to their approach, however, CRprovides a stratified social ontology distin-guishing between the levels of the real, theactual, and the empirical. Acknowledgingthat all social phenomena operate in opensystems, these distinctions allow critical realists to explain why a particular mecha-nism that is ‘in play,’ so to speak, may onlybe contingently actualized and empiricallyidentified. Hence, the powers of generativemechanisms operate ‘transfactually’ in opensystems and may not be realized due to theoperation of countervailing causes (i.e., othermechanisms). That is, their powers ‘may bepossessed unexercised, exercised unrealized,and realized unperceived (or undetected) by[humans]’ (Bhaskar [1975]/1997: 184).Thus, the stratified ontology of CR may givea firmer grounding to Davis and Marquis’s(2005a: 336) invocation of Coleman’s notionof ‘sometimes-true theories.’ Furthermore,unlike Litchfield and Thompson’s view,which focuses on identifying empirical regu-larities, that is regularities that are actualizedand empirically observed, CR identifies theimportant theoretical interest to lie at thelevel of the real.

For example, Leca and Naccache (2006)approach the NI from a critical realist per-spective, providing a non-conflationistaccount of agency and structure in theiranalysis of institutional entrepreneurship.Corresponding to the three domains identi-fied by CR, they place the actor’s experienceat the domain of the empirical, institutions atthe domain of the actual, and institutionallogics at the level of the real. At the level ofthe empirical, organization researchers areinterested in interpreting the subjectivemeanings actors give to their activity throughdiscourse analysis. At the level of the actual,institutions can be identified, even if actorsdo not recognize them because they havebecome taken-for granted. Finally, the insti-tutional logics that underlie and shape insti-tutions lie at the level of the real. ‘Dependingupon contextual factors and the actions of

actors, institutional logics will unfold in thedomain of [the] actual as institutions.Institutions are the results of the ways inwhich actors transpose those institutionallogics through precise scripts, rules, andnorms in specific contexts’ (2006: 632).

The identification of these abstract causalpowers, the institutional logics, is carried out by organization researchers through a process of retroductive logic. FollowingSayer (1992), Leca and Naccache (2006:635; also see Bhaskar [1975]/1997) note that there is a three stage process whereresearchers observe connections or regulari-ties that have been actualized in an institu-tion, build hypothetical models that mightaccount for the observed phenomena, andthen subject the models to empirical scrutiny.By incorporating CR into the new institution-alism they hope that this approach will beable to ‘bring agency back into the institu-tional framework without denying the crucialimportance of institutional embeddednessand thus move beyond the vague notion ofinstitutional pressures to investigate thedialectical interplay between actors’ actionsand institutional embeddedness’ (Leca andNaccache 2006: 643; cf. Archer 1995).

CR, then, appears to potentially providethe new institutionalism with an adequateresponse as to what their theory is. That is,the various concepts, tendencies, and rela-tionships that make up the new institutional-ism refer to the generative mechanisms(consisting of both ‘things’ and ‘relation-ships’) of complex organizations that, inopen systems, may or may not be actualizedand are contingently empirically identifiedby social scientists. Since social scientistswill never be able to construct a completelyclosed system, theory choice must bedecided by explanatory power, rather thanempirical prediction, although this will certainly remain an important, but not final,criterion. A general theory is justifiedbecause complex organizations share similarpowers and liabilities across an array of orga-nizational domains, from hospitals to corpo-rations, from schools to the criminal justice

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system; the same mechanisms (e.g., loose-coupling or isomorphic pressures) are atwork. Finally, institutional processes, whichhave received less examination in the new institutionalism than they deserve(Barley and Tolbert 1997), such as institutionalization and deinstitutionaliza-tion, might be profitably explored throughthe ‘morphogenetic approach’ devel-oped by Archer (1995; Willmott 2000; Mutch2005). Nevertheless, it seems that criticalrealism may be open to the same problem as the social mechanisms perspective if the process of ‘reappraisal’ is not expli-citly incorporated into its theoreticalapproach.

CONCLUSION

Is the new institutionalism, after 30 years,fulfilling its promise as a theory in Litchfieldand Thompson’s terms? Our answer is aqualified ‘yes.’ The new institutionalism hasdeveloped a multitude of measurable con-cepts and empirically verifiable relationshipsto describe and explain organizational phe-nomena. The new institutionalism alsoappears to be one of the most general andcomprehensive theories plied by organiza-tional scholars today; arguably more generaland comprehensive than a number of theoriesthat came before it such as the resourcedependence and population ecology perspectives. And cumulative growth in thenew institutionalism, resulting partly fromempirical research, can be detected. Is thenew institutionalism a theory in other sensesof the term as well? Again, our answer is aqualified ‘yes.’ It has been used as a libraryfrom which researchers can borrow socialmechanisms to explain organizational phenomena. And that branch of the new institutionalism that seeks to uncover theoperation of taken-for-granted cognitivestructures resonates with the main tenets ofpostmodernism. Finally, the general orienta-tion of the new institutionalism is compatible

with the emerging critical realist perspective,which seeks to carve out a middle groundbetween positivism and postmodernism.

Clearly there is much that can be done to move the new institutionalism furtherin the direction of a theory in all four sensesof that term. A theoretical understanding ofthe micro-level has only been weakly developed by the new institutionalism. Forexample, we think that it would useful tobuild upon the sociology of culture(DiMaggio 1997), to improve our under-standing of categories such as conventionsand scripts (Biggart and Beamish 2003), and to engage with symbolic interactionism,dramaturgical, ethnomethodological andother interactionist theories that presumeinstitutionalized understandings that are necessary for temporal stability in socialinteraction.

The question in our minds is how muchfurther should the new institutionalism go?As children in the US, we were told that if wewere to dig deep enough, we would end up inChina. That is, we would end up not at thecenter of things, but rather in different evenantagonistic place. We think this just mightbe the case with theories. At some point,attempts to develop a theoretical orientation,to make it more elaborate, more general,more comprehensive, and more encompass-ing of other modes of theorizing threatens totransform it into something else, its theoreti-cal competitors. For example, it seems possible that attempts to build up the newinstitutionalism’s currently underdevelopedunderstanding of individual level phenome-non by drawing more on psychology and social psychology might result not in the articulation of new ideas but rather there-labeling (as new institutional) of old ideas. Thus we think that new institutionalscholars should remain alert to the possibility that they are engaging in semantic games and stay focused on the goal of identifying truly new insights about behavior in and of organizations asthey deepen and expand the scope of NItheory.

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