9781412931236-Intro 5/19/08 4:24 PM Page 1 Introduction Royston Greenwood, Christine Oliver, Kerstin Sahlin and Roy Suddaby The motivation for this Handbook arose from 2. We focus upon ‘organizational institutionalism’. a conversation with Don Palmer, who raised Several variants of institutional analysis have the question of whether organization theories been identified. Hall and Taylor (1996) propose in general have life cycles. Given the prolif- three basic schools of thought: rational choice eration of theoretical paradigms, do organi- institutionalism, historical (comparative) institu- zation theories build into coherent tionalism, and organizational (sociological) institutionalism. The material covered in this conceptual frameworks supported by dili- Handbook does centre upon organizational insti- gently conducted empirical work, or do they tutionalism, but we are less sure of the accuracy fragment into proliferated confusion? That of the depictions provided by Hall and Taylor conversation never proceeded to a compara- (1996) or Campbell (2004). In fact, we propose to tive assessment of organization theories. But show how institutionalist research applied to it did lead to the present volume. It seemed, organizational behaviour has evolved over time in late 2004, when the idea of a Handbook and that much of this work does not fit neatly was mooted, an appropriate moment to take into the classifications offered by Hall or stock of the institutional perspective on Campbell. Our stance is not to ask, what is dis- organizations because we were approaching tinctive of ‘organizational institutionalism’? But, the thirtieth anniversary of seminal papers instead: ‘What does the institutional perspective tell us about organizational behaviour?’ that not only triggered revitalization of inter- 3. Our timeframe emphasizes contributions made est in the role of institutions but became since 1977. The late 1970s were great years for known as the new institutionalism. organization theory. In a very short span of years, It is important at the outset to set down at least three of the enduring perspectives within certain scope conditions for this volume: organizational theory were initiated: resource dependence theory, ecology theory, and institu- 1. Our interest is in understanding organizations. tional theory. In 1977, two papers (Meyer & How and why do organizations behave as they Rowan, 1977; Zucker, 1977) introduced what do, and with what consequences? These are the became known as new institutionalism. We do overarching questions of organization theory. not deny that institutions and institutional ‘Organizational institutionalism’ is the applica- processes had been examined prior to that date tion of the institutional perspective to those (see Hirsch, Chapter 33 this volume). On the con- questions. trary, the study of institutions has a long and 9781412931236-Intro 5/19/08 4:24 PM Page 2 2 THE SAGE HANDBOOK OF ORGANIZATIONAL INSTITUTIONALISM respected tradition (see DiMaggio & Powell, In this section we review how the ‘so-called 1991; Hinings & Tolbert, Chapter 19 this volume; institutional perspective’(Carroll, Goodstein & and Barley, Chapter 20 this volume). However, Gyenes, 1988: 238) has evolved since 1977. the body of institutional work post-1977 has a By doing so we are, in one sense, retrospec- focus that warrants our treatment of 1977 as a tively tracing the social construction of insti- starting point. tutional theory over the past three decades. We review how the term has been used in the main organization theory journals. We examine how theorists and researchers have understood THE SOCIAL CONSTRUCTION OF the term and we uncover the organizational ‘INSTITUTIONAL THEORY’ issues and questions to which the theory has been applied. We suggest certain pivotal Institutional theory is perhaps the dominant moments when either the definition or the approach to understanding organizations. Its application of the theory shifted. Our motiva- popularity is shown in Figure 1.1, which tion is to understand what makes an institu- reports the number of citations to Meyer and tional story different from other theoretical Rowan (1977). The steady rise in citations is perspectives. This is not an easy task given impressive. And it is clear from these statis- institutional theory’s ‘definitional thicket’ tics that institutional theory is an entrenched (Zucker, 1987: 457). Moreover, any attempt and prevalent approach. Moreover, as to arrange nearly 30 years of research and Haveman and David (Chapter 24 this volume) theorizing can be challenged. Ours, we admit, point out, institutional theory has dominated is a subjective arrangement and our procedure submissions to the Organization and Manage- means we may miss hidden nuggets. ment Theory Division of the Academy of Nevertheless, there are some reasonably obvi- Management. ous temporal signposts. Thus, we begin by But what is it? And why is it so popular? examining the period between 1977 and What aspects of organizational behaviour 1983, when several papers established the does it address? And how well does it do so? foundations of the ‘new’ institutionalism. 300 250 200 150 100 Number of citations 50 0 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 Years Meyer & Rowan DiMaggio & Powell Hannan & Freeman Pfeffer & Salancik Figure 1.1 Citations to Meyer & Rowan (1977), DiMaggio & Powell (1983), Hannan & Freeman (1977) and Pfeffer & Salancik (1978) 9781412931236-Intro 5/19/08 4:24 PM Page 3 INTRODUCTION 3 Foundations: 1977–83 Following Weber, Meyer and Rowan were interested in the rationalization and diffusion The conceptual foundations of modern orga- of formal bureaucracies in modern society, nizational institutionalism were established which they saw as arising from two condi- in the works of Meyer and Rowan (1977), tions: ‘the complexity of networks of social Zucker (1977), Meyer and Rowan (1983), organization and exchange’ and ‘the institu- DiMaggio and Powell (1983), Tolbert and tional context’ (1977: 346). Most attention, Zucker (1983), and Meyer and Scott (1983). both in their paper and in subsequent work, Collectively, these papers set the course for was given to the institutional context, but it is much of the next three decades, although, as worth remembering that ‘relational’ net- we shall note, many of the works that fol- works were seen as important influences. lowed were sometimes selective in their Meyer (1977) and Scott (1983), for example, interpretations. anticipated that complex networks of In the late 1970s, prevailing perspectives interactions between organizations would within organization theory largely portrayed increase the occurrence of rationalized organizations as agentic actors responding to myths, that complex and conflicted fields situational circumstances. Senior managers would give rise to a greater variety of organi- steered organizations by interpreting their zational forms, and that field complexity contexts and taking appropriate actions. would increase the likelihood of myths Structural-contingency theory saw organiza- becoming codified into formal regulations tions adapting to circumstances of scale, and laws. Finally, they pointed out that task uncertainty and strategic scope by appro- rationalized myths are diffused through rela- priate selection of structural arrangements. tional networks. Networks/fields are thus Resource-dependence theory analyzed how both antecedents of rationalized myths and organizations sought to affect the supply of vehicles for their transmission (most clearly critical resources by managing their depend- set out by DiMaggio & Powell, 1983 – see encies on other organizations (e.g. by careful below).1 placement of directors). Even the behavioural Nevertheless, the idea that captured the theory of the firm assumed adaptation to imagination was that organizations are influ- market and performance circumstances, enced by their institutional context, i.e. by albeit within the limits of bounded rationality. widespread social understandings (rational- Ecological theory was the exception, empha- ized myths) that define what it means to be sizing the inability of organizations to be rational. Elsewhere, and less prosaically, adaptively managed, although even in this Meyer and Rowan (1983: 84) referred to the case the problem was not that managers could institutional context as ‘the rules, norms, and not effect organizational adaptation, but that ideologies of the wider society’. Zucker (1983: they could not do so quickly enough. Each of 105) looked to ‘common understandings of these theoretical perspectives focused on the what is appropriate and, fundamentally, mean- relationship between an organization and its ingful behaviour’. And Scott (1983: 163) environment and examined how organiza- offered ‘normative and cognitive belief sys- tions adapted – or attempted to adapt – so as tems’. The underlying focus of early institu- to secure an appropriate ‘fit’. The environ- tional theorists, in short, was the role of shared ment, moreover, was the ‘technical’/market meanings, institutional processes (such as setting, much as assumed in accounts pro- cultural prescriptions, Zucker, 1977) and insti- vided by economists, and the behaviour of tutional conformity.2 executives (organizations) was intendedly Because organizations are expected to (if boundedly) rational. It was against this behave rationally, Meyer and Rowan pro- context that Meyer and Rowan’s (1977) cele- posed that rationalized myths are accepted brated