Institutional Environments

Institutional environments "are characterized by the elaboration of rules and requirements to which individual organizations must conform in order to receive legitimacy and support". (Scott p. 132). Organizations primarily in this environment are not evaluated by their quality of outputs (like schools and mental hospitals).

Interest in institutional environments is more recent than task environments. Berger and Luckman's (1967) perspective on the creation of social reality is important in this area -- individuals invent distinctions or "typifications" that eventually become objective and external from their own actions. Institutions are socially constructed and re-enacted continuously.

Marxist theorists see the broad historical developments that have institutionalized the capitalist/rational perspective in modern organizations. Others have focused on cross-cultural differences that have affected organizational forms (Scott p. 137). Lammers and Hickson (1979) studied organizations from several countries and found three cultural forms:

* Latin type (French, Italian, Spanish) has high centralization, rigid stratification, and sharp inequalities between levels, and conflicts in areas of uncertainty

* Anglo-Saxon type (British, US, Scandanavian) more decentralization, less rigid stratification, more flexble approaches to rules.

* Traditional type (developing countries) has paternalistic leadership, implicit rules, and lack of boundaries between organziational and non-organizational roles.

Of course, there has been many researchers focusing on the uniqueness of Japanese organizations, which challenge western notions of rational models or organizations (Scott p. 138). Hostede did a large cross- comparison of value profiles in 40 societies (Hofstede 1984). He found differences in four values -- power distance, uncertainty avoidance, individualism, and masculinity, and could predict these dimensions based on latitude, population size, and per capita wealth. He suggests that organizational theory is culturally based and that much of modern organizational theory is based on American culture.

He finds that:
"Authors from Latin Europe focus on power, from Central Europe, on truth, from Eastern Europe, on efficiency, from Northern Europe, on change'' (Hofstede, p. 218).

"The state, professional occupations, unions, and trade associations are among the most important sources of institutional structures in the modern world" (Scott p. 139) The have varying degrees of power and influence. The state can range from highly authoritarian (communist countries) to loosely coupled (democratic contries).

"More so than other types of collective actors, the professions exercise control by defining social reality -- by devising ontological frameworks, proposing distinctions, creating typifications, and fabricating principles or guidelines for action." (Scott p. 139). Industry "standards" attempt to impose some uniformity in size, components, and procedures.

Managing Institutional Environments
Katz and Kahn (1978) note that in large organizations often they feel it's easier to change the environment than to modify internal structures in response to the environment (p. 89). For example, when faced with overseas competition manufacturers often call for import tarrifs instead of becoming more efficient.