Institutional Theory: Meyer & Rowan, DiMaggio & Powell
Institutional theorists assert that the institutional environment can strongly influence the development of formal structures in an organization, often more profoundly than market pressures. Innovative structures that improve technical efficiency in early-adopting organizations are legitimized in the environment. Ultimately these innovations reach a level of legitimization where failure to adopt them is seen as "irrational and negligent" (or they become legal mandates). At this point new and existing organizations will adopt the structural form even if the form doesn't improve efficiency.
Meyer and Rowan argue that often these "institutional myths" are merely accepted ceremoniously in order for the organization to gain or maintain legitimacy in the institutional environment. Organizations adopt the "vocabularies of structure" prevalent in their environment such as specific job titles, procedures, and organizational roles. The adoption and prominent display of these institutionally-acceptable "trappings of legitimacy" help preserve an aura of organizational action based on "good faith". Legitimacy in the institutional environment helps ensure organizational survival.
However, these formal structures of legitimacy can reduce efficiency and hinder the organization's competitive position in their technical environment. To reduce this negative effect, organizations often will decouple their technical core from these legitimizing structures. Organizations will minimize or ceremonialize evaluation and neglect program implementation to maintain external (and internal) confidence in formal structures while reducing their efficiency impact.
DiMaggio and Powell conclude that the net effect of institutional pressures is to increase the homogeneity of organizational structures in an institutional environment. Firms will adopt similar structures as a result of three types of pressures. Coercive pressures come from legal mandates or influence from organizations they are dependent upon. Mimetic pressures to copy successful forms arise during high uncertainty. Finally, normative pressures to homogeneity come from the similar attitudes and approaches of professional groups and associations brought into the firm through hiring practices.
They add that rate of institutional isomorphism is increased when firms:
* are highly dependent on the institutional environment
* exist under high uncertainty or ambiguous goals
* rely extensively on professionals
Support for Institutional Theory: Rowan, Tolbert, and Zucker
Rowan examined the growth of three administrative services in California public schools (school health, psychology, and curriculum) from the standpoint of institutional theory. He found that when there is a high level of consensus and cooperation within the institutional environment, diffusion of innovative structures is steady and long-lasting. However, when the institutional environment is contentious and unfocused, adoption of innovative structures is slow and tentative.
Tolbert and Zucker extended Rowan's findings by evaluating the rate of adoption of civil service organizations in the United States from 1880-1935. Their results strongly support the institutional theories outlined above.
They found that when coercive pressures are high (e.g., under state mandate), organizations quickly adopt new structures. Under low coercive pressures the rate of adoption is much slower. However, increased adoption builds legitimacy in the institutional environment, accelerating the rate of adoption of the new structural form.
Furthermore, Tolbert and Zucker confirmed the hypothesis that while early organizations adopt the new form to improve efficiency, later organizations adopt the structural form to maintain legitimacy. Quantitative models predicted civil service adoption based on city characteristics (in early time periods) , but failed to predict adoption in later time periods.
Insights: Population Ecology, Community Ecology, and Institutional Theory
After reading articles in each of these organizational perspectives, I've concluded that debate over the predominance or "rightness" of these approaches is less important than acknowledging each approach as a useful tool for organizational analysis. The extreme complexity of organizational environments requires not one but a set of approaches to increase understanding.
Each approach has gained legitimacy among a subset of organizational researchers. These approaches compete in the technical environment of NSF and foundation grants. I wonder if the adoption of these three organizational theories by mainstream researchers can itself be studied using institutional theory?
Do early researchers adopt new theories for utility, while later researchers adopt for legitimacy? Are coercive, mimetic, or normative pressures more predominant? Within the institutional environment of academic research, which entities exert more influence on their dependents -- organizations granting research money or organizations reviewing articles for publication?
I suspect that the results of such a study would match findings by Tolbert
and Zucker. When academic research and tenure decisions are intertwined,
issues of legitimacy may become very important. In situations of high
uncertainty (like being untenured), new faculty will primarily choose to
do research based on established theories to maintain legitimacy and increase
the odds of publication.