Criticism of institutional theory and further developments

One of the critiques and weaknesses of neo-institutional theory, especially relating to the essence of institutional arguments focusing their attention on social stability through such social reproductive processes (coercive, normative, and mimetic described by DiMaggio and Powell and later elaborated by Scott) as regulative, normative and cultural-cognitive can be attributed to a somewhat simplistic and one-sided view of organizations and organizing as [becoming] identical. Such critique can be based on the argument that while neo-institutional theory accounts offered explanations on the processes of homogeneity in very much detail, it failed

to explain heterogeneity. DiMaggio and Powell themselves back in 1983 made an observation, that “organizations might be extremely homogeneous on some dimensions and yet highly diverse on others” (p. 156).

Another criticism of neo-institutionalism could be related to the fact that explanations of collective action, its reproduction, change and diffusion of practices, primarily focused on the relationship of institutions within their fields at a macro-level while the environment may not encompass what is going on at a micro-level, at the agency level, the details of people’s behaviour in organizations, their day-to-day-activities. Organizations are not just structures; they are about people, their interactions and actions. Moreover, as acutely observed by Boden (1994), “what looks - from outside - like behavior controlled by rules and norms is actually a delicate and dynamic series of interactionally located adjustments” (p.

42). Thus, it is important to make a distinction between saying and acting, or ideas and actions. Claims of acceptance of similar structures and practices may not mean that things are getting done the same way. By explaining how institutions work, we should be particularly aware of the human factor and the role of interpretations and adaptations or enactment. However, a central assumption of organizational institutionalism related to agency was of “actors so embedded in their institutional environments that extant arrangements are ‘taken-for-granted’ and actors cannot cognitively conceive of alternate arrangements” (Suddaby and Viale, 2011, p. 425).

Only recently, institutional scholars started paying attention to the processes through which actors affect the institutional arrangements within which they operate.

In order to address theoretical shortcomings, in 1988, DiMaggio proposed that the role of agency, either individual or collective, power and politics of individuals in the institutionalization needs examination (DiMaggio, 1988). “Since the 1990’s the central focus of institutionalism has shifted from explaining stability to explaining change” (Berman, 2012, p. 261). “The ways and extent to which organizations responded to institutional pressure” (Scott, 2008a, p. 432) became objects of study for neo-institutionalist scholars. For instance, Oliver (1991) explored the extent to which such “requirements as e.g., coercive power of regulations ‘are subject to interpretation, manipulation, revision, and elaboration by those subject to them’”

(in Scott, 2008a, p. 430). Institutional studies find that the elements of social order, referred to earlier, vary among organizations, are dependent on the institutional environments, and might be reinforced in different times. According to Scott, “this implies a transmutation over time of regulative into normative and cultural-cognitive elements” (ibid., p. 431). Conformity, as one of the institutional effects, has been observed on a continuum from ceremonial or symbolic to substantive. For

instance, decoupling has been identified as a form of ceremonial conformity.

Whereas symbolic conformity means “the extent to which organizations generate positive social evaluations” (Heugens and Lander, 2009, p. 68) by adjusting to institutional norms, e.g. state or professional association templates of organizing, substantive conformity is seen as “the extent to which organizations generate accounting-based profits or increase their overall market value” (ibid.) following institutional ordinances, e.g. strategies that are rational and appropriate widely. The meta-analytic evidence presented in Heugens and Lander (2009) confirms that the adoption of isomorphic templates for organizing has a positive relationship on the organization’s symbolic and substantive performance. Such evidence has challenged the assumption that isomorphic templates of organizing provides legitimacy but not necessarily improved performance.

Critics of institutionalism (cf. Peters, 2000; Child, 1972) argued that organizations are not only capable of adapting to changes, creating internal structures by choosing which structures to adopt to fulfil their goals, and coping with the environment but, more importantly, organizations can mold the environment. In order to further address one of the major weaknesses of the theory, namely the role of actors or agents in the processes of institutionalization and organizational change, researchers shifted the focus from convergent change and stability to endogenous change and institutional entrepreneurship. Studies in institutional entrepreneurship defined as “the activities of actors who have an interest in particular institutional arrangements and who leverage resources to create new institutions or to transform existing ones” (Maguire, Hardy and Lawrence, 2004, p.

657) put a much more explicit focus on agency and the identification of “strategies used by actors to change institutional arrangements” (Lawrence, Suddaby and Leca, 2009b, p. 5). While “the discourse of institutional entrepreneurship has helped to redirect neo-institutional analysis toward the study of actors in their role in catalyzing institutional change” (Lounsbury and Crumley, 2007, p. 1006), it has still attracted criticism, in particular related to the classical debate on structure and agency. The tension between institutional determinism and free-will of agency has often been referred as the “paradox of embedded agency” (Holm, 1995). How can organizations or individuals innovate if their beliefs and actions, intentions and rationality “are all conditioned by the very institution they wish to change?” (p.

398). The scholar has argued that the paradox can be solved if institutions are seen as “nested systems, that is, interconnected, multi-level systems in which each action-level or arena simultaneously is a framework for action and a product of action” (ibid.).

The advancement of the institutional logic concept (see section 3.3 for a more elaborate discussion) as well as more recent institutional theory developments on institutional work provide a link between institutions and actions. These theoretical developments deepen our understanding of the variations in organizational practices and beliefs inherent in institutions as well as of the potential for human agency. Institutional logic was introduced by Alford and Friedland (1985) to refer to ”broader cultural beliefs and rules that structure cognition and guide decision making in a field“ (cited by Lounsbury, 2007, p. 289), thus defining “the content and meaning of institutions” (in Thornton and Ocasio, 2008, p. 100). Researchers posited that organizational activities are influenced not just by institutional environments or organizational fields but also by other fields and broader social contexts (Friedland and Alford, 1991; Scott, 2008b). Thornton and Ocasio (1999) in their approach to institutional logics have extended the theorization of coercive, normative, and cultural-cognitive institutional pressures by highlighting their complementarity (in Thornton and Ocasio, 2008, p. 101). Moreover, some organizational fields may not necessarily be characterized by one central, relatively coherent set of beliefs, but rather organizational fields may contain secondary or multiple conflicting belief systems; hence, activities of some organizations are embedded in institutional pluralism (e.g., Dunn and Jones, 2010). As literature in HE quality illustrates, the latter is of particular importance to this study.

Institutional scholars argue that the context of institutional pluralism serves as an enabling condition for human agency (e.g. Rojas, 2010) and institutional change (e.g., Smets, Morris and Greenwood, 2012).