Institutional Theory and Organizational Change

Institutional Theory and Organizational Change

Staffan Furusten

Whether or not they are aware of it, managers do not fully control the nature and timing of their decisions. Their framework of action is limited by institutional constraints in the surrounding environment – what is technically, economically, socially and culturally possible in different contexts. With a better understanding of their environment – and how it affects how they think, what they do and why they do it – decision-makers are also better able to make more carefully considered decisions about organizational change. In this book Staffan Furusten discusses why it is difficult for organizations around the world to resist the pressures of the institutional environment and how organizations worldwide – big and small, private and public – are becoming increasingly alike.

Chapter 4: Institutional movements

Staffan Furusten

Subjects: business and management, critical management studies, organisation studies, economics and finance, institutional economics

Extract

I will now move on to a discussion of elements in the wider, more indirect institutional environment of organizations. An important question is then where the line between indirect and direct elements can be drawn. Possibly such a division lends itself to be made analytically, but it is difficult to define precisely where the boundary lies in practice. We can, however, distinguish between actors and products, as I did in Chapters 2 and 3. We can also distinguish between the visible and what lies beneath, the silent and less easily visible. In previous chapters, I discussed how such components in the institutional environment of organizations can be said to be directly linked to the activities of individual organizations. Individual organizations meet consultants, buy books, apply standards, must follow rules, etc. The immediate environment can therefore be described as more direct, visible and well-defined with respect to its structures. We are now moving from the direct dimension into the less obvious – that is, to those institutional environment elements that cannot be directly associated with particular actors or products. This does not mean that the wider institutional environment is less important to our understanding of why organizations evolve in a certain direction. Quite the opposite: the indirect dimension is highly significant, but it is not at all certain that individuals in organizations perceive that they are affected by it. In the next two chapters, I will attempt to specify what this wider institutional environment is composed of.

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