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 7: The institutional environment and organizational change

Staffan Furusten

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


The main purpose of this book has been to specify key components of the institutional environment surrounding organizations in order to understand how the institutional environment is related to organizational change. The point of departure was the lack of cohesive discussion in the organization and management literature where this is placed in focus. This is surprising since the institutional environment is extremely important for the development of individual organizations and what decision-makers are able to decide. The arguments in the book have therefore been structured on a model where I used the first five chapters to specify what the institutional environment is made up of. In the two final chapters, the discussion shifts to how the institutional environment affects individual organizations, and thereby also decision-makers in these organizations. In the previous chapter, I argued that elements in the institutional environment and organizations are linked through the processes of decontextualization and recontextualization of institutional products. In this chapter, I discuss why organizations do this. Why do organizations and CEOs around the world subject themselves to the difficulties of trying to live up to the demands of the institutional environment? Can organizations and their managers not just ignore this and go about their business? Is it possible for organizations to resist change or handle pressure from the institutional environment in other ways?

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