Organizational Analysis: Week 6 Questions (Institutional Theory)

Meyer and Rowan

Myths: Why are the followed and why do they endure?

• What makes some elements of formal structure, which are manifested as institutional rules,
myth-like? Is it the gap between reality and the ceremonial actions taken to uphold the
institutional myths? Or is it looking for evidence of the truth in the myths in the wrong places?
Do institutional myths function within subunits of the organizations or do they just appear at the
whole organizational level? How myths continue to survive? Are there no myth "watch dogs"?
(Jessica)

• To what extent the benefit from institutionalization of an organization will remain if we

consider: 1. The specific structure of social networks and social relations which might be given
priority to over the fact and extent of institutionalization; 2. The fact that the institutionalization
is so prevalent that everyone knows the formal appearance is distinct from actual practice, taking
it for granted, thus making institutionalization a default which brings no comparative advantage,
or advantage at all. (Phoenix)

• Do myths change? Can they be challenged? Who would do so and why? If myths are
beyond the discretion of individual participant or organization, why can't they be ignored? Who
is the "they" in the phrase "they must be taken for granted" on pg 344? (Jessica)

• While rather disturbing, I can agree with Meyer and Rowan’s (1977) proposition- or at least a
modification of it- that (at least a surprising part of) the formal structures of organizations reflect
the myths of their institutional environments rather than that which might be dictated by their
work activities. This certainly describes my experience in working for the government in Texas.
But how does this happen? What causes this reliance on the myths of the institutional
environment? (Mary Carol)

• meyer and rowan argue that legitimacy offers an alternative explanation for organizational
form and action, and connect the form of the organization (decoupling etc) to the degree of
environmental institutionalization. one implication of their theory is that informal organization is
more prevalent in situations where the environment is heavily institutionalized, yet it seems the
case that informal organization within organizations exists regardless of the organization or its
environment. perhaps what they mean is that informal organizations are more visible where the
org environment is heavily institutionalized? (Vaughn)

What about intra-organizational processes?

• Meyer and Rowan argue that institutionalized myths tend to decouple formal structure from
actual organizational activity. While this distinction seems to separate the symbolic from the
rational, organizational activity itself is also subject to meaning-making. How do organization
members rhetorically coordinate their actual activities while also ceremonializing the
institutionalized myths? Does this theory impose too high a cognitive requirement on
organization members? (In other words—in organizational life, the emperor may have no clothes
but we’re all paid to pretend otherwise? Who has the last laugh here?) (Elizabeth)

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 Organizational Analysis: Week 6 Questions (Institutional Theory)

• I do not understand why do they see the decoupling occurring only between the external and the
internal environment of the organizations. To me it seems that there is an ongoing act of
legitimizing within the organization as well. Their theory seems to suffer from stopping at the
boundaries of the organizations and neglecting the powerful dynamics that shape the activities
inside the organization. it is a similar to how transaction cost theory was criticized against
considering only the costs of the market vs hierarchy. (Hila)

Assumptions v. other theories

• How does Meyer and Rowan's description of efficiency in organization compare with Pfeffer
and Salancik's description of effectiveness and efficiency? Do their share similar notions of
conforming to the environment? (Sae)

• Meyer and Rowan suggest that, as a firm becomes isomorphic with its institutional
environment, three processes tend to take place: structural subunits become decoupled from one
another and from actual activities; rituals of confidence and good faith are performed; and
inspection and evaluation are avoided. The assumptions upon which this theory is based contrast
sharply against the concern with opportunism we saw in TCE and with the problem (and cost) of
agent supervision we saw in agency theory. Is this contrast merely a question of focus on
legitimacy versus focus on efficiency? (Luciana)

• It seems like Meyer and Rowan are taking the long way ‘round to making two observations:
1) Current day society is just as embedded in collective myth and ritual as any human tribes/
groups throughout history; 2) Conceptions of “efficiency” or “evaluation” do not have objective
value or meaning. Rather, they are another expression of myth and ritual. What do the realms of
theology and philosophy have to say about the questions of meaning implied by these
observations: A) Who are we? B) Why are we here? C) Where are we going? See Gauguin’s
famous triptych. (Jennifer)

DiMaggio and Powell

• Powell and DiMaggio set out to show how “individual efforts to deal rationally with
uncertainty and constraint [underline added]” can lead to field-level homogeneity. Yet, the
categorization scheme of coercive, mimetic, and normative isomorphism feels functional and
glosses over the deeper individual-level mechanisms at work. Particularly given advances in
social psychology, could we develop a alternative typology based on the mechanism of
individual choice and the type of uncertainty being reduced; for instance: technical uncertainty
(e.g. technical/ organizational mimicry), social uncertainty (e.g. norms and hierarchy),
psychological uncertainty (e.g. role identities, ceremony, reciprocity-based social support)?
(Matt)

• If, per DiMaggio and Powell (1983), organizations adopt certain practices in order to gain
legitimacy rather than efficiency, does that mean that 1) orgs that have lost legitimacy (in one
way or another), 2) orgs that are start-ups in a new field, or 3) orgs that are reasonably small and
have fewer key stakeholders (ie: they lack lenders and shareholders- at least public ones- but still
have to conform to government regulations) are more able to pursue efficiency/be creative etc.?
Or does the need for legitimacy above all - regardless of industry and the aforementioned

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categories- preclude the pursuit of efficiency without legitimacy? Are there examples of orgs
that lacked legitimacy but were efficient? Where is the empirical analysis of this? (Mary Carol)

• There seems to be quite a direct application of institutional theory to medicine. Indeed, as

described by Paul Starr (The Social Transformation of American Medicine) one can see the
process by which medicine evolved from a trade to a profession in the context of rational myths,
isomorphism, and legitimacy. However, the professional sovereignty of physicians seems to have
resulted in less homogeneity in the practice of medicine. While there may be local norms of
physician behavior, there is great variation in the practice of medicine across the U.S. At face
value, this variation seems to contradict DiMaggio and Powell's idea of isomorphism. Or should
the focus be more on structure than on process/outcomes, in which case the professionalization of
physicans could be viewed as consistent with the notion of isomorphism due to normative
pressures, despite the lack of standardization in their conduct? (Rebecca)

Who to imitate?

• Is isomorphism the forms and practices of several leading organizations, or a combined or

mixture of those of most or all organizations, or something finally taken on by them but different
from those of each organization? (Phoenix)

• dimaggio and powell advance a theory that sees the environment (the organizational field)
affecting the structure of components (entities within the field) seems contingent on the ability of
the entity to correctly determine the extent of its field and thus the population of entities it should
mimic (or respond to coercion by). presumably, org fields are not homogeneous (this is implicit
in the expansive definition of an org field as being constituted by all relevant actors in a
recognized area of institutional life), so that there are localized isomorphic clusters within each
field. who recognizes the area (ie, who determines the perimeter of the org field) and how do
these clusters find each other within the field and form? (Vaughn)

Compared with other theories

• How can we reconcile Powell and DiMaggio's argument of isomorphism with most of the
strategy literature, which revolves around the search for sustainable competitive advantage and
differentiation? In which aspects do firms in a field tend to converge, and in which aspects do
they tend to diverge? Can we speak of an "optimal" degree of isomorphism vs. differentiation?
(Luciana)

• If DiMaggio and Powell (1983) were to have a conversation with Harvard psychologist Ellen
Langer (who focuses on mindfulness, mindful learning, progress through being aware of what
you are doing), what would the conversation look like? (Mary Carol)

Davis, Diekmann and Tinsley

• This week's reading on the deinstitutionalization of the conglomerate firm by Davis et al.
(1994) was really interesting to me because it addresses the abandonment or collapse of
organizational forms and practices, which is not as common as exploration of how they come
about. However, I am a little troubled by the term "deinstitutionalization." This week I also read a
piece on fad cycles and adaptive emulation by Strang and Macy (2001), which argues that

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organizations tend to converge on adopting a new innovation but this tends to be a faddish cycle
with waves of adoption and abandonment. The concept "institutionalization" is used frequently in
the organizational literature, and yet I am not certain what it precisely means. De-
institutionalization is even more vague to me. Does it simple refer to a practice/form that has
fallen out of popularity and common practice? How do we differentiate this process with a
faddish cycle? If organization adopt form or practice in reaction to other organizations, do they
also abandon form or practice because they see other successful and legitimate organizations
doing so? (Sabrina)

• What predictive mechanisms does isomorphism offer to explain the proliferation and
veneration of conglomerates that Davis, Diekmann, and Tinsley reference (5 times on one page
for emphasis) as: “the biggest collective error ever made by American business”; “a colossal
mistake”; “an enormous collective error”; “a financial mistake”;“the collective error”? (Jennifer)

Naturalizing analogy

• Davis et al tell an institutional story about deinstitutionalizing, explicitly highlighting the

natural analogy concept from Mary Douglas. However, their methods and data appear weakest
when they assert the natural analogy mechanism for deinstitutionalization (the undermining of
the natural body “corps” analogy when corporations became conglomerates), with a lack of any
description of the representativeness, sample size, coding, etc. of “business rhetoric.” How
related/important is this natural analogy argument to their overall analysis? (Vince)

• Taken together the articles we read two weeks ago, I think all these changes in the American
firms during 1980s and 90s such as deconglomeration, shareholder movement, and governance
reform show the reconstructing the (power) relationship between managers and shareholders, and
the key is the increasing role of financial market and the rise of agency theory. However, I found
the implication part of the article of Davis at al. (1994) is little vague by using the “naturalizing
analogy” to explain the deinstitutionalization of conglomerate. Then, is the network form or the
nexus of contract more compatible with the concept of natural body? (Dong Ju Lee)

Dobbin

• What is the response of political scientists and economists to Dobbin's challenge of their
inadequate explanations to understand the persistence of political structures? (Anshul Kumar)

Generalizability, Extensions and Definitions

• As highlighted by Davis et al and Dobbin, the neo-institutional framework as articulated by

Meyer & Rowan and Dimaggio & Powell does not adequately address the origins of legitimate
institutions or the process of deinstitutionalization. While both Davis et al and Dobbin attempt to
remedy this deficiency, much of their theorizing is closely linked to their specific institutional
case studies. How generalizable are the mechanisms that they have identified for
deinstitutionalization and genesis? Is the core methodology within neo-institutionalism (that of a
case study storyline) adequate for developing such broader theory? (Vince)

• How generalizable is DiMaggio and Powell’s argument? For rural vs. urban, for Other
countries, etc.? How generalizable is Meyer and Rowan (1977)? (Mary Carol)

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• Meyer and Rowan, DiMaggio and Powell: Organizations seem to try to conform to external
norms which reside in society. In these arguments, there seem to be audiences who watch
organizations and check if they conform to the norm. But here, the norm seems to be pretty
united and simple. What if the norms are different across social groups such as government,
consumers, and trade associations? It would be interesting if empirically look into how
organizations respond to competing norms. (Gru)

• It seems to me that the relevance of any given theory of where and how organizations set
their boundaries and how loose/rigid those boundaries are is a function of the extent to which
state agencies regulate the economy. Institutional theory, with its emphasis on norms, values,
myths, and ceremonies, seems relevant to the extent that the economy is state-regulated and the
autonomy of organizations is restricted; whereas the explanatory power of individualized
perspectives such as the nexus of contracts theory of firms seems to be a direct function of how
"free"/unregulated the market is. This is simply because, in a more free market, firms can't get
away with not thinking efficiently all the time; whereas in a less free market (more regulated), the
tools for success become "politicized", uncertain, and blurred. This highlights the importance of
middle-range theories in organizational analysis because it seems theories vary in relevance
based on certain conditions like economic/social regulation. The strength of a theory depends on
where it is being applied. And this might be why organizational analysis has become increasingly
problem-focused in recent years. (Mazen)

• How and why do the institutionalized rules emerge and fade away? Who and what play the
role in this process for what purpose? (Dong Ju Lee)

• What do the different readings suggest might be the time frame for the institutionalization of
a practice? What factors might speed or slow institutionalization? Can we only recognize
institutionalization retrospectively? (Elizabeth)

• What are the implications of these biology findings for the social behaviors that our readings
collectively refer to as "the iron cage"; "isomorphism", and "institutionalization"? (Jennifer)

• We have had a lot of vocabulary phrases presented across many of these articles (current
week's reading and previous) that use similar words and address related topics. How are the
following terms related: Organizational environment, institutional environment, organizational
field, organization, institutional myth, institutionalized organizations, complex organizations,
interorganizational structure, organizational diversity, rationalized organization, and institutional
isomorphism? Are there more? (Jessica)

• Why are modern organizations assumed to be thoroughly rationalized and giving rise to
rationalized myths as compared to older organizations? Were the latter such institutions
completely irrational or operated only on irrational (or rational) truths? Did they operate in
isolation from each other or lack a normative professionalization? (Jessica)

• For Meyer and Rowan: If, in the extreme forms, organizations are defined as "dramatic
enactments of the rationalized myths", then who are the enactments for? by whom do they occur?
how does it happen? what is the motivation? and why is this all considered to be "Dramatic"?

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(Jessica)

Institutional Theory and The Real World

• Consulting firms are implicated as one mechanism behind isomorphic change. As a

consultant for 4 years to 8 clients, I haven't ever seen clients say “I want x because my
competitor has it” – just for the sake of being similar. When I worked at a client who wanted a
new system to activate customers’ wireless handsets faster, it was a logical response to
competition – not a quest for legitimacy. Also, there are serious roadblocks to information
diffusion from 1 client to the next (legally and ethically). Most clients usually don’t know the
specifics of what their competitors are really doing internally (even with “competitive
intelligence” departments), and consultants certainly can’t tell them. So, what are some true
examples of how homogenizing information spreads (aside from public company reports)? Does
it really spread or is homogenization much more a result of adapting to the environment and
competition? I don’t see how trade shows and informal social networks of people in the same
industry help diffuse uniform business practices. Trade shows are intended for visibility and
marketing. And, I question the extent to which people at separate companies within the same
industry would really talk about their employer’s business practices. (Aaron)

• An organization like Google is extremely unique, successful, and legitimate. It does not
seem to have succumbed to isomorphism that is described here, though internet search firms have
been around for a decade or so. Google hires trained professionals (from similar backgrounds).
It is working in an uncertain environment (globally), and it exists with a lot of ambiguity since it
is a first-mover in virtually everything it does. So, what has allowed Google to be
simultaneously unique and very successful (and legitimate)? For example, is the lack of internet
legislation (p. 150) responsible in any way? Is Google still too new to be affected by normative
homogenization processes? Is 10+ years not long enough to create industry norms?
(Additionally, IDEO would be another example of an organization that doesn’t seem to have
succumbed to these pressures but has been around even longer.) Perhaps they are both unique
enough that there is no real "field" to pressure them? (Aaron)

• Meyer and Rowan apply their model to understanding academic disciplines as an example of
rationalized institutions. How would they respond to the emergence of interdisciplinary programs
and courses like ours? For example, how does the ideas of organizational conformity with
institutionalized myths leading to legitimacy, stability, and survival useful in understanding some
processes of interdisciplinary programs (e.g. cross-registration)? Do such processes conflict with
efficiency? (Sae)