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The Evolution of Institutional


Theory and Its Potential Use
in Accounting Research
By: Ersa Tri Wahyuni,PhD

Padjadjaran Accounting Colloquium Series, 25th April 2016

Agenda

Introduction to Institution Theory

New Institutional Theory

Institutional Logic

Institutional Entrepreneurship

Institutional Work

World Society Theory

Questions and Answers

Padjadjaran Accounting Colloquium Series, 25th April 2016

What is an Institution?

Institutions are social structures that have attained a high degree of


resilience. [They] are composed of cultural-cognitive, normative, and
regulative elements that, together with associated activities and
resources, provide stability and meaning to social life

Institutions are transmitted by various types of carriers, including


symbolic systems, relational systems, routines, and artifacts. Institutions
operate at different levels of jurisdiction, from the world system to
localized interpersonal relationships. Institutions by definition connote
stability but are subject to change processes, both incremental and
discontinuous (Scott, 1995)

Institutions are social structures that are constructed by humans to


provide stability and meaning to life. They are the rules of the game
that both enable and constrain human behaviour.

Padjadjaran Accounting Colloquium Series, 25th April 2016

Examples of Institutions

Organisations

Companies

Industry

Universities

Marriage

A class room

A household

Religions / Church / Mosque

Padjadjaran Accounting Colloquium Series, 25th April 2016

Pillars of Institutions
Institution constraints organisational activity through three different
dimensions:
Pillars
Regulative

Normative

Basis of
compliance

Expedience

Social Obligation Taken-for grantedness


shared understanding

Basis of order

Regulative rules

Binding
expectations

Consultative Scheme

Mechanisms

Coercive

Normative

Mimetic

Logic

Instrumentality

Appropriateness

Orthodoxy

Indicators

Rules, Laws,
Sanctions

Certification,
Accreditation

Common beliefs
Shared logic of action

Basis of legitimacy

Legally
sanctioned

Morally
governed

Comprehensible.
Recognizable,
Culturally Supported

Padjadjaran Accounting Colloquium Series, 25th April 2016

Source: Scott, 2001

Cultural-Cognitive

New Institutional Theory


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What makes organisations so similar?
ISOMORPHISM
Coercive, Mimetic, Normative
Organisational Isomorphism increase with:
Resource centralisation and Dependency
Goal ambiguity and technical uncertainty
Professionalisation
Structuration
WHY? To be viewed legitimate
Source: DiMaggio and Powell (1983)

Padjadjaran Accounting Colloquium Series, 25th April 2016

The Issue of
Decoupling:
What is appropriate
become more
important than what is
consequential
Legitimate behaviour is
appropriate behaviour

Institutions and Legitimacy

Organizations require more than material resources and technical


information, they also need social acceptability and credibility (Scott et al.
2000)

Example of legitimacy:

Input Legitimacy and Output Legitimacy (Botzem & Dobusch, 2012) (e.g : IFRS)

Technical Legitimacy (e.g : ISO)

What can improve legitimacy:

Due process

Legal Support

Endorsement from professional

Diffusion of adoption by industry

Padjadjaran Accounting Colloquium Series, 25th April 2016

How Institutions Response to


pressures?
Oliver (1991) Framework
Strategic Response to
institutional pressures

Aquiescence

Compromise

Avoidance

Defiance

Manipulations

Oliver (1992) discussed


deinstutionalization

Padjadjaran Accounting Colloquium Series, 25th April 2016

Oliver (1991) framework is popular in organisational studies to


analyse organisations with coercive pressures to change.
The concept of deinstitutionalization has been used by Lawrence
& Suddaby (2006) to develop Institutional Work Theory.

Institutional Logic
The term institutional logic was introduced by Alford and Friedland (1985)
to describe the contradictory practices and beliefs inherent in the institutions
of modern western societies.
Core institutions of society : Capitalist market, bureaucratic State, Family,
Democracy and Religion, - each has a central logic that constraints both
means and ends of individual behaviours.
An institutional logic is the way of particular social world works.
IFRS is an accounting standard, which is a socially constructed product as a
result of political struggle of interested actors. Does IFRS has logics? What are
the logics of IFRS?
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Institutional Logic

Usually used to describe institutional change in a micro level analysis

Used extensively in management accounting case studies

Sometime can become a paint brush term where people use


institutional logic without a deeper understanding

Institutional logic is not very easy to find.

New development of this theory is hybrid logic and situational logic

Example of institutional logics for the case of the privatisation of public


companys: Public Service, technical efficiency, commercialisation.

Padjadjaran Accounting Colloquium Series, 25th April 2016

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Institutional Entrepreneurship
(DiMaggio, 1998 ; Battilana, Leca, Boxenbaum : 2009)

Who Change Institutions?

The Paradox of Embedded Agency : Can an Individual really change an


institution?

Yet many evidence : Gandhi, Martin Luther King, Elvis Presley, Sir David
Tweedie,

How to distinguish Institutional Entrepreneur and just key actors?

Institutional Entrepreneurship (DiMaggio,1988): 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 & Lawrence, 2004)

Padjadjaran Accounting Colloquium Series, 25th April 2016

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Institutional Work

Institutional Work (Lawrence and Suddaby, 2006; Lawrence, et.al

2009)

Institutional work represents a new idea connecting, bridging and extending


the work of institutional entrepreneurship, institutional change and innovation
and deinstitutionalisations (Lawrence et al., 2009)

Institutional work : the purposive action of individuals and organisations


aimed at creating, maintaining and disrupting institutions. (Lawrence and
Suddaby 2006)

Institutional Work used three categories: Creating Institutions,


Disrupting Institution and Maintaining Institutions

Focus on the work and actions of actors which change institutions.

Some case studies of institutional work are focusing on creating


institutions

Usually are used at organisational level or field level of study

Padjadjaran Accounting Colloquium Series, 25th April 2016

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World Society Theory

World Society Theory (Meyer, 1997 ; Drori 2003; Drori et al., 2006)

World society theory sees globalisation as more than intense worldwide


transaction but also includes an additional conceptual shift towards the
universal, and is thus a cultural process in addition to being an economic and
political process

Sociological theories
Modernization theory
World Systems Theory (WST) / dependency theory
World polity theory (WPT) / institutional theory

World Society Theory see the world as a village with its own culture and
polity. Globalization are the result of people adopting the world culture

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References
Battilana, J., Leca, B and Boxenbaum, E. 2009. 2How Actors Change Institutions:
Towards a Theory of Institutional Entrepreneurship. The Academy of Management
Annals, 3, 65-107.
Botzem, S., & Dobusch, L. (2012). Standardization cycles: A process perspective on
the formation and diffusion of transnational standards. Organization Studies,
33(5-6), 737-762.
DiMaggio, Paul J., and Walter W. Powell 1983. The iron cage revisited: Institutional
isomorphism and collective rationality in organizational fields, American
Sociological Review 48:147-60.
Drori, G. S. (2003). Science in the modern world polity: Institutionalization and
globalization: Stanford University Press.
Drori, G. S., Meyer, J. W., & Hwang, H. (2006). Globalization and organization: World
society and organizational change: Oxford University Press.
Lawrence, T. B. & Suddaby, R. (2006) 1.6 Institutions and Institutional Work. In: Clegg,
S. R., Hardy, C., Lawrence, T. & Nord, W. R. (eds.) The Sage Handbook of
Organization Studies. London: Sage,pp.215-254
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References
Lawrence, T. B., Suddaby, R. & Leca, B. (2009) Institutional Work: Actors
and Agency in Institutional Studies of Organizations. New York:
Cambridge university press.
Meyer, John W. and Rowan, Brian (1977)Institutionalized organizations:
Formal structure as myth and ceremony. American journal of sociology
83: 340363.
Meyer, J. W., Boli, J., Thomas, G. M. & Ramirez, F. O. (1997) World Society
and the NationState. American Journal of Sociology, 103(1), pp.144181.
Oliver,C. (1991) Strategic responses to institutional processes. Academy of
Management Review. Vol.16 (1) : 145-179
Scott, W. Richard 1995. Institutions and Organizations. Thousand Oaks, CA:
Sage
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Thank You

Padjadjaran Accounting Colloquium Series, 25th April 2016