# Institutional Theory

Question 1

Define institutions

Answer 1

Rules of game in a society

Structures and activities that provide stability and meaning to social behavior.

Question 2

What are the 3 pillars of institutions?

Answer 2

Regulative

• Rules, regulation and policies that “promote certain types of behavior and restrict others”
• Works through enforcement and coercion
• Company’s confidentiality policies

Normative

• Social norms beliefs that are socially shared an carried out by individuals
• The “correct” way of doing things
• E.g. Environmental attitude

Cognitive-cultural

• Generally shared perceptions and values
• Not always a logical rationale
• Works through imitation
• E.g. the recognition of individuals in a society

Question 3

Difference between normative and cognitive-cultural pillars*

Answer 3

Normative can be explained logically, cognitive-cultural cannot necessarily be explained logically.
E.g. The value and recognition of individuals in a society cannot be explained logically, but belongs to the cognitive-cultural pillar of institution.

Question 4

Examples of measures for each institutional pillar

Answer 4

Regulative
- Selected world governance indicators, e.g. Antitrust regulation

Normative
- Selected world governance indicators, .e.g. Government transparency

Cognitive-cultural
- Hofstede’s dimensions

Question 5

Levels of institutions

Answer 5

• World
• Country / society
• Industry / organizational field
• Organization
• Organizational department / subsystem

Question 6

Isomorphism

Answer 6

Becoming similar, a process of homogenization. “ Constraining process that forces one unit in a population to resemble other units that face the same set of environmental conditions”

Question 7

What are the types of isomorphism and how do they relate to pillars of institutions?

Answer 7

Coercive isomorphism - regulative: legislative pressures force the firm to conform

Normative isomorphism - normative: Customer preferences & expectations force the firm to adapt

Mimetic isomorphism - cognitive-cultural: Uncertainty about suitability of product or practice and habits and inertia force the firm to imitate.

Question 8

What is organizational legitimacy according to institutional theory

Answer 8

Legitimacy: acceptance through conforming to rules and norms .
Organization strive for legitimacy &credibility – can gain it through isomorphism. Is consistent with profit maximization.

Question 9

Describe imitation

Answer 9

2 types:

• Frequency based: follow the crowd / do what most do
• Trait-based: Do what the successful do