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New institutionalism describes social theory that focuses on developing a sociological view of institutions--the way they interact and the way they affect society. It provides a way of viewing institutions outside of the traditional views of economics by explaining why so many businesses end up having the same organizational structure (isomorphism) even though they evolved in different ways, and how institutions shape the behavior of individual members.

Sociological or political new institutionalism should not be confused with new institutional economics.

History[edit | edit source]

In all ways, institutionalism and the analysis of the way institutions affect our society are as old as the Greek Philosophers. Thinkers for thousands of years have recognized that insititutions interact with one another in ways that can be studied and understood. Sociologists in the late 19th Century and early 20th Century began to systematize this study. Economist and Social theorist Max Weber focused on the ways bureaucracy and institutions were coming to dominate our society with his notion of the iron cage that rampant institutionalization created.

In Britain and America, the study of political institutions dominated political science until after the post-war period. This approach, sometimes called 'old' institutionalism, focused on the analysing the formal institutions of government and the state in comparative perspective. After the behavioural revolution brought new perspectives to analysing politics such as positivism, rational choice theory and behaviouralism, the focus on institutions was ditched since it saw politics as too narrow. The focus moved to the analysing the individual rather than the institutions which surrounded him/her.

In the 1980s however, new institutionalism, sometimes called 'neo-institutionalism', has seen a revived focus on the study of institutions as a lens for viewing work in a number of disciplines including economics, international relations and political science. Authors like Paul DiMaggio and Walter Powell consciously revisited Weber's iron cage in the early 1980s (DiMaggio and Powell 1983, 1991). The following decade saw an explosion of literature on the topic across disciplines. DiMaggio and Powell's 1991 anthology summarizes work in sociology. In economics, the new institutionalism is most closely associated with Washington University in St. Louis, where Douglass North, who won a Nobel Prize in 1993 for his work with NI, currently teaches.

Introduction to New Institutionalism[edit | edit source]

New institutionalism recognizes that institutions operate in an environment consisting of other institutions, called the institutional environment. Every institution is influenced by the broader environment (or in simpler terms institutional peer pressure). In this environment, the main goal of organizations is to survive. In order to do so, they need to do more than succeed economically, they need to establish legitimacy within the world of institutions.

Much of the research within New Institutionalism deals with the pervasive influence of institutions on human behavior through rules, norms, and other frameworks. Previous theories held that institutions can influence individuals to act in one of two ways: they can cause individuals within institutions to maximize benefits (regulative institutions), similar to rational choice theory or to act out of duty or an awareness of what one is "supposed" to do (normative institutions). An important contribution of new institutionalism was to add a cognitive type influence. This perspective adds that, instead of acting under rules or based on obligation, individuals act because of conceptions. "Compliance occurs in many circumstances because other types of behavior are inconceivable; routines are followed because they are taken for granted as 'the way we do these things'" (Scott 2001, p. 57). Individuals make certain choices or perform certain actions not because they fear punishment or attempting to conform, and not because an action is appropriate or the individual feels some sort of social obligation. Instead, the cognitive element of new institutionalism suggests that individuals make certain choices because they can conceive of no alternative.

For an interesting application of the new institutional approach see Terry Karl (1990), which portrays institutions as constraining elite actors' preferences and policy choices during transition. The focus upon economics in this article is misleading; institutions are politics: they are the substance of which politics is constructed and the vehicle through which the practice of politics is transmitted. New institutionalism was born out of a reaction to the behavioural revolution. In viewing institutions more widely, i.e. as social constructs also and taking into account the influence that institutions have on individual preferences and actions new institutionalism has moved away from its institutional (formal legal descriptive historical) roots and become a more explanaratory discipline within politics.

More recent work has begun to emphasize multiple, competing logics (Friedland & Alford, 1991; Lounsbury, 2007), focusing on the more heterogeneous sources of diversity within fields (Lounsbury, 2001) and the institutional embeddedness of technical considerations (e.g., Scott et al., 2000; Thornton, 2004). The concept of logic generally refers to broader cultural beliefs and rules that structure cognition and guide decision-making in a field. At the organization level, logics can focus the attention of key decision-makers on a delimited set of issues and solutions (Ocasio, 1997), leading to logic-consistent decisions that reinforce extant organizational identities and strategies (Thornton, 2002).

Sub-fields of the New Institutionalism[edit | edit source]

New institutionalism can take different focuses and can draw its inspiration from different disciplines. Here are some types of new institutional study:

Normative Institutionalism[edit | edit source]

See main article: Normative Institutionalism

(Normative institutionalism is sometimes seen as the "original" new institutionalism; much of the introduction of this article relates to a normative view of institutionalism.)

A sociological interpretation of institutions, normative institutionalism holds that a "logic of appropriateness" guides the behaviour of actors within an institution. The norms and formal rules of institutions will shape the actions of those acting within them.

This approach can be readily contrasted with rational choice institutionalism: rather than a series of calculated actions designed to maximise perceived benefit, any given actor within an institution will feel to some extent constrained and obligated by the norms and rules of the institution.

Normative institutionalism is referred to by Hall and Taylor (1996) as "Sociological institutionalism". It defines institutions much more broadly than political scientist or economist and it includes also the symbol systems, cognitive scripts and moral templates, hence it breaks down the divide between 'institutions' and 'culture'.

Rational choice institutionalism[edit | edit source]

See main article: Rational choice institutionalism

Rational choice institutionalism draws heavily from rational choice theory, but is not identical to it. Proponents of this theory argue that political actors' rational choices are constrained ("bounded rationality"). Rational choice theory also argues that institutions are rules that govern the behavior between individuals and that actions are made in interest of the self.

Historical Institutionalism[edit | edit source]

See main article: Historical institutionalism

As the name suggests, this version of institutionalism states that "history matters." Paths chosen or designed early on in the existence of an institution tend to be followed throughout the institution's development. Institutions will have an inherent agenda based on the pattern of development, both informal (the way things are generally done) and formal (laws, rulesets and institutional intereaction.)

A key concept is path dependency: The historical track of a given institution or polity will result in almost inevitable occurrences. In some institutions, this may be a self-perpetuating cycle: actions of one type beget further actions of this type.

This theory does not hold that instituitional paths will forever be inevitable. critical junctures may allow rapid change at a time of great crisis.

Interdisciplinary relevance[edit | edit source]

This way of understanding individual choice is also relevant to economics. New institutionalists in economics recognize that institutions have at least as much influence on the economy as individual's choices. (see institutional economics)

Critiques of New Institutionalism[edit | edit source]

New Institutionalism is often contrasted with "old" or "classical" institutionalism, the latter of which was first articulated in the writings of John Dewey, Thorstein Veblen, John Commons, and others, and which has been further extrapolated by such various scholars as Donald Davidson, Richard Rorty, Amartya Sen, Donald McCloskey, Warren Samuels, Daniel Bromley, EJ Mishan, Yngve Ramstad, and others. Proponents of the older institutionalism are strongly opposed to new institutionalism, most saliently in the manner in which new institutionalism seeks to explain institutional change as merely another instance of maximization. Instead, old institutionalism seeks to articulate reasons for institutional change in terms of social and political volition.

See also[edit | edit source]

References[edit | edit source]

Berger, Peter L. and Luckmann. 1966. The Social Construction of Reality. New York: Doubleday.

DiMaggio, Paul J. and Walter W. Powell. 1983. "The Iron Cage Revisited: Institutional Isomorphism and Collective Rationality in Organizational Fields." American Sociological Review 48:147-160.

DiMaggio, Paul J. and Walter W. Powell. 1991. "Introduction." Pp. 1-38 in The New Institutionalism in Organizational Analysis, edited by Walter W. Powell and Paul J. DiMaggio. Chicago: University of Chicago Press.

Friedland, Roger and Robert R. Alford. 1991. "Bringing Society Back In: Symbols, Practices, and Institutional Contradictions." Pp. 232-263 in The New Institutionalism in Organizational Analysis, edited by Walter W. Powell and Paul J. DiMaggio. Chicago: University of Chicago Press.

Hall, Peter A. and Rosemary C.R. Taylor. 1996. "Political Science and the Three New Institutionalisms." Political Studies 44(5):936-957.

Jepperson, Ronald L. 1991. "Institutions, Institutional Effects, and Institutionalism." Pp. 143-163 in The New Institutionalism in Organizational Analysis, edited by W. W. Powell, DiMaggio. Chicago: University of Chicago Press.

Lounsbury, M. 2001. "Institutional Sources of Practice Variation: Staffing College and University Recycling Programs." Administrative Science Quarterly, 46: 29-56.

Lounsbury, M. 2007. "A Tale of Two Cities: Competing Logics and Practice Variation in the Professionalizing of Mutual Funds." Academy of Management Journal, 50: 289-307.

Meyer, Heinz-Dieter and Brian Rowan, 2006. The New Institutionalism in Education. Albany, NY: SUNY Press.

Meyer, John. W., and Brian Rowan. 1977. "Institutionalized Organizations: Formal Structure as Myth and Ceremony." American Journal of Sociology, 83(2), 340.

Ocasio W. 1997. "Towards an Attention-Based View of the Firm." Strategic Management Journal, 18:187-206.

Parto, Saeed. 2003. "Economic Activity and Institutions," Others 0303001, Economics Working Paper Archive at WUSTL.

Scott, Richard W. 2001. Institutions and Organizations, 2nd ed. Thousand Oaks: Sage Publications.

Scott, W.R., Ruef, M., Mendel, P. & Caronna, C. 2000. Institutional Change and Healthcare Organizations: From Professional Dominance to Managed Care. Chicago: University of Chicago Press.

Thornton, P.H. 2002. "The Rise of the Corporation in a Craft Industry: Conflict and Conformity in Institutional Logics." Academy of Management Journal, 45: 81-101.

Thornton, P.H. 2004. Markets from Culture: Institutional Logics and Organizational Decisions in Higher Education Publishing. Stanford, CA: Stanford University Press.

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