Summary of Institutional Theory on an Institution:When tension arises between professional employees in a company like Google, bureaucratic rules and hierarchical supervision exists like the director, system administrator all with different kinds of job specifications. This theory can well summarize that work arrangements are well shaped as by cultural, social, and political processes (Berger et al., 1967, p. 65).
Institutional theory focuses mainly on the deeper and more resilient aspects of social structure. It considers the processes by which structures, including schemas, rules, norms, and routines, become established as authoritative guidelines for social behaviour within a social set environment as put by Booth (1990). This theory inquires into how these elements are created, diffused, adopted, and adapted over space and time; and how they fall into decline and disuse. Institutions are more or less social structures that have attained a high degree of resilience (Berger et al., 1967, p. 65).
Nevertheless, institutions are composed of cultural-cognitive, normative, and regulative elements that, together with associated activities and resources, provide stability and meaning to social life.Institutional Theory: Generally, institutions are coordinated by various types of carriers, including symbolic systems, relational systems, continuity and artefacts. Hence, they operate at different levels of jurisdiction from the world system to localized interpersonal relationships (Berger et al., 1967, p. 115).
However, Institutional theory has captured the attention of a wide range of scholars and is more so used to examine systems ranging from micro interpersonal interactions to macro global frameworks.Accounting Theory Application:When applied in wider environments and their effects on organizational forms and processes with greater emphasis on the micro-foundations of institutional theory, such as in transaction cost economic and evolutionary economic approaches an astonishing variety of approaches can be well achieved. A perfect example is when tension arises between professional employees, bureaucratic rules and hierarchical supervision exists. This theory can well summarize that work arrangements are well shaped as by cultural, social, and political processes (Berger et al., 1967, p. 65).
In applying this theory to be consistent with conventions, organizations are recognized as rational systems bound by a set of related activities specified in order to reflect the ways in which a relationship is oriented to the pursuit of specified goals. The main insight, however, is the recognition that models of rationality are themselves cultural systems, constructed to represent appropriate methods for pursuing the goals.This theory plays the link between societal views and organization’s actions. Management is more aware of social views and opinions and more willing to incorporate societal norms and expectations, rules, regulations, and requirements in its daily operations of an organization. This concept of bringing the environment and management together has proven to be the ultimate advantage to this theory in addition to isomorphism as Booth (1990) puts it. The models gives rise to institutions by providing templates for the design of organizational structures which include the positions, policies, programs, and procedures of an organization.
These models exert their power through work activities which are often eliminated from the rule systems or the accounts depicting them and also on stakeholders and audiences external to the organization as Fouts (1997) argues. Moreover, there adoption by the organization garners social legitimacy.Institutions have a greater advantage in palpable network connections that transmit coercive and normative pressures from institutional agents, such as the state and professional bodies. This also applies to mimetic influences stemming from similar and related organizations as Eckholm (1985) puts it.It’s disadvantaged in that it places a tremendous amount of constraints on management to conform to the norms, rules, or requirements. High level of constraints can prove to be dangerous to the organization because it can inhibit versatility, creativity, and diversity within a particular field as Fouts (1997) argues it.
Also, within such an environment, management may have a minimal amount of freedom to make decisions hindering the structural process (Berger et al., 1967, p. 55).The concept of “organizational field” and the concept of “societal sector” simultaneously recognize that both cultural and network systems give rise to a socially constructed arena within which diverse, interdependent organizations carry out specialized functions. Therefore, the institutional forces have their strongest effects and are most readily examined in such fields.
Nevertheless, institutions are variously comprised of cultural-cognitive, normative and regulative elements that together with associated activities and resources, provide stability and meaning to social life as put by Eckholm (1985).In conclusion, the Institutional theory can be advantageous to an organization because its stakeholder, as a society, plays a vital role in deciding how legitimate an organization is, directly. Moreover, it has much power in the operations of an organization. Many other theories of organization do not extend the same level of power to its stakeholders in which the stakeholders set the standards as Fouts (1997) argues. Hence, the Institutional theory is a promising theory, despite its disadvantages. This theory is not advantageous for every organization but can be determined by a best fit approach by examining the capability of an organization’s mission, goals, vision, and strategic plans to the basic principles of a theory in an effort to determine which theory fits best it.
However it can also can provide a few downfalls that may hinder productivity as explained.