New institutionalism
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New institutionalism is a social theory that focuses on developing a sociological view of institutions, the way they interact and the effects of institutions on society. It is significant in that it provides a way of viewing institutions outside of the traditional views of economics, explaining, for example, why so many businesses end up having the same organizational structure (isomorphism) even though they evolved in very different ways, or how institutions shape the behavior of individual members.
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History
In some 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 the 1980s new institutionalism, sometimes called 'neo-institutionalism' has seen a revival of the 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 (DiMaggio and Powell, 1991) in the early 1990s. The following decade saw an explosion of literature on the topic across disciplines.
Introduction to New Institutionalism
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 through institutional isomorphism (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 other alternative.
For an interesting application of the new institutional approach see Terry Karl (1990), in which instutions are seen to constrain elite actor's preferences and policy choices during transition. The focus upon economics in this article is misleading, institutions are politics, they are what politics is constructed of and how the practice of politics is transmitted. New Institutionalism was born out of a REACTION to the behavioural revolution. In viewing instituions more widely, ie. as social constructs also and taking into account the influence that instituions have on individual preferences and actions New Institutionalism has moved away from its institutioanl (formal legal descriptive historical) roots and beome a more explanaratory discipline within politics.
Interdisciplinary relevance
This way of understanding individual choice is also relevant to economics. New institionalists in economics recognize that institutions have at least as much influence on the economy as individual's choices. See Institutional economics
References
Berger, Peter L. and Luckmann. 1966. The Social Construction of Reality. New York: Doubleday.
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.
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.
Parto, Saeed. 2003. "Economic Activity and Institutions (http://ideas.repec.org/p/wpa/wuwpot/0303001.html)," Others (http://ideas.repec.org/s/wpa/wuwpot.html) 0303001, Economics Working Paper Archive at WUSTL.
Scott, Richard W. 2001. Institutions and Organizations, 2nd ed. Thousand Oaks: Sage Publications.