The article “Institutional Theory and Institutional Change: Introduction to the Special Research Forum” by M. Tina Dacin, Jerry Goodstein, and W. Richard Scott serves as a crucial introduction to a special collection of studies within The Academy of Management Journal, aiming to significantly advance the understanding of institutional theory. While institutional theory has achieved prominence as a powerful explanation for individual and organizational actions, it has frequently been critiqued for its primary focus on explaining the persistence and homogeneity of phenomena. The authors contend that this narrow focus has not fully tapped the theory’s potential. They highlight that institutions are dynamic, changing over time, are not uniformly taken-for-granted, possess particularistic effects, and are frequently challenged and contested. Therefore, the special research forum was initiated to explore how institutions themselves change in character and potency over time, and to provide new insights into their creation, transformation, and extinction, as well as the interaction of institutional processes affecting these changes.
The forum received over 75 manuscripts, underscoring the growing interest in institutional theory. Instead of offering a general review of institutional theory, this introductory article focuses on three core questions to guide the accepted works:
- What do these studies tell us about the primary sources or drivers of institutional change?.
- What do they reveal about the factors influencing how organizations respond to (by resistance or legitimation) and initiate institutional change, specifically focusing on the role of agency and the necessity of legitimating change?.
- What has been learned about the process of institutional change, particularly “deinstitutionalization” and the emergence of new forms?.
The authors then conclude by outlining promising directions for future research on institutional change.
Institutional Change: Sources, Responses, and Processes
Sources or Drivers of Change
A significant contribution of the studies in this forum is their attention to the sources of institutional change, especially concerning the deinstitutionalization of existing norms and practices. While much of the prior literature emphasized institutional construction and convergent change, deinstitutionalization—the weakening and disappearance of institutions—is an equally vital, though less explored, phenomenon. Scott (2001) emphasized that deinstitutionalization studies are crucial for understanding institutional change more broadly, as the decline of old beliefs and practices often coincides with the rise of new ones.
Oliver (1992) identified three major sources of pressure on institutionalized norms or practices:
- Functional Pressures: These arise from perceived problems in performance or utility associated with existing practices, often linked to broader environmental changes like intensified resource competition. For instance, Thornton’s (2002) study of higher education publishing shows how resource competition and market acquisitions in the mid-1970s undermined professional editorial logic, leading to the institutionalization of a market logic. Similarly, Lounsbury (2002) observed a shift from a regulatory logic to a market logic in the U.S. finance industry due to deregulation, creating new opportunities for finance professionals. Lee and Pennings (2002) demonstrated how performance differentials among competing organizational forms in the Dutch accounting sector served as market feedback, furthering deinstitutionalization and encouraging the adoption of more successful organizational forms. Kraatz and Moore (2002) found that performance-driven pressures from shifting student preferences and competition from public institutions prompted liberal arts colleges to question existing curricula and adopt professionally oriented programs.
- Political Pressures: These result primarily from shifts in the interests and power distributions that underpin existing institutional arrangements. These shifts can be triggered by performance crises or environmental changes that compel organizations to question the legitimacy of a practice. Greenwood, Suddaby, and Hinings (2002) illustrate this with their study of the Canadian accounting profession, where professional associations, responding to market demands for new services, redefined the scope of accounting services to include management advisory services. These associations legitimated the change by referencing existing professional values, such as service to clients, within an “intraprofessional discourse”. Townley (2002) further highlights political pressures in Canadian museums, where the introduction of private-sector business planning and performance measures as part of a “reinvention of government” clashed with the cultural values of museums, underscoring the contested nature of institutional change driven by political motives.
- Social Pressures: These can stem from group differentiation (e.g., increasing workforce diversity), the presence of heterogeneous or discordant beliefs (e.g., from mergers), and changes in laws or social expectations (e.g., affirmative action). Zilber’s (2002) study of a rape crisis center in Israel demonstrates how shifts in the number of participants with a therapeutic focus altered the prevailing feminist ideology. This study confirms Oliver’s (1992) insight that new members with diverse backgrounds bring different interpretive frameworks, diminishing consensus and unquestioning adherence to taken-for-granted practices. Both Townley’s and Zilber’s studies emphasize the “interplay between actors, actions, and meanings” in understanding the “micropolitics” of institutional change.
Initiating and Responding to Change: The Role of Interests, Agency, and Legitimacy
An early critique of neoinstitutional theory was its focus on homogeneity and persistence, neglecting the role of interest and agency in shaping action. Recent work, including studies in this forum, addresses this by acknowledging variation and change, recognizing that multiple institutional logics exist and compete, highlighting the importance of examining the “institutional arenas” where such contests occur.
Kostova and Roth’s (2002) study, for example, explores the adoption of Total Quality Management (TQM) by multinational corporation subsidiaries, demonstrating variation in the institutionalization of practices across countries and organizational units. Their findings underscore the importance of aligning practices, interests, and agency within relational contexts for successful diffusion and institutionalization. Several other studies explicitly focus on power, interests, and agency. Lawrence, Hardy, and Phillips (2002) examine interorganizational collaboration as a form of “institutional entrepreneurship,” where strong ties shape changes in practices. DiMaggio (1988) introduced this concept, where agents deploy resources to create and empower institutions, serving as agents of legitimacy for changes aligned with their interests. Townley (2002) highlights the role of powerful “carriers” or agents in shaping the implementation of new systems, while Zilber (2002) shows organization members as active carriers, making choices in interpreting institutional meanings. Garud, Jain, and Kumaraswamy (2002) provide an illuminating description of Sun Microsystems’ “institutional entrepreneurship” in sponsoring Java technology, which involved destroying existing standards and crafting new rules governing competition in the software industry, showcasing that these processes are often forged through conflict and contain built-in tensions fueling ongoing change.
The creation, transformation, and diffusion of institutions require legitimacy, meaning alternatives are seen as less appropriate, desirable, or viable. Hargadon and Douglas (2001) illustrate this by detailing the need to embed Edison’s electric lighting innovation in legitimate and familiar designs to shape its success against established institutions. Studies in this volume emphasize legitimating change through conformity to field-level cognitive interpretations (Glynn & Abzug, 2002), market feedback (Lee & Pennings, 2002), or the development of constitutive rules (Hinings et al., 2002). Glynn and Abzug’s study, in particular, identifies identity shifts as critical for securing legitimacy, suggesting that identity is embedded in institutional dynamics driven by efforts to gain legitimacy.
Change as Process
Several studies in the forum, particularly intensive qualitative works by Greenwood and coauthors, Townley, and Zilber, make the process of institutional change a central focus. A unifying theme is the “dialectical interplay between… actions (practices and structures), meanings, and actors”. Pressures for deinstitutionalization—whether functional, political, or social—do not automatically break down norms; rather, they are interpreted, given meaning, and responded to by organizational actors. Greenwood et al.’s model describes a critical stage of theorization and legitimation in institutional change, where existing or new actors specify the failings of old norms and justify new ones based on moral or pragmatic considerations. As this process diffuses, new norms gain legitimacy and become institutionalized.
The studies highlight differences in how this process unfolds. Greenwood and colleagues show how powerful professional associations in Canadian accounting fostered change over 20 years, justifying the expansion of services pragmatically (e.g., management advisory services) while normatively framing it as consistent with client service. Townley, conversely, found a highly contested process in Canadian museums, where attempts to introduce business planning were resisted by those who saw it as threatening cultural values. Zilber’s study of an Israeli rape crisis center reveals how changes in personnel and the ability of new volunteers to advance therapeutic practices significantly influenced the process. These studies demonstrate the value of qualitative research strategies, alongside quantitative methods, for exploring the nuanced dynamics of institutional change that might otherwise go unnoticed.
New Directions for Future Research
The authors identify several central and promising developing areas for institutional theorists to extend their ideas on change processes:
- Different Levels and Mechanisms of Change: Institutional change can occur from micro interpersonal and suborganizational levels to macro societal and global levels, over brief or extended periods, and incrementally or abruptly. The articles in the forum tend to focus on more micro levels, shorter time periods, and incremental changes. Zilber’s study of meaning changes in a rape crisis center is a micro example, while Townley examines the impact of new institutional logics at a provincial government division level. More macro studies include Thornton (U.S. higher education publishing), Lee and Pennings (Dutch accounting), Greenwood et al. (Canadian professional business services), and Lounsbury (U.S. finance). Collectively, these hint at larger transnational processes like the “restructuration” of professional services.
- Transnational Trends: Historically, professional organizations adopted diverse forms distinct from conventional businesses. However, recent decades have seen a global acceleration of processes breaching these boundaries, allowing corporate forms to penetrate fields like publishing, legal services, business services, healthcare, and higher education. This indicates a broader transformation of professional work, with newer occupations, like financial services, accommodating corporate patterns. Leicht and Fennell (2001) describe these new work arrangements combining managerial and professional logics as the “neo-entrepreneurial workplace”. These large-scale changes are complex, partly driven by shifts in Western governments’ regulatory policies, moving from public utility regulation to incentive-based, competition, and deregulation approaches. This new vocabulary of governance mechanisms is itself a product of decades of research, new economic theories, and the rise of neoconservative political leaders. These changes lead to new mechanisms by delegitimating existing forms and introducing new cultural-cognitive conceptions that form the basis for new political policies, legal mechanisms, and normative frameworks. Further research can be informed by analyses of other major transnational changes, such as the “new public management” widely adopted in Scandinavian countries, Australia, and New Zealand (Christensen & Lwgreid, 2001; Townley, 2002). Studies also examine economic and political transformations in Eastern Europe and the emergence of new economic institutions in Asia. At this level, new ideas are translated as they are transmitted, leading to divergent outcomes rather than isomorphism, creating “hybrids” that combine new and old elements through bricolage. Various “carriers” like symbols, relations, artifacts, routines, professional associations, NGOs (e.g., World Bank, WTO), consultants, and multinational corporations are involved in this global diffusion, with diversity introduced by the carriers themselves, their connections, and the differing attributes of host systems.
- Broadening Field-Level Studies: While many articles in the forum operate at the field level, they often limit attention to changes within a single organizational form or population (e.g., publishing houses, accounting organizations, law firms, colleges). While valuable, these studies risk overlooking more profound transformations in fields. The authors suggest five types of changes deserving more attention:
- Changes in relations among existing organizations: Beyond individual organizational connections, changes in the levels and distributions of connections at the field level (e.g., contractual ties replacing equity ties) are important for field “structuration”.
- Changes in boundaries of existing organizations: Forms can change to encompass more, fewer, or different functions. Fligstein’s (1990) study of U.S. corporations shifting from unified to multidivisional structures involved both a form change and an expansion of domain, redefining their field beyond product lines. Scott and associates (2000) observed hospitals unbundling functions (e.g., kidney treatment) while themselves integrating into larger healthcare systems.
- The emergence of new populations: Organizational ecologists highlight the demise of existing forms and the development of new types of organizations as a key driver of change. Research should pay more attention to “generative processes” spawning new organizations and industries, including entrepreneurial activities. The social movements literature also offers insights into how new interests become organized and introduce new actors, actions, and structural arrangements, providing a framework for examining dynamics involving both established and emergent organizations and power processes.
- Changes in field boundaries: Fields are defined by regulative, cultural-cognitive, normative, and technical dimensions, and disruptions along any of these can fundamentally alter field structure. Examples include deregulation in financial services (Lounsbury), shifts in environmental views (Frank, Hoffman & Ventresca), revised normative codes in accounting (Greenwood et al.), and technological disruptions (Garud et al., Tushman & Anderson).
- Changes in governance structures: Each field has a distinctive governance structure, often a combination of public, quasi-public, and private forms, influenced by wider societal systems. It’s crucial to attend to the full array of governance mechanisms, not just allocative and regulative roles of governments. Regulative systems often have greater effects through the normative and cognitive processes they initiate than through coercion. Less attention has been given to their constitutive powers, where governance systems can create and legitimate organizational forms, and determine property rights. Organizations also actively affect these rules and policies through perception, interpretation, negotiation, and enactment, collectively constructing compliance meanings. Collaboration with organizational ecologists, social movement theorists, and law and society scholars is encouraged to explore these complex interactions.
- The Moral Dimension of Institutions, Individual Identity, and Organizational Integrity: Scholars are encouraged to explore the moral dimension of institutions and change. This includes the interdependence between institutions and individual identity and roles, as institutions shape individual experience, character, and behavior by assigning responsibility and providing standards (Bellah et al., 1991). Secular changes can become moral crises for individuals, altering the meaning of trust, loyalty, and commitment within organizations (Hughes, 1958; Sennett, 1998). In healthcare, organizational changes have influenced the character of professionals, their loyalties, and ethical obligations, leading to “de-moralization”—the erosion of the moral calling associated with roles due to changing institutional environments (Toulmin, 1990; Sullivan, 1995; Friedson, 2001). Institutional change also impacts the character and integrity of organizations. Institutionalization establishes an organizational character based on commitments to values, forming a normative rationality that legitimates choices and sustains integrity. The challenge for institutions is to maintain integrity while responding to new environmental demands and expectations, avoiding both insularity and opportunism (Selznick, 1992). Hoffman (1997) shows that rigid maintenance of integrity can be detrimental if organizations fail to adapt to changing institutional environments, as seen with chemical and petroleum companies initially resisting environmental concerns. The dynamic tension between institutional integrity and responsiveness, and leadership’s role in this adaptation, remains underexplored.
- Variations in the Potency of Institutions over Time: Future research should explore variations in institutional potency. Dacin (1997) and Glynn and Abzug (2002) have examined this, but mechanisms driving the waxing and waning of institutional power over time are still largely unknown. Shifts in professional norms (e.g., physician autonomy) demonstrate such variations. Kostova and Roth’s (2002) findings question sequential approaches to institutionalization, suggesting that further examination of the temporal embeddedness of institutions could offer insights into the power, pacing, sequencing, and momentum of institutional change. Work in social movements may provide relevant insights into temporality.
In conclusion, the articles in this special research forum significantly contribute to the understanding of institutional theory and change, both theoretically and methodologically. The authors stress that the challenge for institutional scholars is to continue exploring and exploiting the diversity of viewpoints both within and outside the boundaries of institutional theory, positing that some of the most promising work will occur at these boundaries.
Reference:
Dacin, M. T., Goodstein, J., & Scott, W. R. (2002). Institutional theory and institutional change: Introduction to the special research forum. The Academy of Management Journal, 45(1), 45-56