Innovation and institutional change: the transition to a sustainable ...

14 Chapter 2
emerges because of changes in human behaviour, interaction and practice.
Max Weber conceptualises this with the building blocks ‘social action’ and
‘order’. Action is behaviour invested with meaning, and the prefix social
implies action is oriented to another actor 1 (Smelser and Swedberg, 2005: 9).
Order comes into being “when social actions are repeated over a period,
regarded as objective, and surrounded by various sanctions” (Smelser and
Swedberg, 2005: 9). In his classical ‘The Protestant Ethic and the Spirit of
Capitalism’, Weber pointed at the link between patterns of behaviour
ingrained by Protestantism and the advance of modern Western industrial
economy (Landes, 1969: 22-23; Castells, 1996: 210-215). The relevance lies
in the general argument that cultural and institutional transformation brought
forth a new paradigm of economic organisation and the necessary ethical
foundation for pure individual profit-seeking (Castells, 1996: 211, 213).
Also Beck (1992: 201) points out that Weber argued that “work,
technological change and economic development are tied into the system of
cultural norms, the prevailing expectations and the value orientations of
people”. Sociologists also criticise basic premises regarding rational
behaviour of actors utilised in mainstream economics. Simon stressed the
bounded rationality of human behaviour due to limits of individual cognitive
capacity and March and Simon argue how an individuals’ actions are
strongly conditioned by the organisation which they are a part of (Scott,
2001: 26). Parsons (1982) explained how systems of norms regulate the
interaction of humans, and Berger and Luckmann (1966) focus more on
cognitive aspects and argue that reality is a product of social interaction
based on the formation of shared knowledge and belief systems which guide
human behaviour. More broadly speaking, the notion of institutions is used
to capture the way human behaviour and interaction is enabled, guided,
constrained and regulated by various types of rules (Scott, 2001). Institutions
have taken a central place in a variety of approaches from different academic
disciplines. Consequently, there is a wide divergence of definitions regarding
institutions and in ways to study them. Table 2.1 introduces three main
pillars in the nature of institutions, based on Scott (2001). The regulative
pillar is broadly accepted: institutions regulate and constrain behaviour.
Economists predominantly draw on this pillar in the way they integrate
institutions into economic reasoning (e.g. Williamson, 1981 and North,
1990). In the normative pillar behaviour is conditioned by social beliefs and
norms. Early sociologists such as Parsons and Durkheim see institutions as
resting mainly on this pillar (Scott, 2001: 55-56). The cognitive pillar of
1 With the focus on individual action and its relation to other actors Weber distinguishes
himself from micro-economics where individual action is seen as unconnected to other
individuals (Smelser and Swedberg, 2005: 4).