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

34 Chapter 2
New institutionalism in organisational theory
New institutionalism in organisational theory approach institutions as
socially constructed, routine-reproduced program or rule systems. Contrary
to the regulative and normative approaches in institutional economics here
the focus is particularly on the way shared cognitions and taken-forgrantedness
of certain ways of doing things as exemplified in the
“homogeneity of practices and arrangements found in the labor market, in
schools, states, and corporations” (DiMaggio and Powell, 1991: 9). An
example is the work of Tolbert and Zucker (1994) who aim to understand the
way certain organisational structures diffuse across industries. They
conceptualise a sequential process of institutionalisation where innovative
organisational forms become fully integrated and taken for granted as they
move through three phases. In the first pre-institutionalisation phase of
habitualisation the new structural arrangements are born in response to
specific organisational problems and become formalised in policies of
procedures in some organisations facing the same problems. As adoption of
the new practice is still low, not many organisations will be aware of it, and
knowledge exchange regarding the new practice, on its purpose and effects
and the way it may be implemented, is very limited. In the second semiinstitutionalisation
phase some degree of consensus is developed by decision
makers in organisations as to the value of the new practice, and increasing
adoption takes place on the basis of this consensus. They call this process
objectification in the sense that increasing generalisation takes place
regarding the value of the new practice, also because pre-testing has
occurred in early adopters. In this phase diffusion may be facilitated by socalled
‘champions’, a set of individuals with a material stake in the
promotion of the structure (DiMaggio 1988). The final process towards full
institutionalisation is termed sedimentation by Tolbert and Zucker. This
involves survival of the new practice over a lengthy period of time and
across generations of organisations. “Full institutionalization of a structure
is likely to depend on the conjoint effects of relatively low resistance by
opposing groups, continued cultural support and promotion by advocacy
groups, and strong positive correlation with desired outcomes” (Tobert and
Zucker, 1994: 24).
In their analysis of the emergence of the early automobile and biotechnology
industries Rao and Singh (2001) argue that institutional factors are crucial in
explaining emergence and decline of industries. Through a process of
building legitimacy new forms “have to be justified and integrated into the
prevalent institutional order” (p. 264). In both cases it was a political
process “because support has to be mobilized for the goals, authority
structure, technologies and clients embodied in the new form. In the case of
the early automobile industry, opposition from vigilante antispeed