Institutional Theory: Reaction Paper

Institutional theory looks at organizations as elements of society and seeks to understand the influence of the social environment in shaping their development, through the pressures to conform to socially accepted organizational values and practices (Meyer and Rowan, 1977 and DiMaggio and Powell, 1983). By striving to establish social legitimacy, organizations are susceptible to environmental pressures leading to isomorphic tendencies. Nevertheless, firms may also respond and react to such pressures by influencing their environment.

One of the insights from institutional theory that interests me the most is the research that attempts to understand organizational change under the neo-institutional framework. The research of Greenwood and Hinings (1996) presents a very interesting view of the factors conditioning organizational behavior regarding change. By composing a model of the dynamics involved in organizational change that may or not enable organizations to surpass the forces of inertia, this theory intends to explain why some organizations change, radically, while others, subject to the same pressures, resist change or change with a slow pace.

This is nowadays a very important issue since organizations, namely firms, are suffering very intense market and technological pressures to continuously adapt to new requirements and therefore it is critical to understand the forces explaining resistance to change and innovation. Innovation forces are to an increasingly great extent driving economic development and innovation is a central topic in policy development in OECD countries (OECD, 1992). Since change-averse organizations tend to have difficulties in absorbing and producing such innovation, the understanding of the underlying mechanisms of institutional adaptation become very important.

I believe the institutional ability to change can be a determinant factor in the innovation process that takes new, revolutionary products to the market. For radical