Institutional change

Economists and New Institutionalists such as North (1984)thinks that institutional change is possible, which comes from a change in the relative pricing i.e. the relative bargaining power of the rules versus constituents of (rulers vs rulers). The changes in relative prices driven by demographic changes, change in stock of knowledge and change in technology, especially military. Such changes provide entrepreneurs the opportunity in making profits, so that they may lobby for institutional changes.

(you may understand why North Korea and Iran are insisting their nuclear power technology)

Organizational sociologists think, because of path dependence, it is not easy to have institutional change at all.

Path dependence here refers to the structure inertia, that organization internal changes are slower than outsider environmental changes. That is because:

1. The goals of organization are multiply, to maintain and reproduce their structure, apart from performing collective action.

2. To survive is one of top goals for organization. It must have invested considerable resources to enter into business, to ensure reliability of performance, secured by maintaining reliability in compliance to rules and regulations.

3.The organization possess relatively fixed norms, corporate culture, and rules and procedure.

The detailed illustration on structure inertia:

The limitation of adaptation perspective is that there are a number of processes that generate structure inertia. The inertial pressures arise from internal structural arrangement and environmental constrains.

Internal constrains:
1. Firm investment in plant, equipment, and specialized personnel constitutes assets that are not easily transferable.
2. Firm decision makers face information constrains.
3. Internal political constrains. When firm structure changes, political equilibria also disturbed. Management always faces the challenge between long term re-organization benefit vs., short term political resistance.
4. Firm has its own historical constrain, normative agreement provides justification to resist changes, and precludes the serious consideration of alternative responses.

External pressures:
1. legal and fiscal barriers to entry and exit from markets
2. Availability of information.
3. legitimacy constrain
4. General equilibria is hard to achieve by collective rationality.

Those above inertial pressures render adaptive perspective must be supplemented with a selection orientation.

Path dependence and structure inertia together foster a resistance to change, which is "a by-product of the ability to reproduce a structure with high fidelity: high levels of reproducibility of structure imply strong inertial pressure." (Hannan and Freeman 1989:77). Because selection pressures favor organizations with a high level inertia, successful organizations tend to be those that carry with them the strongest inertial forces.

Therefore, organization sociologists think institutional change is not easy, if it is not all impossible, the new organizational forms adapt more quickly to a changing institutional environment, at the same time, the risk is high too.

Under selection pressures, there are three isomorphic processes that shapes firms and institutional environments in term of surviving-:

1. Coercive isomorphism: political influence of the state through their legal enforcement


2. Mimetic progress: firms adapt the successful strategies which other firms have proven


3. Normative pressure: Professionalization is an important source for organizational homogeneity. Formal education and professional schools provide a common cognitive base fro cadres who run organizations.

Organizational sociologist's focus on new organizational forms is complementary to North's theory of institutional change. Changing relative prices opens new niches and opportunity structures for new organizational forms to emerge. Sociologists also focus on social movements which are often motived by ideas and cultural beliefs.