Lecture 21 - Institutions and Organizational Legitimacy - Part 2

In this module, we will continue our discussion of organizations as open-systems whose survival depends on their relation with the environment. In particular, we will discuss one of the prevailing organizational theories stemming from sociology, called “neoinstitutional theory.” In oversimplified terms, one can think of neoinstitutional theory as arguing that an organization’s survival de- pends on its fit with the cultural environment. That is, a firm’s success depends on whether it adopts structures that are deemed rational and legitimate in the external environment; that the firm mirrors environmental beliefs about what a legitimate organization of that type should look like. Neoinstitutional theory has always been one of the harder theories for students to fully grasp, so we have organized the chapter to be a little repetitive. We will discuss many of the core concepts twice and relate them in different ways so you get a better sense for what this theory conveys.

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