Institutional Approach to Strategic Management

Introduction: Primary Objective of the Paper

The main topic of this research is institutional theory and Strategic Management with insight on Strategy as practice theory. There will be presented primary and secondary objectives, research question and contribution, theoretical model & hypotheses, research methodology, key findings, limitations and potential future research

Secondary Objectives of the Paper

Institutionalism is a broad philosophical concept that connects several spheres of human social life. Specialists apply institutional theory in socioeconomic and philosophical disciplines. Researchers note two paradigmatic approaches to the interpretation of institutionalism (Aksom & Tymchenko, 2020). There is a concept of traditional institutional theory and a modern idea of the theory of institutional change. Each of these institutional theoretical approaches has advantages and disadvantages. The primary objective of this work is a comprehensive study of the sociological aspect of institutional theory.

One of the fields of the possible practical application of the institutional approach is Strategic Management. Therefore, it is essential to understand the principles of Strategic Management and its interconnections with institutional theory. It is also worth noting that recent studies indicate that Strategy as practice can become an ideological competitor to institutional theory. That is why it is necessary to conduct a qualitative comparison of the institutional approach and the Strategy as a practice. Comparison of their conceptual similarities and differences can become a cognitive theoretical basis.

Both traditional and modern institutional theories, which is also mentioned as neo-institutionalism, are a branch of organisational philosophy. Organisational philosophy is a humanities discipline that interacts with qualitative concepts. It gives rise to abstractness and the impossibility of creating a conventional system of criteria for assessing the institutional approach. It is a fundamental problem of organisational philosophy (Aksom & Tymchenko, 2020). Therefore, researchers use factors such as predictive and explanatory abilities to assess the conformity and applicability of organisational philosophical concepts.

Research Question and Contribution

This observation and comprehensive study of institutional theory give rise to the main research question of this work. Is the institutional approach applicable to Strategic Management?

This work claims that this it is. Moreover, the author found out that Strategy as practice can serve as that reformation resource that will complete the theoretical basis of the modern theory of institutional change (Suddaby, Seidl, & Lê, 2013). Individual perception concepts and cognitive schema prediction complement the Institutional work and institutional logic macroeconomic approach.

As it was noted above, this work explores several interrelated topics. Therefore, it is necessary to establish conventional definitions of the studied sociological terms. According to Aksom and Tymchenko (2020), “Institutional theory is now acknowledged as the dominant theory of organisations or a macro theory of organisation-environment relations” (p. 2). The central ideological core of the traditional institutional theory is isomorphism and conformist behaviour (Aksom & Tymchenko, 2020). The contemporary approach of institutional change focuses on a theoretical heterogeneity basis.

Theoretical Model & Hypotheses

Strategic Management is a scientific, economic discipline. Strategic Management explains how managerial skills, industrial processes, external environments and institutions affect the performance of firms (Garrido, Gomez, Maicas, & Orcos, 2014). It is worth mentioning that strategic managers also study and develop new principles of social interaction and business management systems. For a long time, there were only two conventional approaches to understanding strategic management. They are industry-based approach and a resource-based approach (Garrido et al., 2014). Each of these concepts arose in connection with paradigmatic changes in the economy and society. Recent research indicates a new trend that is the institutional-based approach. This approach is a combination of the theoretical foundations of both economics and philosophy.

Strategy as practice is another method of understanding organisation as a philosophical concept and organisational structure. Strategy as practice is “primarily micro in orientation, with an interest in how interactions between individuals influence competitive decisions and firm behaviour” (Suddaby et al., 2013, p. 330). It is important to note that modern institutional theory and Strategy as practice have similar theoretical and conceptual bases but differing views on them.

The modern institutional theory argues that behaviour is determined by external macroeconomic factors, while Strategy as practice links behaviour to individual practice and practising agents (Suddaby et al., 2013).

Adherents of the modern institutional theory believe that cognition is the result of the interaction of personal practice, behaviour, interpretation and institutions (Suddaby et al., 2013). Therefore, institutions and cognition equally influence each other. Theorists of Strategy as practice think that cognition is shaped by interpersonal practise, individual experience, interpretation, and behaviour.

The modern institutional model claims that language is the genesis of social rules, norms and institutions (Suddaby et al., 2013). Strategy as practice considers language only as an organising element within organisations and a way of communication between economic agents.

Research Methodology

One of the critical aspects of any research work is the correct and reasonable choice of methodology. The author of this work considers only the qualitative parameters of several concepts of the organisational philosophical field. That is why a qualitative method is the current research methodology. “Qualitative research is aimed at gaining a deep understanding of a specific organisation or event, rather a than surface description of a large sample of a population” (“Data collection strategies II: Qualitative research,” n.d., para. 1). Another critical point of the study is the choice of applicable and adequate qualitative methods. The first chosen research method is conceptual analysis, and the second one is content analysis.

Conceptual analysis is one of two applied research methods for this work. “In conceptual analysis, a concept is chosen for examination and the analysis involves quantifying and counting its presence” (“Content analysis,” 2019, para. 1). This method was chosen because of several causes, such as the need to understand sociological and economic topics, and the study of mutual and conflicting philosophical concepts and branches. It is worth to mention that conceptual analysis also has a qualitative research element.

However, a single research method is not enough to study such an important topic as broad organisational theory. “Using content analysis, researchers can quantify and analyse the presence, meanings and relationships of such certain words, themes, or concepts” (“Content analysis,” 2019, para. 6). This method is also necessary for the selection and analysis of academic sources related to the research topic and the individual interpretation of the data obtained.

Key Findings

A study of institutional theory and Strategic Management with insight on Strategy as practice theory revealed several key findings. The institutional theory applies to Strategic Management. Moreover, it is was discovered that the traditional institutional approach is more relevant and competent to Strategic Management than modern alternative models such as institutional work and institutional logic. Institutional work and institutional logic can only explain past and present social and economic processes, and they lack a predictive component. It is supported by academic sources such as the recent theoretical research by Aksom and Tymchenko (2020) and empirical evidence from Garrido et al. (2014).

The Strategy as practice being an organisational theory that focuses on micro-level processes is not very applicable to macro-economic processes. However, unlike the concept of institutional change such as institutional work and institutional logic, it has the significant predictive capability. Combining these organisational theories may allow specialists to develop a new and unique mixed theoretical approach. Moreover, an original mixed organisational scientific method could redefine the entire conceptual and ideological basis of not only institutionalism but also all corporate philosophy in general. According to Suddaby et al. (2013), “so, for example, one interesting path for applying this combined perspective would be to retheorise the modern corporation” (p.338).

Limitations and Potential Future Research

Like any other research, this work also has a number of limitations. These are a limited number of possible academic sources. In this study, only three scholarly articles were analysed. It is also important to mention that this research contains only theoretical reasoning. The empirical component is absent in the presented work. However, such limitations give rise to new perspectives for other researchers. Possible future research should be a theoretical breakthrough in institutionalism that transforms both modern institutional theory and Strategy as practise into an entirely new organisational approach. It is also necessary that the original idea should be supported by significant fieldwork and empirical evidence.

Conclusion

The author of this paper comprehensively explores three concepts of institutionalism and organisational philosophy. These are traditional and modern institutional theories, Strategic Management and Strategy as practice. The theoretical foundations, relationships and possible ways of developing these concepts were analysed. This research should encourage other researchers to bring new and unique theories in the scientific discourse.

References

Aksom, H., & Tymchenko, I. (2020). How institutional theories explain and fail to explain organisations. Journal of Organizational Change Management, 1-30.

Garrido, E., Gomez, J., Maicas, J. P., & Orcos, R. (2014). The institution-based view of strategy: How to measure it. BRQ Business Research Quarterly, 17(2), 82-101.

Suddaby, R., Seidl, D., & Lê, J. K. (2013). Strategy-as-practice meets neo-institutional theory. Strategic Organization, 11(3), 329-344.

Content analysis. (2019). Web.

Data collection strategies II: Qualitative research. (n.d.). Web.

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BusinessEssay. 2022. "Institutional Approach to Strategic Management." November 15, 2022. https://business-essay.com/institutional-approach-to-strategic-management/.

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