Summary: Macro Case 2

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• 5 Introduction to Institutional Context

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• When do institutions come to the forefront?

  1. When you are in an unfamiliar context
  2. When the environment changes 
  3. When the institution is carefully analysed
  4. When different rule systems clash or when an institution is violated

• What is path dependency?

  The notion that the choice options for a particular decision people or organisations encounter are limited by the decisions made in the past, even though past circumstances may no longer apply.

• What are the 3 pillars of institutions?

  1. Regulative institutions - formal laws that dictate behaviour
  2. Normative institutions - informal expectations, principles demanded by society
  3. Cognitive institutions - broadly shared convictions of how the world works

• What is instrumental rationality?

  When imperfections in the market correct themselves and there is no need for institutions

• What are some of the limitations that bound reality

  1. Limited information 
  2. Limited cognitive abilities - can't take all possible factors in account when making decision
  3. Limited time - prevents you from weighing options 
  4. Ideologies - die-hard communist does not make decision that involves private property

• What is the neoinstitutionalism/behaviouraal perspective of institutions?

  Takes a sociological view of institutions and emphasises how institutions and society influence each other. Institutions not necessarily used because of economic function, but because they give legitimacy to the actions of firms and people when the actions comply with demands/expectations of institutions.

• What are the different forms of power?

  1. Authority - legitimate power
  2. Coercive power - forced on people
  3. Normative power - peer pressure, social proof, etc.

• What is institutional isomorphism?

  The tendency of an individual unit within a population or an institutional context becoming a more and more similar to the other units in that same institutional context.

• What are the 3 forms of isomorphism?

  1. Coercive isomorphism - formal and regulated way of telling people to do things in a certain way
  2. Mimetic isomorphism - Companies copying other companies because they had success using that strategy. 
  3. Normative isomorphism - teaching standardised behaviour which becomes the norm after a while

• What are the different forms of imitation?

  1. Outcome imitation - because another company has success with a strategy, you implement it too
  2. Frequency imitation - copying other because everyone else does it
  3. Trait imitation - copying certain traits of companies because they appeal to you