Entrepreneurship (Essay Sample)

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Literature Review on Institutional Theory’s Use in Business Studies
Institutional theory is a theoretical phenomenon that focuses on the deeper aspects of the social world. The term institution has various definitions, but this review majors on one definition; an established rule of behavior acceptable as culture or norm. Institutions are basic in giving an explanation of the social framework because they engrave to the social orders and government that all social researchers cannot end without tackling them. The institutional theory, therefore, bases on social theory. This review focuses on the use of institutional
theory on business studies especially in entrepreneurship.
Institutional theory is the framework used for analyzing social organizational in the public domain. It views the social sect suggestively made up of the institution as the basis of these organizations. They have conditions that control the actions, and they have rules and a way of practice. They are not everywhere and not for everyone. Instead, they are in some particular context in which they control the activities in that context. Simultaneously, these contexts facilitate actions by ensuring that the world is understood and meaningful to the society. One of the pioneer investigations on institutional theory was done by Meyer and Rowan in the year 1977. They began by investing the consequences of institutional context on the structures of organizations. They did research on how a social fact, such as language and religion could become an institution. With time, more authors wrote more on institutional theory. They came up with more questions that were aimed at giving more facts than the existing ones on institutional theory. Examples of the questions were; how institutions change, die, and the ways in which they relate to each other.
The history of institutional theory is very long because the major institutions such as language and government keep on changing with time, place and conditions. Max Weber, an early writer, gave an insight of how institutions have a significant influence on action and structure of organizations. Though he did not use the term organization, his concept of cultural rules clearly explains the idea of systems. Institutions are meaningful systems. They symbolize knowledge, moral autonomy and beliefs (Durkheim, 97). In this book, he brings out the concepts that these symbolic systems direct products to human interaction but often got indirectly. This happens because, action instill beliefs. Studies on institutions, and their origin and change have had a dramatic progress. Authors have researched to a point that they break down this development of institutional theory into two major academic directions; phenomenology ( Berger and Luckmann, 81) and ethnomethodology ( Garfinkel, 90).
Phenomenology outlines the structures of significant shapes in social interaction. Their argument shows that the ordinary language and its growth do constitute the common definitions. Institutions are essential in the building and construction of independent organizations regardless of the environment and culture surrounding it. On the other hand, ethnomethodology investigates the nature of applicable knowledge that people use on daily basis. Garfinkel also suggests that norms and traditions are guidance formulas, and doers apply them swiftly having a great potential for innovation, improvement, and negotiation. The two explanation concepts gave a lens to institutional researchers to explain how institutional sector influences action.
Institutional theory has a wide acceptance throughout the world. As a result, it has links with very controversial and intense arguments. For instance, realist researchers view the concept of an institution as ambiguous and hence cannot be a reliable source of information. They argue that this controversy is the basis for the lack of both theoretical and practical explanation of the process of institutionalism. Differently, other researchers do not view the methods of phenomenology and ethnomethodology any useful, however small basic information ( Pierre, 501). Others still believe that institutional theory is at the macro level, and hence there is no point in trying to give explanations of the micro concepts. Finally, there is the idea that institutional theory has grown beyond limits; beyond its proper domain.
Lately, two directions have been taken to try and develop the concept of institutional theory. They provide viable openings of development for both theoretical and empirical research. The first lane addresses the issue of business people having a big role to play in shaping their context. This type of research came into place as a result of the introduction of institutional entrepreneurship, and it has shown some significant impact especially in recent years. It has attracted researchers because of its interest in the idea of agency and power. This implies that organizations have the ability to alter uninterruptedly the institutional context that would be a reliable source of power and superiority to organizations ( Suddaby & Lawrence, 63).The second line of view focuses the progress of endogenous explanations for institutional contexts. Attempts to this work have begun which are aiming at establishing understanding of rationalization (Meyer & Jepperson, 390).
Some primary attempts in this direction have begun and are focusing on the development
of endogenous understandings of rationalization (Meyer & Jepperson 2000). Institutional theory portrays to be a prevalent foundation for researchers in various domains such as organizational theory and political science (DiMaggio & Powell 22). Specifically, Its application has been of great help to entrepreneurial researchers. Institutional theory is playing a major role in explaining the aspects that add up to entrepreneurial success (Shane & Foo’s 9), other than entrepreneurial resources (Ahlstrom & Bruton 207, Peng 378). Resources are very vital for any business venture to thrive (Bhide 456). Factors such as tradition, environment, and history have a direct impact on industry and hence entrepreneurship. These issues will result in entrepreneur growth (Baumol, Litan & Schramm 402).
Through the institutional theory, researchers have been given on opening ti view and identify these issues that would eventually lead to entrepreneurial growth. It brings to place a non-economic identification of organizational strategies in business (DiMaggio & Powell 96), Scott 471). Every institution has its rules, and some exist by default. These rules regulate the economic activities. These institutions, similarly, enable entrepreneurs into their environments and also their acknowledgment (Bruton & Ahlstrom 205). There are other entrepreneurial factors that lead to its development. Such institutional factors are the availability of favorable market and the necessary capital (Foster 16). The absence of these factors can limit a new venture to thrive as expected (Baumol 91). Likewise, availability of these basic factors will enable a business to thrive (Soto 19).
There are aspects that hinder entrepreneurial efforts. These factors affect directly the efforts put in place. Examples of these factors are the support of government towards entrepreneurship, the norms in the society that relate to the field of business and the support the environment have towards entrepreneurship. The government has a key role to play in ensuring that businesses thrive and entrepreneurship thrives in the best way possible. First, the government can remove barriers in that hinder development such as over-taxation and irrelevant stifling rules. Secondly, it can provide a favorable market so that to attract foreign investors. In a research done by Broad man and his colleagues shows that lack of effective marketing institutions was a hindrance to the growth of economies in Eastern in about ten years ago. In such cases of unfavorable investment environments and clear property rights, the private investors depend holly on informal sets and regulations that would somehow boost their entrepreneurial ambitions (Ahlstrom, Bruton, & Lui 42). Like in the Sub-Saharan African countries, entrepreneurs have to add more capital to start off businesses, which do not have the guarantee to sustain. Even with this efforts among entrepreneurs, they, however, face discouragement by the absence of formal institutional designs and hence prefer areas with these favorable government regulations. For instance in the United States of America, it can take four days for a business to kick off, whereas it takes less time in Hong Kong (Timmons & Spinelli 204). This statistic shows that the institutional environment have a great impact on the establishment and development of entrepreneurship, and all the business initiatives.
Institutional environment being the basis of all entrepreneurial activities, it can
Both revive or kill entrepreneurship in a country. According to Ahlstrom, Young and Nair, 41, an institutional environment can pioneer an unproductive behavior in a form of harmful institutional entrepreneurship that will worsen the situation (Rajan & Zingales 99).
According to Trist 83, entrepreneurs establish their services and products in a set up that is under-organized. This is because, in such a domain, upcoming investors can realize some aspects of similar interests hence venturing. They prefer areas that are developing because they are less spread and familiar to the public. The advantage of these growing institutions is that they have a potential for improvement. They also in some cases collaborate amongst themselves to start new institutions that will benefit them in one way or another in promoting their firms (DiMaggo 89; Lawrence, Hardy &a...