THE IRON CAGE REVISITED:INSTITUTIONAL ISOMORPHISM AND COLLECTIVE RATIONALITY IN ORGANIZATIONAL FIELD

THE IRON CAGE REVISITED: INSTITUTIONAL ISOMORPHISM AND COLLECTIVE RATIONALITY IN ORGANIZATIONAL FIELDS

by PAUL J. DIMAGGIO WALTER W. POWELL

1. What is the research purpose/question or in case of a conceptual article what is the theory being examined or applied in the article?

The purpose of this article is to question why there is homogeneity of organizational forms and practices; and they sought to explain homogeneity, rather than variation, as most other organizational theorists have focused on in the past. This challenge affects the Church and Christian organizations too.

The authors further stated that they posit that “bureaucratization and other forms of organizational change occur as the result of processes that make organizations more similar without necessarily making them more efficient” (p 147).

2. What are the key arguments/ concepts/assertions/ postulates/ hypotheses developed or tested in the article?

1. DiMaggio and Powell posit that “Once disparate organizations in the same line of business are structured into an actual field (as we shall argue, by competition, the state, or the professions), powerful forces emerge that lead them to become more similar to one another. Organizations may change their goals or develop new practices, and new organizations enter the field. But, in the long run, organizational actors making rational decisions construct around themselves an environment that constrains their ability to change further in later years. (p. 148). “The concept that best captures the process of homogenization is isomorphism. In Hawley's (1968) description, isomorphism is a constraining process that forces one unit in a population to resemble other units that face the same set of environmental conditions” (p. 149).

a. The authors argue that once an organizational field is established that they seek

conformity and homogeneity. b. When the authors refer to the “same line of business” they are referring to their use of

the term organizational fields. They define organizational fields as “...those organizations that, in the aggregate, constitute a recognized area of institutional life” (p. 148). They continue by stating that “the structure of an organizational field cannot be determined a priori but must be defined on the basis of empirical investigation. Fields only exist to the extent that they are institutionally define” (p. 148). c. Organizations are becoming more bureaucratic, but not necessarily more efficient d. “Bureaucratization and other forms of organizational change occur as the result of processes that make organizations more similar without necessarily making them more efficient” (p. 147). e. “Highly structured organizational fields provide a context in which individual efforts to deal rationally with uncertainty and constraint often lead, in-the aggregate, to homogeneity in structure, culture, and output” (p. 147).

• “None of this, however, ensures that conformist organizations do what they do more efficiently than do their more deviant peers” (p. 153-154).

• As such, in lay terms, what this all means is that in their attempt to address uncertainty within their environment, organizations isomorphically develop bureaucracies, which in turn yield homogeneity in structure, cultures, and outputs across organizations. 2. In support of their concept, DiMaggio and Powell postulate that there are two types of

isomorphism: competitive and institutional.

a. Competitive Isomorphism focuses on market competition. The authors state that this is most befitting of organizational fields with free and open markets. b. The authors continue by stating that competitive isomorphism must be supplemented with institutional isomorphism. According to the authors, institutional isomorphism takes into account the greatest influencer of organizations – other organizations. They continue, “organizations compete not just for resources and customers, but for political power and institutional legitimacy, for social as well as economic fitness.6 The concept of institutional isomorphism is a useful tool for understanding the politics and ceremony that pervade much modern organizational life” (p. 150). Within institutional isomorphism, the authors identified three ways in which this form of isomorphic change occurs: “1) coercive isomorphism that stems from political influence and the problem of legitimacy; 2) mimetic isomorphism resulting from standard responses to uncertainty; and 3) normative isomorphism, associated with professionalization. This typology is an analytic one: the types are not always empirically distinct.” (p. 150).

i. “Coercive isomorphism results from both formal and informal pressures exerted

on organizations by other organizations upon which they are dependent and by cultural expectations in the society within which organizations function” (p. 150). (i.e. government mandate). ii. Mimetic isomorphism derives from uncertainty and ambiguity and unclear solutions. “Uncertainty is also a powerful force that encourages imitation. When organizational technologies are poorly understood (March and Olsen, 1976), when goals are ambiguous, or when the environment creates symbolic uncertainty, organizations may model themselves on other organizations (p. 151). “Organizations tend to model themselves after similar organizations in their field that they perceive to be more legitimate or successful” (p. 152). iii. Normative isomorphism – “A third source of isomorphic organizational change is normative and stems primarily from professionalization. Following Larson (1977) and Collins (1979), we interpret professionalization as the collective struggle of members of an occupation to define the conditions and methods of their work, to control "the production of producers" (Larson, 1977:49-52), and to establish a cognitive base and legitimation for their occupational autonomy”(p. 152). For example, “individuals in an organizational field undergo anticipatory socialization to common expectations about their personal behavior, appropriate style of dress, organizational vocabularies (Cicourel, 1970; Williamson, 1975) and standard methods of speaking, joking, or addressing others (Ouchi, 1980). Particularly in industries with a service or financial orientation (Collins, 1979, argues that the importance of credentials is strongest in these areas)...” (p. 153). “Two aspects of professionalization are important sources of isomorphism. One is the resting of formal education and of legitimation in a cognitive base produced by university specialists; the second is the growth and elaboration of professional networks that span organizations and across which new models diffuse rapidly. Universities and professional training institutions are important centers for the development of organizational norms among professional managers and their staff. Professional and trace associations are another vehicle for the definition and promulgation of normative rules about organizational and professional behavior” (p. 152). 3. The authors developed 12 hypotheses (A1-6; B1-6) on pages 154-156, supporting the authors’

assertions about isomorphic change regarding uncertainty, modeling, coercion, constraint, and normative processes found in professional organizations. (For the purpose of preventing this summary from being too long I’ll not list all 12 hypotheses and descriptions). 3. Where relevant, what is the methodology used to test hypotheses/questions?

The authors did not test their hypotheses, as they intended it to be a theoretical discussion, but could be empirically tested. They stated, “The hypotheses discussed below are not meant to exhaust the universe of predictors, but merely to suggest several hypotheses that may be pursued using data on the characteristics of organizations in a field, either cross-sectionally or, preferably, over time. The hypotheses are implicitly governed by ceteris paribus assumptions, particularly with regard to size, technology, and centralization of external resources” (p. 154). 4. Summary of results/conclusions

• Although this article did not include any testing of the hypotheses, numerous implications are raised from the DiMaggio and Powell around organizations and social change:

o See each hypothesis on pages 154-156, as the authors explain their

hypotheses/conclusions in-depth detailing their perspective. o The authors posit that there is a general lack of innovation, a frustration around power, and an overall state of irrationality that persists within organizations. o “a more developed theory of organizational isomorphism may have important

implications for social policy in those fields in which the state works through private organizations. To the extent that pluralism is a guiding value in public policy deliberations, we need to discover new forms of intersectoral coordination that will encourage diversification rather than hastening homogenization” (157-158). 5. Strengths and Weaknesses of the article (could be related to assumptions, theory, logic, methods, or even writing & packaging of the article)

• “We have not discussed the expected nonlinearities and ceiling effects in the relationships that we have posited. Nor have we addressed the issue of the indicators that one must use to measure homogeneity” (p. 156). As such, there are many variables the authors did not discuss in their hypotheses. Their discussion is based on linear forces without account for contingencies.

• The authors could have taken this a bit deeper as they discussed each isomorphic Perhaps discussing how substantive rationality and formal rationality correlate with isomorphic the change processes they outlined, considering Weber cited these two types of rationality as a means for society to avoid the iron cage.

• The article could have been written in a more practical language such that practitioners could more readily digest their assertions. The concepts presented are very apropos and raise extremely poignant questions and concepts about organizational theory that could provide great insights into how the environment impacts organizations. The two types of rationality appear to be yin and tang forces for one another. 6. Unusual/special/interesting/ surprising ideas in the article?

• The concept of isomorphism is one I never thought of in terms of organizational life. It’s known in mathematics, but to think of how the concept applies to organizational change is quite brilliant and thought-provoking. In their theoretical hypothesizing, the authors made many ontological assumptions about the forces that influence organizations, why organizations are homogeneous, and what prompts them to change.

• Something interesting...The article’s title is a play on Karl Weber’s simile comparing bureaucracy to an iron cage in which its members are imprisoned while being managed like machines (Hatch, 2018). 7. Research ideas generated by the article?

• Many research ideas could be derived from this topic:

o How does Weber’s proposition that people act based on the meanings they

ascribe influences organizational variation and similarity? o How does power influence isomorphic change across specific organizational

fields (i.e. management consulting, financial services, etc.)? o What types of organizational competition most yield isomorphic change toward

homogeneity? o From a sociological standpoint, how does this research coincide with how

humans behave in social settings? What isomorphic changes toward similarity occur? o Further research on how organizational fields are derived could result from this article

References:

DiMaggio, P. J. & Powell, W. W. (1983). The iron cage revisited: Institutional isomorphism and collective

rationality in organizational fields. American Sociological Review, 48: 147-160.

Hatch, M. (2018). Organization Theory: Modern, Symbolic and Postmodern Perspectives; Oxford

University Press, 4th edition.