Institutional Theory and Isomorphism: Limitations in Multinational Companies

Abstract

Today's popular thinking is that every organization is unique and, in their processes and organizational behavior, specific. However, we witness how organizations, particularly those operating within the same industry, are becoming similar and the same as each other. The explanation for this occurrence is the institutional theory of organization that was created primarily as a critique to contingency theory that supports idiosyncratic of organizations. Institutional theory of organization explains how organizations operating within the same industry or organizational fields tend to adapt to the same structures, behaviors and activities. In the foreground of the institutional theory of organization is the institutional isomorphism that explains the similarity of the companies in an organizational field. In this paper, the author will present the current knowledge regarding this approach in management and will emphasize the lacks of this theory when it is applied with multinational companies and its subsidiaries; the multinational companies are interesting to researchers because of the complexity of operations and the complexity of the external environment and intra-organizational environment.