Systems Theory, Societal Contexts, & Organizational Heterogeneity Raimund Hasse & Georg Krücken Discussion by Carliss Charles

New Institutionalism: The macro- perspective John Meyer-modern society is not a concrete, hard-wired structure composed of actors. Rather, a broader & imagined cultural system in which the main cultural patterns of Western society are embedded The causality for societal development is top-down: society as the embodiment of broader cultural norms constitutes its actors ◦ Nation-states ◦ Organizations ◦ Individuals

New Institutionalism: The macro- perspective Organizations are considered to be shaped by their wider socio-cultural environment In this context, organization is the dependent variable Global culture and its organizational representatives are the independent variables

The meso-perspective DiMaggio & Powell- organizations are deeply shaped by those other organizations which serve as ‘significant others’ ◦ Organizational fields 3 Pillars of Isomorphism Coercion Regulatory agencies State organizations Normative isomorphism Professional associations Consulting firms Educational institutions Mimicry peers Competitors collaborators

The Meso-Perspective: More on Fields Organizations differ according to their field membership Organizational fields mediate between a single organization and broader societal contexts Organizations are considered to be more actively involved in the overall development of society—they negotiate with other organizations and may also try to manipulate those organizations and other institutional factors

The Meso-Perspective: More on Fields~Discussion What determines whether or not organizations can be successful in actively intervening into their context? What determines how organizations may use their potential for active intervention Thoughts on ‘institutional engineering of fields’? Thoughts on the role of institutional entrepreneurship?

Luhmann’s Systems Theory: Modern Society, Differentiation & Organizations Sophisticated forms of societal stratification emerged before the advent of modernity, particularly in ancient high cultures ◦ Differentiation is strictly vertical, societal order is structured e.g. caste system in India Disappearance of vertical stratification triggered by challenging the status of religion as an authority that determines social life in general (e.g.16 th century Europe politics claim autonomy from religion)

Luhmann’s Systems Theory: Modern Society, Differentiation & Organizations Functional differentiation-as societal systems are considered to fulfill functions that cannot be substituted for other systems. ◦ The economy regulates the production & distribution of scarce products and services ◦ Science generates new knowledge ◦ The political system produces collectively binding decisions which affect the entire society Based on a binary scheme of information- processing

Luhmann’s Systems Theory: Binary Information Processing SystemFunctionEfficacyCodeProgramMedium Law Manage Norm Expectations Regulation of Conflicts Legal / IllegalLaws, regulation, constitution Jurisdiction Politics Make Collective Decisions Possible Practical Application Government / Opposition Goals of Political Parties/Ideol ogies Power Science Production of Knowledge Supply of Knowledge True / FalseTheories, methods Truth Economy Reduction of Scarcity Satisfaction of needs Payment / Non- payment BudgetsMoney (source: H-Georg Muller, 29, cited by,

Luhmann’s Systems Theory: Modern Society, Differentiation & Organizations Most systems on the macro-level of society represent a specific and highly reductionist binary logic of info processing, and concerns relevant for other systems or overall societal norms have to be transformed according to that logic Coded info processing provides societal systems with an identity which distinguishes them from the other Any societal system is dependent on the contributions of other systems, and modern society is characterized by a high degree of mutual dependency. ◦ A crisis in any system may negatively effect other systems ◦ Examples?

Luhmann’s Systems Theory: Organizations The transition from stratified to functionally differentiated societies → the spread of formal organizations. The process of functional differentiation and organization building Societal systems ↔ organizations Growth and increasing complexity stimulate organizational differentiation Systems theory supports new institutionalism- organizations are well advised to copy the prevailing norms of their wider societal context In contrast to new institutionalism, systems theory stresses that these norms are copied only the extent they support the realization of ends which constitute the specific identity of an organization

THE SOURCES OF SOCIETAL & ORGANIZATIONAL HETEROGENEITY AT THE MACRO-LEVEL OF SOCIETY Two Examples: The example and transformation of the modern welfare state & Academic Entrepreneurship

The Expansion & Transformation of Modern Welfare State Macro Neo-Institutional Theory (Meyer) Sociological Systems Theory (Luhmann) Diffusion of general societal norms(external triggers) Must adhere to broader societal norms of justice, progress, etc. for legitimacy The impact of other welfare states is central Conceptualized as trans- national processes and external causes Specific rationality of the political system (internal triggers) Emphasis on the effects of the functional differentiation in society Other societal systems are only relevant as an external resource for continuous reproduction An inevitable consequence of the evolution of the political system & the interplay of its core institutions (mass media, administrative agencies)

Academic Entrepreneurship (AE) Macro Neo-Institutional Theory (Meyer) Sociological Systems Theory (Luhmann) Emphasizes the match b/n AE and social norms & expectations Processes of mutual adjustment and isomorphic tendencies See Neo-Institutional research on entrepreneurship (Hwang/Powell 2005) See Inter-organizational networks among academia & industry (Powell/White/Koput/Owen-Smith 2005) See Universities and their embeddedness in wider social norms & expectations (Meyer/Schofer 2007) Emphasizes societal differentiation & distinct logics of societal systems AEs can be characterized by an economic program, a political program and a science system Must be considered as creating an opportunity for societal systems & their organizations Conceptualized as opportunity structures that can be exploited by any of its participants

Conclusion Sociological systems theory stresses the conceptual links between organizational analysis and wider societal fields and their developments Neo-institutionalism and systems theory can be used as guidelines for re- establishing a macro-perspective on the interconnectedness of societal and organizational developments

OT Questions Why do organizations exist? Why are firms the same/different? What causes changes in organizations? Why do some firms survive and others don’t? What are the emerging issues?