Institutional theory: an interdisciplinary synthesis?
Although theoretical perspectives of institutional theory in the different disciplines have different emphases, there are significant intersections between them, which provides significant insights on institutional theory. Figure 2.2 illustrates four main configurations, namely, exchange
Figure 2.2 Interdisciplinary synthesis of institutional theory.
transaction, actor-specific interactions, networks approach, and institutional overlap. These various combinations provide some of the main themes of institutional theory development and application, including in a tourism context.
The first configuration is an exchange transaction that is a focus primarily in economics and political science (Figure 2.2). The transactional nature of the relationships between different actors in the national system is emphasised by both fields as well as by business studies (North, 1990; Peters, 2012). This transactional relationship is regarded as being influenced by the rational choices that involved actors make (Williamson, 1991). Political science scholars focus on political factors of the development of the state, where the government is one of the key actors, if not the major
Disciplinary foundations 53 actor, facilitating the formation of formal and informal institutions (Evans, 1995; Kollner, 2013). Whereas in economics, the focus is on the transaction itself, which is driven by an exchange process between the involved parties (Coase, 1998). This exchange influences the formation of institutions, which shapes the institutional environment of the state (North, 1991 ) and the associated institutional arrangements, which are critical in terms of the allocation of responsibilities for policy areas, including tourism (Hall, 2008). The transactional overlap between the two disciplines illustrates the importance of formal and informal institutions in the formation of the institutional environment. Both disciplines acknowledge that institutions are socially embedded, with institutional development deriving from the formal institutional structure, which therefore gives importance to the exchange transaction between actors.
The second configuration is between sociology and political science, which is illustrated in Figure 2.2 as actor-specific interactions. The relationship between the different actors is reciprocal and has a significant impact on the formation of the institutional environment (Kollner, 2013; Meyer & Hollerer, 2014). Both sociology and political science emphasise the fact that the relationships between the actors are influenced by the existing socially embedded rules (Fadda, 2012; Meyer & Rowan, 1977). The focus in sociology is on the impact these relationships may have on organisational behaviour (Oliver, 1991; Suchman, 1995). In political science, the emphasis is placed on the structural behaviour of the formal institutional environment, such as governments, organisations, and issues of governance (Kollner, 2013; Peters, 2012). The behaviour of these actors is institutionalised, based on existing rules and values, which is a common perspective in both disciplines (Evans, 1995; Fadda, 2012; Oliver, 1991). The challenge occurs when organisations and the government have diverging interests and are faced with managing continuous changing relationships between them as a result of their diverging interests (Voronov & Weber, 2016). These relationships can be reciprocal but differ in the way they are managed.
The institutional theory in sociology and economics views networks between actors as an important component of the institutional environment, which is the third type of configuration of institutional theory which has become a major area of interest in tourism even if not necessarily viewed via the lens of institutional theory (Hall, 2008). In economics, networks are examined through the development of an institutional environment, where networks are informal institutions that traditionally enabled international trade and helped to manage relationships with foreign traders (North, 1990). Sociologists see networks as a more complex form of organisational relations that serve as mechanisms to facilitate their operations, although more formal networks can also assume an organisational life of their own. Thecommonality between the two disciplines is that networks are used to manage the relationships between different actors, including governments and organisations, which influences their domestic and international operations. The networks between different actors develop as a result of the relationships between them, and these networks play a crucial role in the development of the institutional environment within a state. This line of thinking is a significant development of institutional theory in business and organisational studies.
Although the institutional theory in business studies, including existing research in tourism, has been dominated by economics and sociology, political science provides great insights into the formal structure of the institutional environment of a particular state or level of governance. Indeed, research on governance in tourism has been substantially influenced by institutional theory (Hall, 2011a, 2011b; Amore & Hall, 2016). The fourth configuration is the institutional overlap of the key perspectives on institutional theory between the three disciplines (Figure 2.2), which indicates potential common ground in the development of institutional studies. However, there the various fields of study that tend to focus on different scales of analysis; for example, the focus in economics is primarily on the macro level, on how institutions impact the economic development of a country. Political science examines the institutional impact on political development and formal governance structures of a state (Evans, 1995; Peters, 2012; Tsai, 2016). Whereas sociologically influenced literature concentrates on the institutional impact of organisations’ behaviour and development. All disciplines, however, acknowledge that institutions are socially embedded and treat the historical development of institutions with a high level of importance to understanding their functioning (Evans, 1995; North, 1991; Scott, 1987). Recognising that institutions are socially embedded is essential for examining how institutional environments have developed. Formal and informal institutions also co-exist, and the interplay between them makes the institutional environment more complex, but it also helps to guide organisational practices. Formal and informal institutions exist within a state, but their interplay occurs as a result of the relationships between key actors. However, critically for understanding tourism from an institutional theory perspective, this institutional interplay contributes to the institutional environment of a particular country (Fadda, 2012) and the place of tourism within it. The issues of institutional analysis and its significance for understanding tourism is discussed in further detail in the next chapter.