What is Institutional Theory? 

Institutional theory considers the processes by which structures, including schemes, rules, norms, and routines, become established as authoritative guidelines for social behavior. 

What Does Institutional Theory Explain?

Different components of institutional theory explain how these elements are created, diffused, adopted, and adapted over space and time; and how they fall into decline and disuse.

How Does Institutional Theory Apply to Business?

Institutional theory, as applied to business organizations, is an approach to understanding organizations and management practices as the product of social rather than economic pressures. 

Adoption and retention of many organizational practices are often more dependent on social pressures for conformity and legitimacy than on technical pressures for economic performance. 

What are Social Pressures?

Social pressures might include ethics, peer activity, social norms, etc.