Institutional perspective

There is no single and universally agreed-upon definition of an institution, even in the relatively narrow institutional school of thought (Bjorck 2004, 1). However, one can take a look at sug-gested formulations of leading researchers in the field. Riker (1980, 445), following traditional view on institutions, refers to institutions as «congealed tastes» about interpersonal rules. The researcher argues that «people whose values and tastes are influential live in a world of con-ventions about both language and values» (Riker 1980, 432). The mentioned concon-ventions are, consequently, condensed in institutions. Therefore, institutions in Riker's (1980, 432) view are,

simply put, «rules about behavior, especially about making decisions». Also following tradi-tional view, Ostrom (1986, 3-5) elaborates on the concept of institutions, pointing out the afore-mentioned lack of common understanding of institutional concept and arguing that researchers would benefit from focusing their view. The researcher suggested to apply the notion of rules to institutions, prescriptions of which are «required, prohibited or permitted» (Ostrom 1986, 5).

Following this approach, Shepsle (1986, 53) looks at institutions as grouped «rules, procedures, and arrangements».

The extant body of research also presents a new, multifaceted view of institutions. Powell and DiMaggio (1991, 8) were the first ones to summarize the new flow in institutional theory, ar-guing for rejection of the single-minded approach, and noted growing interest both in cognitive and cultural explanations. Scott (2001, 48), one of the most prominent scholars operating in the new institutional field, propagates an open-minded approach to the notion of institutions and provides a concise yet comprehensive definition: «Institutions are social structures that have attained a high degree of resilience».

2.4.2. Institutionalization

Friedland and Alford (1991, 248-249) introduce the notion of «institutional logic» in the broad context of exploring the connected relationships between an individual, organization and soci-ety as a whole. They argue that every single one of the most important institutional orders of societies has a central core defined by specific logic, represented as «a set of material practices and symbolic constructions» that serve as building blocks of principles, available for individu-als and organizations (Friedland & Alford 1991, 248). Thornton and Ocasio (1999, 804) provide a more thorough explanation, defining institutional logic as «the socially constructed, historical patterns of material practices, assumptions, values, beliefs, and rules» by utilizing which indi-viduals and organizations alike manage reality, producing means of existence, organize both space and time, and also find meaning for their daily social activities.

Institutional theory, therefore, presents a sum of ideas that form a more or less coherent per-spective of underlying mechanisms that influence, support, change and restrict social behavior of individuals and organizations alike (Bjorck 2004, 1). In other words, institutional theory contemplates the forces shaping the social environment in a holistic manner. Institutional per-spective elucidates how guidelines are created, adopted, adapted, refused, picked up again through time and space. Even though institutional perspective is a wide and sometimes confus-ing area which does not represent a strict system of rules, it provides a valuable opportunity to

take a closer look at deep and resilient sides of social structures, considering the mechanisms by which structures, which include rules, norms, routines, schemas, importantly for thesis topic - values, and so on become established and implanted as guiding principles for social behavior for people as individuals and, importantly for the thesis topic - for people as members of organ-izations, including business organizations (Scott 2005, 460).

The process of implantation of the guiding principles, for example, organizational values, can be referred to as institutionalization. Selznick (1957, 17, 21-22) argues that «to institutionalize is to infuse with value». According to Scott (1987, 493-497), institutionalization can be viewed as both a process of creating reality and as a process of instilling value. Before a value is insti-tutionalized, it is just a mechanical tool with no attached meaning in reality. Institutionalization works by producing shared understanding among individuals in organizations about what kind of behavior is right and, consequently, meaningful (Amah 2012, 213). «Three Pillars of Insti-tutions» framework proposed by Scott (2014, 60) can be used to further elaborate on the process of institutionalization.

2.4.3. The Three Pillars of Institutions

Scott (2014, 59) asserts that there are three systems identified back in 1990s as vitally important parts of institutions: regulative, normative and cultural-cognitive systems. Hence, there are reg-ulative, normative and cultural-cognitive pillars of institutions. In the table 1, adopted from Scott (2014, 60), it is outlined how the three pillars differ from each other - on the basis of compliance, on the basis of order, by enabling mechanisms and so on.

Table 1: The Three Pillars of Institutions.

Regulative Normative Cultural-cognitive Basis of compliance Expedience Social obligation Taken for granted Basis of order Regulative rules Binding expectations Constitutive schema

Mechanisms Coercive Normative Mimetic

Logic Instrumentality Appropriateness Orthodoxy

Indicators Rules and laws Certification Isomorphism

Affect Fear / innocence Shame / honor Certainty / confusion Basis of legitimacy Legally sanctioned Morally governed Culturally supported

Source: Scott 2014, 60.

The regulative pillar is, arguably, the one that is the most evident. It is based on explicit regu-latory processes - conformity, rules, sanctions, monitoring activities and so on. Individuals and organizations alike accept the regulations, since it presents a rational choice in the presence of an enforcing power - which can be, for example, the government of a given country - that en-forces the regulations by the means of coercion (Oliver 1991, 168). Such coercion is, conse-quently, the central force in the regulative view, the basis for the institutional influence that gives an incentive for participating individuals and organizations to conform to both formal and informal pressures (DiMaggio & Powell 1983, 150). Scott (1995, 35) refers to the process as the «logic of instrumentality» which assures compliance of actors. Laws and rules are created and applied by individuals and organizations in the belief that they will serve their interests, and other actors conform to these not only because of the central force in form of coercion, but also by pursuing the similar need of advancing their own interests.

The normative pillar emphasizes the obligatory aspect of social life, defining what is right and wrong, appropriate and inappropriate. The normative systems are based on values (in this view, what is considered appropriate) and norms (in this view, how things should be done). In this sense, values are defined as «conceptions of the preferred or the desirable», along with stand-ards by which structures and behaviors can be evaluated and compared to each other. Norms generally specify how things should be done, «defining legitimate means to pursue valued ends» (Scott 2008, 55). While in action, normative pillar of institutionalization defines objec-tives and outcomes, and assigns ways to achieve said objecobjec-tives and outcomes. This is what Dimaggio and Powell (1983, 152) refer to as «normative pressures», describing processes that influence and develop shared understanding of problems, group-level acceptance of the same behaviors and similar approaches to decision-making. The normative elements of institutions a based not on rules or sanctions, like regulative elements are, but on the sense of social obligation to comply, ingrained in the notions of social necessity and appropriateness (March & Olsen 1989, 161). Individuals and organizations comply with their roles due to the feeling of social obligation (Wicks 2001, 664-665). Moral governance, along with feelings of shame and honor, play a big role in expected execution of social roles (Scott 2014, 60). This creates a situation when actors may act not in their best individual interests, but in the way that suits their particular roles best. In such a way normative systems, on one hand, restrict social behavior and, on the other, empower individuals with rights and privileges, enabling social action and providing guidelines for an organization.

The cultural-cognitive pillar represents modes of behavior based on subjectivity. The central force affecting the cultural-cognitive view is cognitivism, which implies that an individual's response to an environment depends on how said individual internally processes the external stimuli in form of external events and objects, labelling those accordingly to his or her internal symbolic representations of the world. Response of an individual can be constituted of thoughts, feelings and actions (Wicks 2001, 665).

Institutions can operate on all levels, from the world level to personal level. The Three Pillars of Institutions framework (Scott 2014, 60), therefore, can be applied at different levels, with countries, organizations and individuals alike representing units of analysis.

2.4.5. Organizational values as institutional carriers

Jepperson (1991, 150) argues that institutions are being carried on and reproduced by being put in institutional carriers. All kinds of carriers can reproduce institutions, including laws, values, scripts, roles, authority systems, and so on. There are four types of institutional carriers, accord-ing to Scott (2001, 77-83). First type is represented by symbolic systems, in which meanaccord-ingful information is implanted. Second type is represented by relational systems, which include in-terpersonal and interorganizational links alike. Third type is represented by routines, which stand for habits. Fourth type is represented by artifacts, which are material objects.

The three pillars (Scott 2014, 60) addressed above move along dimensions that include cultural carriers. These dimensions form a continuous hierarchy, taking steps from «the conscious to the unconscious, from the legally enforced to the taken for granted» (Hoffman 2001, 36). Spe-cific carriers, grouped in four types, are summarized in the table 2 below.

Table 2: Institutional pillars and carriers.

Regulative Normative Cultural-cognitive

Symbolic systems Rules, laws Values, standards Categories, schema Relational systems Governance systems Regimes Structural

isomorphism

Routines Protocols Roles Scripts

Artifacts Objects complying

with specifications

Objects meeting conventions

Objects possessing symbolic value

Source: Scott 2001, 77.

The carriers represented in the table above may be used to reproduce regulatory, normative and cultural-cognitive elements - alone or in various combinations. Considerable variations can be expected in both carrying mechanisms and what is being carried (Scott 2003, 882).

2.4.6. Normative transmission of organizational values in family business

The Three Pillars of Institutions framework (Scott 2014, 60) provides three approaches to un-derstand institutions. Each of the three pillars has its adherents in different fields of study, who dissect reality at different levels of analysis. Some researchers use pillars all together (Brundin

& Wigren-Kristoferson 2013, 460). Yet, more often, pillars are viewed as separate and even competing, assuming the fact that the three pillars are being based on different assumptions and provide varying justifications. Therefore, some researchers tend to emphasize some particular pillars more than the others (Vallejo-Martos 2016, 121). In the light of the thesis topic, regula-tive pillar of institutions provides an understanding, for example, of how government, as an institution (Ruef & Scott 1998, 879), affects a family company, forcing the latter to conform to various imposed rules and laws. Cultural-cognitive pillar of institutions provides an understand-ing, for example, how individual organizational actors are affected, on personal level, by or-ganizational culture of the family company they work for (Vallejo-Martos 2016, 122). For the purpose of elaborating on the initial institutionalization and subsequent transmission of organ-izational values in family business, the normative pillar of institutions can be utilized.

Family, as an institution, is created by the agents that constitute it. Therefore, family business can be defined as the business in which family, as an institution, has a clear presence and influ-ence (Powell 1991, 194; Vallejo-Martos 2011, 453). While institutionalization can be viewed as the initial process of instilling values (Scott 1987, 493-495), transmission is «the process by which cultural understandings [including values] are communicated to a succession of actors»

(Zucker 1997, 729). Values, as carriers, belong to the normative pillar of institutions (Scott 2001, 77). The normative pillar, therefore, provides an explanation of how the institutionaliza-tion and transmission of organizainstitutionaliza-tional values occurs. Organizainstitutionaliza-tional values become norma-tively institutionalized if they are seen as desirable and appropriate by a powerful actor or ac-tors, who are then committed to uphold the organizational values in their everyday actions, at the same time instilling other organizational actors in the system, so that they also become committed to organizational values as to the most desirable and appropriate ways of doing things (Scott 2008, 55; Lizardo 2010, 3). Family business founder, as an agent of family insti-tution, carries out the initial process of normative institutionalization of organizational values

and starts the normative transmission of said values. The founder's successors, in guise of man-aging directors of family business, guiding the company during different periods of time, em-brace the organizational values instilled by the founder and propagate the continuous process of normative transmission of said values, using their managerial roles to exert a strong con-forming influence on organizational members (Schein 1995, 230; Brundin & Wigren-Kristofer-son 2013, 453; Vallejo-Martos 2016, 122).

Indeed, the founder is the dominant figure in the family business organizational culture, and founder's influence «often lingers past his or her lifetime and into succeeding generations»

(Denison et al. 2004, 64), with generation after generation being influenced by original objec-tives and methods of the founder (Sonfield & Lussier 2004, 199). Successful long-living family companies tend to nurture the values instilled in them by their founders. Family members in such companies take active and long-term roles in family business management, «acting as trustees of the founder's values» (Denison et al. 2004, 63-64, 66, 69). Indeed, across genera-tions, organizational values serve as the basis of long-living family businesses' cultures, with family companies being committed to organizational values (Aronoff 2004, 57). Organizational values tend to persist over time, even when organizational membership changes (Kotter &

Heskett 1992, 4). Astrachan et al. (2002) argue that «values are so important that anything, or anyone that interrupts ... [their functioning] could send the family business into chaos» (see Hall & Nordqvist 2008, 55). Family owners engaging in business subscribe meanings to being in business that go beyond single-minded pursuit of profit, and one of such core meanings is to

«perpetuate family values» (Hall & Nordqvist 2008, 57). Willen Van Eeghen, a former manag-ing director of the 353-year-old Van Eeghen Group family business, completely owned by the van Eeghen family since the business foundation (Van Eeghen Group 2016), believes that «one of the main things behind ... [Van Eeghen Group longevity is] a feeling of values which we have in there ... every generation I knew ... [followed] a kind of set of values ... you could more or less count on ... and I think these values have worked» (see Bennedsen 2004). Now that the literature review for the purposes of the thesis is nearing completion, it is time for the author to construct a coherent theoretical framework and design research subquestions.