Which theory focuses on how social and organizational norms shape organizational routines and functioning?

• A. Contingency Theory.
• B. Institutional Theory.
• C. Evolutionary Theory.
• D. Psychodynamic Theory.

Answer: (B)

Institutional theory explains how social and organizational norms become embedded in the routines and functioning of organizations. It argues that organizations seek legitimacy by conforming to the expectations, rules, and practices that exist in their professional and cultural environment. Over time, these norms become taken for granted, so routines—like decision processes, reporting structures, and standard operating procedures—are shaped to align with what is considered normal or legitimate. This leads to stability and similarity across organizations because they are all under the same normative pressures.

For example, hospitals adopt standardized patient care procedures and governance practices because professional norms and accreditation bodies expect them, not just because they are efficient. Universities mirror common governance and faculty governance norms to maintain legitimacy.

Contingency theory, by contrast, focuses on fitting organizational structure to the specific external and internal conditions rather than on normative pressures shaping routines. Evolutionary theory looks at variation, selection, and retention of organizational forms over time rather than normative conformity. Psychodynamic theory centers on individual psychology and unconscious processes within organizations, not the influence of social norms on routines.