Financial Accounting Theory: Understanding Institutional Theory

This report discusses the significance of institutional theory in financial accounting, including its purpose, roles, and responsibilities. It also explores the trends of institutional theory and its impact on organizational studies and sociology.

Financial accounting
theory

Table of Contents
Topic – Institutional Theory........................................................................................................................3
Introduction.................................................................................................................................................3
Main Body...................................................................................................................................................3
Purpose........................................................................................................................................................3
Role & Responsibilities...............................................................................................................................3
Conclusion...................................................................................................................................................5

Topic – Institutional Theory
Introduction
Institutional theory mainly focus on the specific role which are related with the social,
economical and also political system in which most of the companies can effectively operate
their business & obtain their legitimacy. It is analyzed that pressure & expectations can be easy
expected by the effective institutional constituents like state, interest, public , family & also
interest group. Institutional theory is considered as the specific approach which can help to
maintain the clear understanding about the organization & also management practices related
with the product of social and state of economic pressure. It determines specific popular
prospective related Management Theory because this theory is helpful to maintain the
organizational behavior which defies the economic rationality. This report will discuss about the
significance of institutional theory along with its purpose, roles & responsibilities (Chu and et.
al., 2018).
Main Body
Purpose
Basically Institutional Theory was recognized by the John Meyer & Brian Rowan in the late
year 1970. This theory is helpful to explore the effectiveness of the organization and also helpful
to identify that how organization is fit in context of the societal, national , state & also global
environment. This theory is useful to maintain the adoption & spread related to the formal
company structure which associated with the written policies, new forms and standard practices.
Institutional theory determined that institutional environment can affect strongly & also
influence the growth of the formal organizational structure (Dubey and et., al., 2019).
Role & Responsibilities
The role of institutional theory is more because it can useful to provide the specific basis of
systematic analysis related with the innovation, utilizing the theoretical contribution and

implications about the distinction between the informal & formal institutions, normative, cultural
& regulative kind of institutions & also various level of institutions are considered in order to
maintain the each & responsibilities related with the Institution theory.
Trends of Institutional Theory .
There are 2 kind of dominant trends related with the Institutional theory which are given below - Old institutionalism New institutionalism
It is determined that these type of trends are helpful in emerging the perspective in term of
organizational studies & sociology that mainly turn in " new Institutionalism" which many reject
the specific model named as rational actor model of the classical economics. Instead of it, the
theory that the specific cognitive & cultural explanation of the organization phenomena & social
consideration. Property related with supra - individual related unit which can helpful to reduce
the affective aggression and also consequences which provide direct impact on the individual on
their attributes and also motives (Krell, Matook and Rohde, 2016).
This theory is mainly confirmed about the organization & maintains the deeper & also resilient
aspects of the social structure. Computation of theory similar as the proper in which and its
structure includes some activities with their related with rules, regulations, norms, routines &
also schemes. Institutional theory is computer as the recording concept forever company because
it's key stakeholders are play a crucial role in order to determine the specific legitimacy of the
company and maintain the much power related with the operational & organization.
Institutional theory generally emphasizes some environmental factors which can influence the
organization directly. In context of this theory, every activities can be managed in an appropriate
manner so that company can effectively present the organizational paradigm, maintain
management operations paradigm and also combined manage the impact of external factors

which can mainly contributing in the organization in context of both perspective (Sherer,
Meyerhoefer and Peng, 2016).
This theory mainly includes the specific economic, political and also social dynamics.
This theory is considered as the art of the theory in which nature of the art & also objects can be
containing as the art of the institution which is also known as the art of the World.
Conclusion
The main purpose of this assessment is to focus on the institutional theory which is
considered as the most prominent theory related with the financial account. This report discuss
about the purpose of institutional theory and also roles and responsibilities of institutional theory
to the organization can effectively manage the impact of external environmental factor and
maintain their performance & gain more profitability rate.

References
Chu, Z., Xu, J., Lai, F. and Collins, B.J., 2018. Institutional theory and environmental pressures:
The moderating effect of market uncertainty on innovation and firm performance. IEEE
Transactions on Engineering Management, 65(3), pp.392-403.
Dubey, R., Gunasekaran, A., Childe, S.J., Blome, C. and Papadopoulos, T., 2019. Big data and
predictive analytics and manufacturing performance: integrating institutional theory,
resource‐based view and big data culture. British Journal of Management, 30(2),
pp.341-361.
Krell, K., Matook, S. and Rohde, F., 2016. The impact of legitimacy-based motives on IS
adoption success: An institutional theory perspective. Information &
Management, 53(6), pp.683-697.
Sherer, S.A., Meyerhoefer, C.D. and Peng, L., 2016. Applying institutional theory to the
adoption of electronic health records in the US. Information & Management, 53(5), pp.570-580.