The Institutionalized Organization

AbstractAs organizations mature, their designs and governance structures become institutionalized and their modification becomes challenging. Institutionalization of governance structures in particular and organizations in general confers many advantages, such as stability and predictability, which should be acknowledged. However, this chapter focuses on the “dark side” of institutionalization, that is, the challenges that the taken-for-grantedness of governance structures presents to the designer. Specifically, when governance structures institutionalize, designers may forgo a continuing, relentless comparison of alternatives to maintain efficiency in governance decisions. Moreover, persistence of governance structures is a potential cause for concern especially in intraorganizational relationships and transactions. This chapter complements chapter 3 by a closer examination of the trade-offs and potential efficiency distortions associated with internal transactions.