I. INTRODUCTION
1.3. Framing of the research approach
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- How economic, political and sociocultural dimensions of institutional systems work together as a system; how the competing demands co-exist and co-evolve? How economic, political and sociocultural preferences of actors interact?
- What motivates actors to pursue endogenous institutional evolution?
1.3. Framing of the research approach
The proposed research and its approach are new institutionalist, which generally assumes that institutions matter – they structure, guide, influence and constrain economic behavior (North, 1990, p. 3) – and are hence interesting as they “generate empirical regularities in behavior” (Culpepper, 2005, p. 174), which is why new institutionalism in its different strands has been the dominant theoretical framework to study political economies in the recent decades. New institutionalist research approach as a methodological approach includes two central elements: firstly, institutions influence, condition and even determine economic, political and social life within societies, shaping both behavior and outcomes, but secondly institutions are also always endogenous and socially constructed (Przeworski, 2004, p. 527; North, 1990; Thelen, 1999). Therefore, studying institutional change with new institutionalist approach is a methodological approach to theorize how institutions can be both constituted of social action as well as constitutive of social action without compromising either of the basic tenets1 (Hall, 2009). For the dissertation, the approach emphasizes the endogenous actor-centered aspect of institutions being constituted by behavior. The research approach is new institutionalist, but approach can be characterized as eclectic as it synthesizes elements and ideas from various strands of new institutionalism. The research approach incorporates into research framework elements from rational choice institutionalism, institutional economics and comparative capitalism (e.g. Williamson, 1985; North, 1990; Hall & Soskice, 2001), historical institutionalism (Thelen, 1999; Pierson, 2000; Vogel, 1996) and sociological institutionalism, including organizational theory and economic sociology (e.g.
Greenwood, Raynard, Kodeih, Micelotta & Lounsbury, 2011; Battilana, 2011; Lawrence,
1 Most of the existing research tends to compromise one of the basic building blocks. Notable exemptions of co-fitting both elements can be found from Aoki (2007; 2013), North (1990), Bourdieu (1977), Giddens
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Suddaby & Leca, 2009; DiMaggio & Powell, 1983; Scott, 2008; Granovetter, 1985).
Important influence is the field theories of sociology to understand diversity of the social structures and interaction of the diverse fields (Fligstein & McAdam, 2011; Bourdieu &
Wacquant, 1992; Giddens, 1984).
The research approach is thus eclectic. Important reason why different paradigms of new institutionalism should be synthesized is excellently summarized by Hall and Taylor (1996, p. 950-951) arguing that historical institutionalism has tendency to ignore microfoundations of why individual actors and organizations behave as they do due to institutional influences, while rational choice institutionalism is more focused on the microfoundations which supports theory-building but its behavioral assumptions are somewhat simplistic, even ignoring some central features of individual behavior, whereas sociological institutionalism is more accurately focused on understanding the behavioral motivations of actors. Historical institutionalism is important as it highlights the origins of institutions and how power and resource asymmetries are reflected in institutional building, and the historical institutionalism accurately captures how institutional infrastructures of individual nations are and stay unique due to path dependency and historical trajectories (Hall & Taylor, 1996, p. 938-941), whereas the rational choice institutionalism highlights the importance of rationality making institutions work and the functionality of why institutions are needed. Moreover, eclectic synthesis of different paradigms is important as institutions are created due to the social embeddedness of economic, political and social life – societies need structure to function – and institutions have economic, political and social dimensions but these are deeply intertwined and tangled (i.e. we cannot easily separate technical aspects from distributional or social elements in institutional design) (Friedland, 2009), which means different dimensions of institutional systems need to be simultaneously theorized.
The research approach builds on rational choice institutionalism as the microfoundations of the theory – how institutions structure incentives and pay-off functions of actors – but also uses sociological institutionalism to emphasize social embeddedness driving the creation of institutions that structure rationality and agency of actors. Rational choice institutionalism together with new institutional economics portrays institutional evolution
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as less problematic than sociological institutionalism as it perceives a rather spontaneous process of more efficient institutions replacing less efficient ones, but sociological institutionalism provides more nuanced understanding of the political and social nature, as well as bounded and socialized rationality of actors, of institutional evolution, especially how more efficient institutions are not implemented due to distributional and ideological reasons. Historical institutionalism is incorporated into the research approach as the foundation of the institutional evolution – i.e. institutional building does not operate in a vacuum, but existing institutional framework and power asymmetries influence future trajectories of institutional evolution. Current literature and research tends to be strictly divided into different realms of new institutionalism, where theories occasionally even argue that different strands of new institutionalism cannot be co-fitted due to different theoretical foundations (e.g. Haack & Schoeneborn, 2015; Streeck, 2007), but arguably this is incorrect as different dimensions of institutional designs are deeply tangled – economic, political and social aspects cannot be untangled from each other (Friedland, 2009) – which means necessity for synthesizing different theories to establish a proper theory of institutionalism. Moreover, different fields of new institutionalism are complementary to each other and forming a theoretical framework by synthesizing these elements should lead to more dynamic and empirically accurate theory of institutions (Thelen, 1999). Historical institutionalism is able to grasp the temporal and spatial variation in institutional infrastructures across political economies, whereas rational choice institutionalism emphasizing individual rationality is accurate forming theoretical assumptions of how actors behave within institutionally constructed settings, but only with guidance of sociological institutionalism we can understand how the agency and rationality are constructed.
The research approach is thus broadly new institutionalist, incorporating rational choice institutionalism, historical institutionalism and sociological institutionalism. The combination of paradigms means that approach to theorizing and studying institutional change pre-necessitates certain assumptions about the nature of the phenomenon being studied. Firstly, similarly to Varieties of Capitalism, the institutional evolution needs to be approached with a game theoretic approach thus implying the social embeddedness necessitates that utility of actors – including institutional entrepreneurship – is
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determined by ability to cooperate with other actors (see Hall & Soskice, 2001). Social embeddedness drives the creation of institution as the institutional structures provide templates for societies to function and operate (Granovetter, 1985). Game theoretic approach suggests that engaging in institutional entrepreneurship is dependent on perception of how other actors behave, do they engage in complementary behavior or not.
Secondly, similarly to historical institutionalism, the history matters as historical institutional trajectories influences creation of new trajectories, where institutional heritage influences economic assets, social positions and cognitive lenses of actors with implications for pursuing new paths (Pierson & Skocpol, 2002). Thirdly, institutional systems are constituted by plurality of institutional fields and institutional evolution operates as a differential growth of institutional fields among the plurality of fields (Friedland & Alford, 1991; Blyth, Hodgson, Lewis & Steinmo, 2011; Haveman & Rao, 1997; Thelen, 2014). Lastly and most importantly, institutional change operates always endogenously and always as selection, which means that institutions never change but instead endogenously bottom-up new startups propose new institutional fields which via evolution by selection replace older fields.