MCLS6202 Enquiry and Issues in Society and Culture Lecture 11-12 Conceptual Foundations of

1. MCLS6202 • Enquiry and Issues in Society and Culture • Lecture 11-12 • Conceptual Foundations of • the Enquiry into Issues of Society & Culture: • New institutionalism

2. Recapitulation: In Search of the meta-structure underlying the Curriculum of NSSC LS

5. Lecture 4-5 • Conceptual Foundations of the Enquiry into Issues of Society & Culture: • New institutionalism • (I) • The Conceptual Framework

6. Why Institutionalism? • In search of a cognitive schema to make sense of Area II: Society and Culture • The three modules of the Area • Hong Kong Today • Modern China • Globalization • The dialectic between globalization and local context of HK & China • Globalization as a process of “annulment of temporal/spatial distances” (Bauman, 1998, p.18). • “Hong Kong today” and “modern China” as social entities of particular time and place.

7. Why Institutionalism? • In search of a cognitive schema … • The dialectic between HKSAR and sovereign China • Dialectic between “One Country and Two Systems” • Dialectics between two governmental systems • Dialectics between two legal civil systems • Dialectics between two economic systems • Dialectics between two cultural systems

8. Why Institutionalism? • In search of a cognitive schema … • Dialectics in institutional perspective • Globally mobile institutions vs. locally embedded institutions • Institutional dialectics between the sovereignty of PRC and the autonomy of HKSAR • Institutional dialectics between bureaucratic-authoritarian state and liberal and democratizing state • Institutional dialectics between socialism with Chinese characteristics and liberal “Chinese” capitalism • Institutional dialectics between civil society of bureaucratic-authoritarian traditionalism in mainland China and civil society of liberal-instrumental colonialism in HK • Institutional dialectics between Chinese traditional culture and the informational-global culture in post-traditional or even post-modern society

10. What so New about New Institutionalism? • One of initiative of the new institutionalist perspective is the reaction to prevailing perspectives in political sciences in the 1960s. One is the “old institutionalism”, which focuses their studies of the political institutions on formal-legal structure of the government, such as the check-and-balance institution among the legislative, executive and juridical structures. The other is the political behavior approach, which applies the behaviorism in psychology and concentrate o analyzing the political behaviors of individual political actors, such as voters. In reaction to them, new institutionalism focuses on the political meanings, symbols and cultures that constitute the regularity and durability underwriting a given political systems, most notably the modern state.

11. What so New about New Institutionalism? • Another initiative of the new institutionalist perspective is the reaction to the methodological individualism advocated by neoclassical school in economics, which stipulates that economic transactions are activities mediated by market competitions among rational agents seeking maximizing returns. Instead, new institutionalists in economics stipulate that economic agents are embedded in specific socioeconomic contexts, rely on incomplete information, and work with bounded rationality. As a result, they have to work out other institutional forms other than competition to cope with uncertainty, risk, cheating and malfeasance. These institutional forms include firms, contracts, hierarchically governance, etc.

12. What so New about New Institutionalism? • In sociology, the rise of new institutionalism is mainly in reaction to the legal-rational system model prevailing in organization studies. Drawing from the social phenomenological perspective made popular by Berger and Luckmann’s classic work on sociology of knowledge, The Social Construction of Reality (1967), new institutionalists emphasize the regularity and durability of patterned interpersonal relationships and the subjective and cognitive elements underlying these patterned relationship and their enduring practices.

13. Conception of Institution in New Institutionalism • Douglass C. North stipulates that “institutions are rule of the game in a society or more formally, are the humanly devised constraint that shape human interaction. In consequence they structure incentives in human exchange, whether political, social or economic.” (North, 1990, p. 3)

14. Conception of Institution in New Institutionalism • James March and Johan Olsen’s defines that “An institution is a relatively enduring collection of rules and organized practices, embedded in structures of meaning and resources that are relatively invariant in the face of turnover of individuals and relatively resilient to the idiosyncratic preferences and expectations of individuals and changing external circumstances.” (March and Olsen, 2006, p.3) According, in institutions…

15. Conception of Institution in New Institutionalism • According, in institutions… • “There are constitutive rules and practices prescribing appropriate behavior for specific actors in specific situations. • There are structures of meaning, embedded in identities and belongings: common purposes and accounts that give direction and meaning to behavior, and explain, justify and legitimate behavioral codes. • There are structures of resources that create capabilities for action.” (March and Olsen, 2006, p.3, my numbering)

16. Conception of Institution in New Institutionalism • John Campbell’s states that “Institutions …consist of formal and informal rules, monitoring and enforcing mechanisms, and systems of meaning that define the context within which individuals, corporations, labor unions, nation-states and other organizations operate and interact with each other. Institutions are settlements born from struggle and bargaining. They reflect the resources and power of those who made them and, in turn, affect the distribution of resources and power in society. Once created, institutions are powerful external forces that help determine how people make sense of their world and act in it. They channel and regulate conflict and thus ensure stability in society.” (Campbell, 2004, p. 1)

17. Conception of Institution in New Institutionalism • Richard Scott defines that “are comprised of regulative, normative, and cultural-cognitive elements that, together with associated activities and resources, provide stability and meaning to social life.” (Scott, 2008, p.48)

18. Conception of Institution in New Institutionalism • Peter Berger and Thomas Luckmann indicate that “institutionalization occurs whenever there is a reciprocal typiifcation of habitualized actions by types of actors. Put differently, any such typification is an institution. What must be stressed is the reciprocity of institutional typifications and the typicality of not only the actions but the actors in institution. The typifications of habitualized actions that constitute institutions are always shared ones. They are available to all members of the particular social group in question, and the institution itself typifies individual actors as well as individual actions.” (1966, p. 72)

19. Explaining Institutions • One of the primary research questions new institutionalists have to answer is why institutions are possible to constitute and more importantly to endure across generations. Two groups of theorists have proposed theories to account for the enduring effects of institutions. • Berger and Luckmann’s Social Construction of Reality (1967) Berger and Luckmann stipulate that there are numbers of factors contributing to the enduring existence of institutions across generations. These includes

20. Explaining Institutions • Berger and Luckmann … • Historicity: "Reciprocal typifications of actions are built up in the course of a shared history. They cannot be created instantaneously. Institutions always have a history, of which they are the products. It is impossible to understand an institution adequately without an understanding of the historical process in which it was produced." (Berger and Luckmann, 1967, p.72) This structural feature of historicity in institution implies an essential methodological implication in the study of institution, that is, study the historical configuration, from which the current institution emerged and developed, is vital to any institutional analysis.

21. Explaining Institutions • Berger and Luckmann … • Social control: "Institutions …, by the very fact of their existence, control human conduct by setting up predefinied patterns of conduct, which channel it in one direction as against the many other directions that would theoretically be possible. …These mechanism (the sum of which constitute what is generally called a system of social control) do …exist in many institutions and in all the agglomerations of institutions that we call societies. …To say that a segment of human activity has been institutionalized is already to say that this segment of human activity has been subsumed under social control." (p. 72-73)

22. Explaining Institutions • Berger and Luckmann … • Socialization: As a set of reciprocal typifications of habitualized actions has achieved its historicity, i.e. proven its social efficacy through time and has further been backed up by social control mechanism, it can be said that this set of intersubjectivity has been externalized and objectivated. However to complete the cycle of institutionalization, this intersubjectivity must in turn be internalized into the subjectivity of the new members of a culture. It is by means of socialization, acculturation, education, or even indoctrination that new members will acquire the "common-sense knowledge" necessary to be able to become fully functional members of a culture.

23. Explaining Institutions • Berger and Luckmann … • Legitimation: Accroding to Berger and Luckmann’s conceptualization legitimation is “best described as a 'second-order’ objectivation of meaning.” (1967, p. 110) That is, if meanings are externalized, objectivated and typified through continuous human interactions and practices in the first place, they further need the “second” round of meaning-endowing efforts in order to formally institutionalized within a given society.

24. Explaining Institutions • Legitimation: … • Berger and Luckmann have divided the process of legitimation into two sub-processes. Legitimation is a “process of ‘explaining’ and justifiying’.” (1967, p. 111) • Explanation of cognitive validity: “Legitimation ‘explains’ the institutional order by ascribing cognitive validity to its objectivated meaning. …It always implies ‘knowledge’. ” (1967, p. 111) • Justification of normative dignity: “Legitimation justifies the institutional order by given normative dignity to its practical imperatives. ….Legitimation is …a matter of ‘value’.” (1967, p. 111)

25. Explaining Institutions • Legitimation: … • Berger and Luckmann further differentiate that there are four levels of legitimation: • Incipient level of legitimation: It refers to the “linguistic objectivations of human experiences.” (1967, p. 111) That is a given institutional order is assigned with a sets of names and vocabularies to provide it with cognitive as well as normative forms of objectivations. For examples, the system of vocabularies a culture ascribed to the kinship institution has not only provided various kinship relationships with cognitive validity but also lend them normative justifications of ‘what can be done and what not’.

26. Explaining Institutions • Legitimation: … • Berger and Luckmann …four levels of legitimation: … • ‘Theoretical’ level of legitimation: This level of legitimation “contains theoretical propositions in a rudimentary form. Here may be found various explanatory schemes relating sets of objective meaning. These schemes are highly pragmatic, directly related to concrete actions. Proverbs, moral maxims and wise sayings are common on this level.” (1967, p.112) • Formal-knowledge level of legitimation: It contains established systems of knowledge and groups of specialized personnel who are entrusted with the authorities to use, produce, transmit and disseminate the designated sets of knowledge. The process entails the formal systems of education as well as those of the professions and scientists in modern society.

27. Explaining Institutions • Legitimation: … • Berger and Luckmann …four levels of legitimation: … • Cultural level of legitimation: It refers to the process in which various provinces of meanings are integrated into what Berger and Luckmann called “the symbolic universe”. “The symbolic universe is conceived of as the matrix of all socially objectivated and subjectively real meanings. The entire historic society and the entire biography of the individual are seen as events taking place within this universe. …On this level of legitimation, the reflective integration of discrete institutional processes reaches its ultimate fulfillment. A whole world is created.” (1967, p. 114) Living and acting in this universe, individuals take the respective knowledge and norms as natural, given and ‘taken-for-granted’ similar to the air they breath within the physical universe.

28. Explaining Institutions • Richard Scott identifies three elements, which lend supports to the enduring effects of institutions. He calls them three pillars of institutions. • The regulative pillar: The effect or order of institutions is accounted for by ways of emphasizing the prominence of explicit regulative processes prevailing in institutions. They consist of “rule-setting, monitoring, and sanctioning activities” undertaken in institutions. Hence, the institutional effects, i.e. the institutional order, depend on “the capacity to establish rules, inspect or review others’ conformity to them, and as necessary, manipulate sanctions ──rewards or punishments── in an attempt to influence future behavior.” (Scotts, 2008, p. 52)

29. Explaining Institutions • Richard Scott …three pillars of institutions…. • The normative pillar: Theorists emphasize the normative pillar in accounting for institutional effects by focusing on the “prescriptive, evaluative, and obligatory dimensions” of social life. “Normative systems include both values and norms. Values are conceptions of the preferred or the desirable together with the construction of the standards to which existing structures or behavior can be compared and assessed. Norms specify how things should be done; they define legitimate means to pursue value ends.” (2008, p. 54)

30. Explaining Institutions • Richard Scott …three pillars of institutions…. • The cognitive-cultural pillar: The institutional effects can also be accounted for by emphasizing cognitive-cultural elements in institutions, which refer to “the shared conceptions that constitute the nature of reality and the frames through which meaning is made.” (2008, p. 57) Scott underlines that the use of the hyphenated label cognitive-cultural recognizes that ‘internal’ interpretive processes are shaped by ‘external’ cultural frameworks.” (P. 57) In other words, the meaning-making processes are dynamic interactions between internal cognitive acts on the parts of individuals and external socialization and simulation on the parts of culture.

32. Levels of Institutional Analysis: • “Institutional arrangements (i.e. elements) can be found at a variety of levels in social system – in societies, in organizational fields, in individual organizations, and in primary and small groups” (Rowan & Miskel, 1999, p. 359; Scott, 2008, p. 85-90)

33. Levels of Institutional Analysis: • System level – The conception of Institutional environment • Institutional environment: “Institutional environments are, by definition, those characterized by the elaboration of rules and requirements to which individual organizations must conform if they are to receive support and legitimacy” (Scott and Meyer, 1991, p.123) • Two of the most prominent institutional environments in modern society are the nation-state and market, both of which share one of the most salient features of modernity, namely, rationality.

34. Levels of Institutional Analysis: • Sector level – The conception of organizational fields • Organizational field: It refers to “a community of organizations that partakes of a common meanings system and whose participants interact more frequently and fatefully with one another than with actors outside of the field.” Hence, “fields are bounded by the presence of shared cultural-cognitive or normative frameworks or common regulatory system so as to ‘constitute a recognized area of institutional life’” within a community of organizations. (Scott, 2008, p. 86)

35. Levels of Institutional Analysis: • Sector level – The conception of organizational fields • Isomorphism: Organizations in an a organization field tends to become homogenous in terms of cognitive, normative and regulative aspects of the organizations. The concept best captures this process is isomorphism. “Isomorphism is a constraining process that forces one unit in a population to resemble other units that face the same set of environmental conditions.” (DiMaggio and Powell, 19991, p. 66) • Two of the forces at work in modern society are efficiency and legitimacy. The former is more likely to be related to the competitiveness of the market, while the latter to the state.

36. Levels of Institutional Analysis: • Organization level – The formal structure of the organization • To comply with the isomorphic constraints of the organizational field and institutional environment, individual organizations have to structure themselves in regulative, normative and cognitive aspects to meet with the institutional elements of the filed and environment. • As a result, two of the ideal types of formal structure of the organizations have constituted in modern society, the firm and the bureaucracy of government agencies.

37. Levels of Institutional Analysis: • Human interaction level – “reciprocal typifications and interpretations of habitualized actions” • Members of an individual organization, organizational field, or institutional environment will share many commonalities in meanings, interpretations, and typifications, i.e. common cognitive elements. • They will institutionalize common languages, interacting and communicating patterns, and routines in practices. • They will also institute common “logic of appropriateness" and normative elements. • Their inactions are also subjected to the regulative elements of the institution in which they find themselves.

38. Levels of Institutional Analysis: • Individual level - Internalization and Identity • In reaction to rational choice theory, new institutionalism perceives individuals not simply as actors governed by rational calculus of preferences and self-interest, i.e. logic of consequences (James, 1994, p.3) but as agent having internalized set of norms, values and rules and their agency is governed by the logic of appropriateness of particular institutional settings. • "When individuals and organizations fulfill identities, they follow rules or procedures that they see as appropriate to the situation in which they find themselves. Neither preference as they are normally conceived nor expectations of future consequences enter directly into the calculus.” (March, 1994, p. 57)

41. Lecture 4-5 • Conceptual Foundations of the Enquiry into Issues of Society & Culture: • New institutionalism • (II) • The Institutions of the Capitalist Market: • Economic/Rational-Choice Institutionalism

42. The Institutions of the Capitalist Market: • Economic institutionalists stipulate that capitalist market as an institution is a historically specific form of economic system instituted to regulate and resolve the problems of scarcity of resource, production and distribution of goods and services. It is built on numbers of sub-institutions.

43. Institution of private property right: • One of the cornerstones of capitalist market is the institution of the endorsement of the private property rights. • According to Armen A. Alchain, private property rights consists of three elements. They "are • exclusivity of rights to choose the use of the resource, • exclusivity of rights to the services of a resource, and • rights to exchange the resource at mutually agreeable terms." (http://www.econlib.org/library/Enc/PropertyRights.html)

44. Institution of private property right: • Dominance of the firms or capitalists: According to Peter A. Hall and David Soskice formulation, one of the essential features of capitalism is that it "is a firm-centered political economy that regards companies as the crucial actors… They are the key agents of adjustment in the face of technological change or international competition whose activities aggregate into overall levels of economic performance.

45. Actor-Centered Framework of Varieties of Capitalism • Based on the premise of the dominance of the private property rights of the capitalists or firms, Hall and Soskice have built a comparative framework to study the variety of capitalism. The framework is built around the key player of the economy, i.e. the firm. Accordingly, it is made up of the following elements. (Hall and Soskice, 2001, Pp. 6-21).

46. Actor-Centered Framework of Varieties of Capitalism • A relational view of the firms: As one of the primary working assumption of economic institutionalism, though the firms are the dominating actor in the economy, they are embedded in relational networks. Therefore "its success depends substantially on its ability to coordinate effectively with a wide range of actors. (Hall and Soskice, 2001, p.7) These relations can be summarized into five spheres. • the sphere of labor relationship • the sphere of vocational training and education • the sphere of corporate governance • the sphere of inter-firm relations, and • the sphere of coordinate problem vis-à-vis their own employees.

47. Actor-Centered Framework of Varieties of Capitalism • Liberal market economies and coordinated market economies: By reference to the way in which firms resolve the coordination problems they face in these five spheres, national political economies can be categorized along two ideal-typical economies • Liberal market economy (LME): "In LME, firms coordinate their activities primarily via hierarchies and competitive market arrangements. …Market relationships are characterized by the arm's-length exchange of goods and services in a context of formal contracting. In response to the price signals generated by such markets, the actors adjust their willingness to supply and demands goods or services, often on the basis of the marginal calculations by neoclassical economics." (Hall and Soshice, 2001, p. 8)

48. Actor-Centered Framework of Varieties of Capitalism • Liberal market economies and coordinated market economies: … • Coordinated market economies (CME): In CME, firms depend more heavily on non-market relationship to coordinate their endeavors with other actors and to construct their core competencies. Their non-market of coordination generally entail more extensive relational or incomplete contracting, network monitoring based on the exchange o private information inside networks, and more reliance on collaborative, as opposed to competitive, relationships to build the competencies of the firms. (p. 8)

49. Actor-Centered Framework of Varieties of Capitalism • The role of institutions and organizations Firms’ coordinating efforts are not only conditioned by the overall market-relational context of the national political economy (i.e. LME or CME), in which firms are embedded. Their coordinating capacities are also constrained by the specific institutional and organizational contexts. Hall and Soskice suggest two sets of institutions, which provide significant references for comparison of varieties of capitalism.

50. Actor-Centered Framework of Varieties of Capitalism • The role of institutions and organizations • Regulative institutions: They refer to sets of “institutions providing capacities for (i) the exchange for information among the actors, (ii) the monitoring of behavior, and (iii) the sanctioning of defection from cooperative endeavor. Typically, these institutions include powerful business or employer associations, strong trade unions, extensive networks of cross-shareholding, and legal or regulatory system designed to facilitate information-sharing and collaboration. Where these are present, firms can coordinate on strategies to which not have been led by market relations alone.” (2001, p. 10)