Relevancy of Institutional Theory for Managers.

Institutional theory is one the most renowned theoretical approaches to internationalization process of firms. From the 70s, there have been publications supporting and developing this theory by researchers such as Di Maggio, Powell, Scott, Meyer or Rowan. Nonetheless, some other alternative theories, such as OLI paradigm or TCE model, have also proven themselves quite significant. Shortell and Kalunzy (2000, p. 24) state that organizations must face certain external factors such “external or societal norms, rules, and requirements that an organization must conform to, in order to receive legitimacy and support”; which are two basic factors for a successful internationalization process. Nowadays, it is essential to determine the accuracy of internationalization theories because corporations need to respond to the challenges of a globalized world. This essay aims to examine the applicability of the main assumptions of this theory in order to explain the internationalization decisions made by firms´ managers. For that purpose, key aspects such as its scope, current importance or empirical support will be evaluated.

Meyer and Rowan (1977), Di Maggio and Powell (1983), and Scott (1987) state that, in order to obtain legitimacy, firms must face “isomorphic pressures” from the external context. Di Maggio and Powell (1983) define isomorphism as "constraining process that forces one unit in a population to resemble other units that face the same set of environmental conditions" and they remark that firms are forced to compete for legitimacy and political influence apart from customers and resources. Scott (1995) specified that there are three types of isomorphic pressures: regulatory, cognitive and normative. Regulatory pressures can be defined as the rules, legislation and sanctions established by government that companies must follow. Cognitive pressures refer to the shared vision of how the world works by the members of an institution or societal entity able