Conceptualizing Institutions And Organizations: A Critical Approach

Abstract

This paper reviews the concept of institutions and its relationship to capitalist development as used in the field of NIE and compares it to the use of the concept by Hall and Soskice. By specifying exactly what institutions are, how and why they should be differentiated from organizations, and how they influence transaction and production costs, Douglass North and the NIE articulate the role of institutions in understanding economic development. Hall and Soskice however, reveals a broad and varied use of the concept which ignores one of the key elements of institutions – enforcement and also fails to provide a clear differentiation between institutions and organizations which leads to confusions in understanding their specific roles in the process of development of the two types of economies that the authors define. A varied, imprecise and inconsistent use of the concept may lead to an overestimation of the role of institutions and conversely underestimation of the role of organizations in capitalist development.