“Systems Theory, Societal Contexts,

and Organizational Heterogeneity”

To appear in:
“Handbook of Organizational Institutionalism”
edited by R. Greenwood, C. Oliver, R. Suddaby, K. Sahlin
Thousand Oaks, CA/London: SAGE

Raimund Hasse

University of Lucerne,

raimund.hasse@unilu.ch

Georg Krücken,

Germany University of Administrative Sciences, Speyer,

kruecken@dhv-speyer.de

May 2007

1
Introduction

From the outset, attention to the embeddedness of organizations in wider societal contexts

has been a trademark of the new institutionalism in organizational analysis. Different strands

of neo-institutional analysis converge in continuing this Weberian approach to the study of

organizations by focusing on the co-evolution of organizations and their societal

environments. This general point of departure is shared by both the macro-sociological and

the inter-organizational perspectives on organizations. The former, which has been

elaborated by John Meyer and his students, assumes that organizations are shaped by the

broader social and cultural forces of a global society. The latter, which has become most

prominent in the concept of organizational fields, sees organizational behavior as intimately

bound to other organizations in their field. Both approaches differ with regard to many

aspects, most notably the level of abstraction and the role attributed to organizational

agency. Nevertheless, they both lead to an overemphasis on homogeneity and convergence,

triggered by world societal forces or by those forces operating within an organizational field.

As organizational research has increasingly begun to question this overemphasis and to

allow for more heterogeneity and variety, more and more neo-institutional scholars have

looked for conceptual remedies against this bias. The concept of the institutional

entrepreneur seems to play a crucial role here, as it helps explain why organizations which

operate under the same circumstances do not always become similar. By focusing on the

micro-level of individual actors, however, the basic feature of the new institutionalism in

organizational analysis, i.e., the analysis of interrelations between organizations and their

broader societal environments, becomes less pronounced. We clearly see both the necessity

of allowing for more heterogeneity and variety in neo-institutional research and the

conceptual problems revolving around analyses highlighting the role of institutional

entrepreneurs. Therefore, we would like to present a macro-sociological alternative to the

currently debated micro-level approach to heterogeneity and variety.

2
In contemporary European macro-sociological theories, the argument that modern society

can only be perceived as being composed of different, at times conflicting spheres, and not

as a homogeneous set of principles is well established. Pierre Bourdieu has distinguished

between different societal fields (for example, economy, education, arts, mass media, and

politics). Albeit these fields may both overlap and be composed of diverse subfields, they are

characterized by distinct norms, values, and rationalities. Bourdieu’s fields are

conceptualized as arenas for competition whose “rules of the game” can be modified by

powerful actors. It is important to notice, however, that success in one field cannot easily be

translated into other fields. In his much cited book “Distinction: A Social Critique of the

Judgment of Taste” (Bourdieu 1984), these limits to convertibility become obvious as

Bourdieu delineates cultural barriers to the new rich, whose possession of economic capital

does not lead to a similarly developed distinction of taste. Not unlike Bourdieu, Anthony

Giddens (1984) has distinguished between different social institutions based on their

modularities of structuration. Specific combinations of rules and resources constitute political,

economic, legal and other institutional domains on the societal macro-level. Though Bourdieu

and Giddens could be of great help in developing a theoretical perspective for organizational

institutionalism, in which differences, not homogeneity on the societal level are highlighted,

we will focus on Niklas Luhmann’s systems theory for this purpose.1 Luhmann has placed a

much greater emphasis than the other authors on the fact that modern society is defined

through autonomous, functionally differentiated societal systems (economics, science,

politics, religion etc.), which follow a very distinct logic (Luhmann 1995, 1997). To point out

precisely this characteristic of his theory, an American collection of some of his articles

appeared under the title “The Differentiation of Society” (1982). In addition, and in contrast to

Bourdieu and Giddens, from his early writings up to his later work Luhmann has also been an

organizational sociologist (Luhmann 1964, 2000). According to Luhmann, modern society

1
But see Hasse/Krücken (2005a: 85-94) for a closer look at Bourdieu and Giddens from a neo-
institutional point of view.

3
can only be fully understood when taking into account the expansion of formal organizations

– in all societal systems over time and on a global scale (see Hasse/Krücken 2005b).2

We would like to develop our argument in four steps. First, we will reconstruct both the

macro-perspective and the field approach in neo-institutionalism. According to our analysis,

they both lead to a similar overemphasis on homogeneity. Only in this context can the search

for concepts allowing for heterogeneity and variety be understood. As we will see at the end

of part 1, the neo-institutional figure of the institutional entrepreneur could be seen as a result

of that search process. Second, we will reconstruct Luhmann’s perspective on society with its

strong emphasis on differences between societal systems. As we will argue, from this

perspective modern society can only be reconstructed as a multidimensional project. This

orientation could counterbalance both the bias towards convergence inherent in neo-

institutional analysis and the recent emphasis on institutional entrepreneurs. Third, and in

order to fully grasp the interrelatedness of societal and organizational trajectories in

Luhmann’s work, we will discuss the basic tenets of his contributions to organizational

sociology. In the fourth part, we will then demonstrate that Luhmann’s macro-perspective can

offer insights into societal differentiation, which are also valuable for the concrete analysis of

organizations in society. With the help of two examples we will exemplify the similarities and

differences between the macro-sociological perspective in the new institutionalism and

Luhmann’s systems theory. In the end we will briefly discuss the implications of our analysis.

1. The new institutionalism: homogenizing forces in society and organizational fields

1.1. The macro-perspective: global diffusion processes and the rationalization of

society

2
It should be noted that Luhmann has also developed a specific micro-foundation of organizational
theory, which offers further perspectives for a comparison with the new institutionalism (see Hasse
2005).

4
The macro-sociological strand of the new institutionalism has been elaborated mainly by

John Meyer over the last thirty years (Krücken/Drori 2007). He assumes that modern society

is not a concrete and hard-wired structure composed of actors. It is rather a broader and

imagined cultural system, in which the main cultural patterns of Western society – like

universalism, progress, and equality – are embedded. This cultural system is inherently

globalizing. The driving forces of societal development are, therefore, not actors and

interests as typically assumed. The causality is not “bottom up”, but rather “top down”.

Society as the embodiment of broader cultural norms constitutes its actors. With its strong

phenomenological and “culturalist” emphasis, the macro-perspective in neo-institutional

research is a strong antidote against all kinds of realist, individualistic and actor-centered

social theories, currently prevailing in American sociology (Jepperson 2002; Krücken 2002).

According to Meyer, the cultural system of society constitutes three types of modern actors:

nation-states, organizations, and individuals. Though organizations are of paramount

importance in Meyer’s macro-sociological institutionalism, from the perspective of

organizational research it is striking that they mainly have the status of a dependent variable

in this theory context. The cultural shaping of organizations is mostly emphasized in Meyer et

al. (1997). Here, the authors criticize dominant interpretations of globalization in which (a)

globalization processes are interpreted as an aggregate effect of state activities, and (b)

state activities are considered as an outcome of individual and organizational action within

nation states. Against this perspective, Meyer et al. (1997) argue that organizations are

considered to be shaped by their wider socio-cultural environment.

Though Boli/Thomas (1997) have put more emphasis on the effects of organizations, they

take a similar view. Their main argument is that organizations of a specific type –

international ones of the third sector (i.e., non-governmental and non-profit) – serve as

agents of world culture. The norms and cognitive schemes of the latter, then, are supposed

5
to profoundly affect any modern state and organizations of all types. The legitimacy and

power of international organizations, so the argument goes, stems from their status as

institutions which are driven by universal ideals instead of utilitarian interests.3 As in the case

of Meyer et al. (1997), the authors identify a cause/effect-relationship between states,

organizations, and individuals on the one hand and a broader global culture and its

organizational representatives on the other. According to this perspective, the former is the

outcome of the latter. In addition, even the most influential organizations are seen as carriers

of broader cultural norms, enacting and enforcing them, but not as independent actors in

society.

This macro-perspective on the relation between society and organizations has led to one of

the most fascinating contemporary research programs in sociology, which has been highly

influential for the development of organizational institutionalism. Over the last thirty years

Meyer’s approach has proved its originality and fruitfulness when addressing the global

diffusion of cultural and structural features of Western society, which cross-cut different

regions and sectors of world society. In this, the spread of formal organizations, which are

the central embodiment of these features, figures most prominently (for a most recent and

systematic account see Drori et al. 2006). The neo-institutional approach of Meyer and his

students has also proved its innovative character by exploring new lines of theoretical and

empirical research. Closer links to other research traditions have been looked for, like, for

example, social movements research (Khagram et al. 2002; Tsutsui 2004). Furthermore, the

more recent focus on science in the ongoing rationalization of society (Drori et al. 2003) and

theoretical reflections on the constitution of individual actorhood in modern society

(Meyer/Jepperson 2000; Frank/Meyer 2002) have opened up whole new lines of

investigation and made similarities to other ways of theorizing visible, which have hardly

3
See Meyer/Jepperson (2000) for further details on status differences between individual and
organizational actors with respect to non-utilitarian ends.

6
been explored yet.4 Nevertheless, and this point is central for the argument we will develop

here, the macro-approach in neo-institutional research does not systematically account for

heterogeneity and differences in society. Despite all theoretical developments and

refinements the approach has undergone over the last thirty years, the underlying

assumptions on homogenizing forces in global society have remained stable und unchanged.

Even critics who generally sympathize with that approach point to the inherent limitations of

its overemphasis on homogeneity and convergence (for a most comprehensive critique see

Schneiberg/Clemens 2006).

1.2. The meso-perspective: from inter-organizational relations to institutional

entrepreneurship

DiMaggio/Powell (1983) have offered a starting point, which is different from the macro-

perspective discussed above. Their contribution does not refer to an all-encompassing world

culture or to other kinds of broader societal contexts. Instead, DiMaggio/Powell considered

organizations as being deeply shaped by those other organizations which serve as

“significant others” in the sense of Berger/Luckmann (1967). Conceptually, organizational

and inter-organizational parameters gained status as independent variables, and in this

respect the perspective has been meso-sociological. The basic units were organizational

fields (not a single organization); and any organization was considered to be embedded in a

distinct setting of organizations (Greenwood/Hinnings 1996: 1026-7). DiMaggio/Powell’s well-

known "three pillars of isomorphism" (Scott 2001) thus can be used to classify the shaping of

organizations by other organizations: Coercion results from regulatory agencies

(predominantly state organizations); normative isomorphism is based upon professional

4
Here we think in particular of the work of Michel Foucault. Though from very different angles and
despite Foucault’s rejection of the idea of a coherent narrative of society, with regard to the role of
science and, in particular, to the constitution of individual actorhood, both approaches display some
remarkable similarities (Krücken 2002: 248-53). As Foucault has become one of the intellectual points
of reference for broader organizational theorizing, especially in the European context, also the field of
organizational research might benefit from exploring how Foucauldian and neo-institutional thinking
relate to each other.

7
associations, consulting firms and educational institutions; and mimicry stems from the

ongoing observation of peers, competitors and collaborators.

DiMaggio/Powell’s (1983) notion of organizational fields has expanded the scope of

organizational analysis profoundly. For the argument to be developed here it is most crucial

to note that the concept of organizational fields and its focus on isomorphism within fields

has, implicitly, offered an understanding for persistent differences between fields. To the

extent to which organizations are shaped by other significant organizations (such as state

organizations, regulatory agencies, professional associations, consultants, competitors and

collaborators), they are exposed to rather specific influences. It thus may be concluded that

organizations differ according to their field membership which, for example, results from their

embeddedness in national regimes (Orrù et al. 1991; Dobbin 1994).

Assumptions regarding the differentiation of organized contexts also can be found in other

contributions from the founding phase of the new institutionalism. Scott (1983) distinguished

between two sectors – technical and institutional – and argued that a focal organization

either is embedded in a technical or in an institutional environment. This assumption soon

was replaced by the insight that most organizations have to deal with both technical and

institutional requirements (Hasse/Krücken 2005a: 33-4). Additionally, it seemed that such a

distinction was too rigid to account for differences within these two sectors. Scott/Meyer

(1991) thus developed a more differentiated concept of societal sectors. Sectors were

conceptualized as functional domains which are composed of diverse organizations as well

as corresponding non-organizational features such as meaning and belief systems or

governance structures and other “rules of the game”. In a similar vein, Scott (1991) has

emphasized characteristic features of organizational fields. Not unlike DiMaggio/Powell

(1983), organizations appear to be deeply influenced by “their” field – and to a much lesser

extent by an all-encompassing world culture.

8
To summarize, the field approach is characterized by the assumption that organizational

fields mediate between a single organization and broader societal contexts. The implication

of such a conceptualization is that global impacts tend to be devaluated because such

impacts need to be enacted by field-specific institutions. Such an understanding of

organizational fields fits nicely to observations of robust differences because isomorphism

within fields corresponds with diversity among organizational fields. It thus can be argued

that clusters of interacting organizations can be considered as institutional barriers against

homogenizing trends on a global scale.

Based on the organizational fields-approach some new institutionalists have argued from the

1990s onwards that, to a certain extent, organizations can also actively intervene in their

contexts. This implies a farewell to sharply distinguishing between environmental causes and

corresponding effects on a focal organization. Instead, the notion of organizational fields

highlights processes of mutual adaptation. As compared with the top down-perspective of the

macro-sociological approach, organizations are thus considered to be more actively involved

in the overall development of society. According to this perspective, organizations negotiate

with other organizations and they may also try to actively manipulate those organizations and

other institutional factors. Analytically, the crucial shift is from “environment” to “context”

(respectively “network”) because this shift implies that a focal organization appears to be an

integral part of its institutional setting.5

Two basic questions emerge from this perspective: (1) What determines whether or not

organizations can be successful in actively intervening into their context, and (2) what

determines how organizations may use their potential for active intervention? In order to deal

with these questions, it should be noted that neo-institutionalists ever since have described

5
John Child made a similar point in order to argue in favor of his strategic choice-analysis: “The
concept of an organizational environment as a social network … raises doubts about how externalized
it really is from its constituent organizations” (Child 1997: 57). In order to emphasize this, Child
rigorously identifies “inner structuration” (related to organizational parameters) and “outer
structuration” (related to the organizational context) as objects of strategic choice (Child 1997: 70-1).

9
the constitution of fields and the socialization of single organizations as an open and ongoing

process. In this respect, references were made to the social constructivism of

Berger/Luckmann (1967) (DiMaggio/Powell 1983; Meyer 1992). The legacy of this theory

also has sensitized for the potential of organizations to active handling of institutional

constraints. Accordingly, the processing of environmental constraints is open for variation,

and this deeply affects the reproduction of the institutional context. Fligstein (1996), for

example, even has described organizational fields as political arenas – arguing that there are

striking imbalances of power at work (see also Greenwood et al. 2002). While some

organizations may experience their field context as being out of control, others may be in a

position that allows for an institutional engineering of fields.

The idea of organizations being actively involved in their context does not just imply

imbalances of power. It also raises questions about how organizations may utilize their

potential and to what extent they handle issues of power strategically. These questions have

led to a rediscovery of purposive agencies, being conceptualized as something which is not

covered by institutional factors (Beckert 1999). The concept of agency, however, is not taken

from economic approaches such as rational choice or principal/agency-theory. Instead, new

institutionalists have incorporated insights from those theories of practice which have been

developed in late 20th-century European sociology (Bourdieu 1977, 1990; Giddens 1984;

Joas 1996). Agency, then, includes the potential for actively making choices and for reflexive

self-monitoring, but it is not assumed that decisions and actions are determined by fixed

preferences (cf. Feldman/Pentland 2003: 95-6; Child 1997).

Institutions, from this perspective, may constrain or enable to act in accordance with given

interests, and they may thus become objects of strategic modifications. However, it is not just

organizations (and, of course, not heroic individuals) which can serve as “institutional

entrepreneurs” (Thornton 1999; Greenwood et al. 2002). Instead, professions, standard

setters (Hwang/Powell 2005) and social movements (Roa et al. 2003) can get involved in the

10
engineering of institutions. As a consequence, institutions can be considered as the outcome

of a broad array of institutional entrepreneurship (DiMaggio 1988) – either because actors

are supposed “to escape the determining power of institutions (…) [or because of, RH/GK]

(…) multiple institutional referents that overlap and conflict” (Dorado 2005: 385). This

requires that institutional forces have to be handled actively (Barley/Tolbert 1997;

Friedland/Alford 1991). In any case, the issue of institutional entrepreneurship has led to a

rediscovery of agency (Emirbayer/Mische 1997). It has let researchers deal with the entire

range of cognitive, social and material resources which are needed for successful

interventions in the institutional setup (Rao 1998; Lounsbury 2001), and it has led to the

identification of contingency factors which determine the opportunity structures to do so

(Seo/Creed 2002).6

Due to the theoretical significance of entrepreneurship it comes as no surprise that new

institutionalists debate the issue controversially. While some “stress at the outset that an

institutional perspective is more ‘constructivist’ than ‘agentic’” (Hwang/Powell 2005: 180),

others argue that “the discourse of institutional entrepreneurship has helped to usefully

redirect neoinstitutional analyses towards the study of actors and their role in catalyzing

institutional change” (Lounsbury 2005: 30). From the latter point of view, this discourse has

attracted a great bulk of attention, because it offers an explanation for the dynamic character

of institutional contexts (Greenwood/Hinnings 1996). There is also the potential to end quasi-

paradigmatic disputes with old institutionalists, with institutional economics and with those

social theories which put more emphasis on voluntary action and rational decision making

(Blom-Hansen 1997; Abbell 1995). Finally, there are profound non-academic considerations

which support the emphasis on active entrepreneurship, because as compared to macro-

6
To some extent, the contemporary emphasis on agency and institutional entrepreneurship seems to
be a “forward to the past”. There are striking resemblances to theoretical discussions many decades
ago when old institutionalists such as Philip Selznick (1949) and Arthur Stinchcombe (1965) were
highlighting issues of power and conflict (Greenwood/Hinnings 1996: 103-4). In doing so, they joined a
broad coalition of researchers which criticized the prevailing Parsonian approach as being far too
static and sterile. Among these critics was S.N. Eisenstadt (1964, 1965), who considered elites and
leadership roles as carriers of institutional entrepreneurship. Not unlike many contemporary

11
sociological top down-explanations the focus on institutional entrepreneurs offers better

perspectives for decision makers and consultants (Sahlin-Andersson/Engvall 2002). One

may thus expect a high degree of cultural legitimacy and support for developing such a

perspective – and, ironically, this is quite in line with basic insights of the macro-sociological

approach in neo-institutionalism (see Hwang/Powell 2005: 182 for the same argument).

While such pragmatic reasons for bringing actors back in have been discussed broadly, a

more critical reflection of the theoretical impact of putting interests and entrepreneurship at

center stage has been neglected. In order to compensate for this one-sidedness it needs to

be taken into consideration that the outlined trend affects the aspiration to explain what

otherwise most often is taken for granted - i.e., rational action and our understanding thereof.

In same cases, the focus on institutional entrepreneurs has led to a reversal of the traditional

neo-institutional perspective because actors’ preferences and their choices are assumed to

explain institutional structures. The advantage of such a perspective seems to be that one

can more easily focus on issues of variation and differentiation – the Achilles heel in both the

macro-approach (“global society”) and the organizational meso-perspective (“institutional

isomorphism”) in neo-institutional theorizing. The disadvantage, however, is that the quest for

less situational and for other than actor-based causes of persistent differences tends to be

neglected. In particular, this applies to causes which might be inscribed in the social structure

of modern society – and which are experienced as external social realities.

We assume that the quest for such causes is less developed because the institutional

context programmatically has been equated either with a uniform and homogenizing world

culture or with homogeneous institutional configurations at the field level. Both world culture-

explanations at the macro-level and field-concepts of isomorphism at the meso-level did not

allow for an explanation of persistent differences, be they at the level of society or within

organizational fields. In order to emphasize differences and heterogeneity, for many neo-

researchers of entrepreneurship, Eisenstadt also argued that reference to other institutions and the

12
institutional researchers there appeared to be no alternative to referring to the micro-level

and to bring purposive actors and their interests and strategies back in. In what follows we

will present an alternative explanation by referring to Luhmann’s systems theory. It is based

on a concept of social structure which is more sensitive to differences – and which considers

such differences to be deeply inscribed into the macro-structure of modern society. Our brief

account of the basic tenets is structured around issues of modern society’s internally

differentiated character (2.1.), and the role organizations play in that macro-sociological

approach (2.3.).

2. Luhmann’s Systems Theory: Modern Society, Differentiation, and Organizations

2.1. Modern society as a differentiated and multi-dimensional project

Luhmann’s theory of social systems is one of the most comprehensive projects in social

theory of the 20th century. The approach is unique in combining a grand historical perspective

with an in-depth analysis of dominant features of contemporary society.7 At its core one can

find a scheme that outlines the evolution of human society from the beginning onwards. In

this respect, there are some resemblances with Durkheim’s remarks on simple forms of

social life as the starting point (Durkheim 1933). When it comes to Luhmann’s reflection on

more recent forms of societal evolution, one may also identify similarities with another

founding father of social theory: Max Weber. Not unlike Weber (1958), Luhmann refers to a

unique set of circumstances in the Western world which triggered the take off of modernity.

ability to mobilize support were preconditions for institutional change.

13
In a broad socio-historical perspective, Luhmann has stressed that sophisticated forms of

societal stratification emerged before the advent of modernity, particularly in ancient high

cultures as for example in China, Egypt, Greece, and India (Luhmann 1982, 1997). Here, the

differentiation is strictly vertical, and societal order is structured in a clear-cut and hierarchical

way. Characteristic features of stratified societies can be illustrated with respect to the

traditional caste system in India. First, there are strict rules which affect every facet of social

life. Second, mobility via economic achievement or via marriage is restricted. Third, hierarchy

is legitimized by religion. As a consequence, status differences and positions in the societal

strata are experienced as destiny, and no legitimate alternative form of social order is taken

into consideration.

Historically, the disappearance of vertical stratification as the main principle of societal

differentiation was triggered by challenging the status of religion as an authority that

determines social life in general. This process began in Europe in the 16th century, when

politics began to claim autonomy from religion. At the end of this process, a political order

was to be found, which no longer was subordinated to any other order. Since then, politics

can be described as a distinct field which follows an inner logic that is independent of

religious and other authorities. Likewise, the birth of the modern sciences is marked by their

emancipation from religious beliefs and wider social norms. In comparison with its ancestors

which were embedded in guilds and monasteries, science defined itself as an enterprise

which is based on the rigorous observation of facts. Since then, social conditions, such as

political regulation or religious dogma may constrain or support scientific research, but they

do no longer directly affect the direction of scientific progress. Luhmann has thus stressed

that the sciences have matured to an autonomous sphere of modern society, just as politics.

A similar development could be observed with regard to the economy. In this respect,

Luhmann’s contribution is in line with Max Weber (1968), Karl Polanyi (1944), Jürgen

Habermas (1985/1989), Anthony Giddens (1984), and many others. The common ground of

these sociologists is to assume that economic relations, which traditionally used to be

14
embedded in wider social bonds, are increasingly characterized by the specific logic and

rationality of the economic field.

The economy may serve as the paradigmatic case for the emergence and lock-in of specific

rationalities. It neither can be derived from wider frames of non-economic criteria nor can it

be reduced to the motives and preferences of individual actors. While this basic idea was

already at the heart of Karl Marx’s analysis, Luhmann expands it to a more general

statement on the horizontal differentiation of society. That type of societal differentiation,

which has substituted vertical stratification as the dominant mode of differentiation, is called

“functional differentiation” as societal systems are considered to fulfil functions that cannot be

substituted for by other systems.8 The economy as a societal or functional system regulates

the production and distribution of scarce products and services; science generates new

knowledge; and the political system is unique in producing collectively binding decisions

which affect the entire society. From this point of view, both politics and science, for example,

are distinct societal systems with characteristic rationalities that cannot be subordinated to

the logic of other systems. Furthermore, the historical appearance of other societal systems

has been described. Among them are the nuclear family and the ideal of romantic love,

which both are no longer primarily based upon political or economic or any other external

reference. In a similar vein, the emergence of an art system, of mass media and of sports

has been described as a historical process. The fundamental characteristic of any such

system is that it is based on a distinct logic, which implies that it develops specific criteria for

success. As a consequence, what is politically feasible may not be true according to scientific

standards; real love cannot be affected by economic considerations, and arts are not

necessarily in line with religion.

8
There is a certain tension in Luhmann’s work between the early emphasis on societal functions as
the driving-force of differentiation processes and the later emphasis on processes of internal self-
reproduction. While the early period is marked by the influence of Talcott Parsons, the later one is
linked to the “autopoietic turn” in general systems theory, i.e., the assumption that the elements of a
system are linked to other elements of the same system, but not to external references. As we will
focus on the distinct logics of individual societal systems, through which they constitute themselves in
difference to other societal systems, the functional aspects of Luhmann’s work are only to be seen
against that backdrop.

15
Analytically, Luhmann has argued that most societal systems, which came into being with the

turn towards the functional differentiation of society, are based on a binary scheme of

information processing (i.e., 0 or 1, plus or minus, yes or no). Binary codes are all-

encompassing constructions as they allow to process everything that happens in society by

assigning one value or the other. As everything can be processed according to the binary

coding of information, societal systems actively scan their environments for opportunities to

apply their codes. The technical advantage of such a mode of information processing is its

reductionism: Any information is either “0” or “1”. For example, the application of the binary

code “true” or “false” is assumed to be at the core of science. Science can thus be defined as

that specific form of information processing which strictly refers to whether or not something

is considered as true or false. Binary coding not only allows for the expansion of the system.

It also safeguards against the claims of other systems. Monetary payments, for example, are

an important prerequisite for science. A direct interference with the code of scientific truth

and falsity, however, is labelled as a scandalous distortion. The same logic is to be found in

other systems as well. In the economy, monetary transactions are related to each other. The

code is “payment” versus “non-payment”, and the economic system only can be activated to

the extent to which this code can be applied. In a similar vein, the political system is about

the power to make collectively binding decisions, and the code is “power” vs. “lack of power”.

The legal system strictly distinguishes between “legal” and “illegal”, regardless of material

effects and issues of social norms; mass media are about attracting the attention of the

public according to what is regarded as news-worthy or not; and sports is based on the code

“winning vs. losing”. To summarize, most systems on the macro-level of society represent a

specific and highly reductionist binary logic of information processing, and concerns relevant

for other systems or overall societal norms have to be transformed according to that very

logic.

16
Coded information processing provides societal systems with an identity which distinguishes

them from each other. This identity is not open for change. But these systems are not only

based on codes, but also on programs that, by contrast, can and do change. Programs

provide societal systems with information on how the code is to be applied. According to

Luhmann, the dynamic character of societal systems is thus inscribed into the variation of

their programs. In order to illustrate the dynamics of systems, one may again refer to

science. There is the state of the art of a research field, there are modifications with respect

to theories and accepted research methods, and there is variation of research agendas – all

of which indicate how the scientific code is to be applied. Likewise, economic rationality can

only be applied to the extent to which scarcity, demand and corresponding price signalling

can be identified; in politics there are thematic issues, agendas, and political programs; the

legal system is based on legal norms as inscribed into constitutional law and into court

decisions; in mass media there are schemes which serve as providers of information about

what to select and how to present what has been selected; in sports there are plenty of

regulations which limit and specify competition. Combining the selectivity and robustness of

binary information processing with the openness and flexibility of programs has provided

societal systems with a degree of complexity which historically was never experienced

before. The consequence is unprecedented growth: Today, there is more science than ever;

politics is more all-encompassing and regulates many facets of society; legal issues can be

related to almost anything, economic activities have exploded etc.

Societal dynamics, however, are not limited to the dynamics of its individual systems. Any

societal system is dependent on the contributions of other systems, and modern society is

characterized by an extraordinary high degree of mutual dependency. The economy, for

example, is in permanent need of scientific knowledge in order to be innovative; it is

dependent on legal norms, in particular with respect to property rights; it needs mass media

in order to attract attention (via advertisement and product placement); and it is in need for

political decision making and implementation, for example in order to regulate competition or

17
with respect to anti-trust norms. Without such outputs of other systems, the economy would

be substantially less efficient. Vice versa, the same holds true for other systems, all of which

are dependent on economic and other outputs. Due to the high degree of mutual

dependency, a crisis in any system may negatively affect other systems. Societal evolution is

thus described as a risky enterprise. As Luhmann has shown in particular in his work on risk

and the environment (Luhmann 1989, 1993) as well as in his “Observations on Modernity”

(Luhmann 1998), the polycentric and highly interrelated character of modern society is both a

strength and a permanent source of vulnerability of modern society.

Compared with the macro-sociological perspective in neo-institutional theory, it is obvious

that Luhmann’s perspective emphasizes the multidimensional and internally differentiated

character of modern society. The basic argument is that neither an hierarchical, stratified

order nor a clearly identifiable center remains after the advent of modernity. In the polycentric

society as described by Luhmann, no unifying system or common coordinating principle

exists. Neither religion or politics, nor science or the economy determine modern society as a

whole. From this perspective, societal integration or homogenization on the basis of universal

norms and cultural principles cannot be achieved. Instead, modern society is shaped by very

distinct societal logics and their interrelatedness. Before we compare basic tenets of both

macro-approaches with the help of two examples, we will focus on Luhmann’s organizational

theory.

2.2. Bringing organizations back in

In Luhmann’s grand theory of societal evolution organizations are of pivotal importance as

societal macro-structures and organizations co-evolve. Historically, organizations emerged in

ancient high cultures which were characterized by the prevalence of an hierarchical and

stratified societal order. However, due to shortcomings in the social preconditions of these

societies – literacy, money economy, and technologies of accounting were still not given on a

18
larger scale – the diffusion of organizations was rather restricted both geographically (close

to the leaders in the centers) and functionally (public administration and larger military and

construction projects). While this constellation remained rather stable for a long time, the

transition from stratified to functionally differentiated societies witnessed the spread of formal

organizations. Luhmann has described this initial phase of modernity as a co-evolutionary

process of functional differentiation and organization building. According to this interpretation,

functional differentiation requires formal organizations, and it stimulates the further spread of

organizations which, again, allow for further differentiation. This process of mutual self-

enforcement begins with the institutionalization of guilds and crafts, and it is later related to

religious organizations, scientific associations, business enterprises, political parties and so

forth. The19th century is crucial for the spread of the organizational form, when club

membership of very diverse sorts gained status as an integral part of a modern life style.9

Today, most societal systems are represented by specific organizations, and, vice versa,

most organizations are related to a societal system. For organizations, this implies copying

and reproducing those forms of rationality which are represented by the codes of the system

in which they are embedded. The business firm, for example, is characterized by

subordinating any of its diverse activities under monetary aspects, i.e., issues of payments.

Likewise, political parties and their candidates strive for positions of political power; scientific

institutions and universities aim at the discovery of truths, sports clubs aim at being

champions, publishing houses and TV stations try to gain the attention of a mass audience,

and so forth. Exceptionally, organizations may alter their primary orientation. For example, a

9
It should be noted that close linkages between organization building on the one hand and the
development of specific forms of rationality have been observed by other social scientists as well.
Michel Foucault, for example, has emphasized the significance of the “birth of the clinic” (Foucault
1973) for the development of the modern medical system; Richard Whitley (1984) convincingly has
shown that the transformation of more or less sporadic “amateur sciences” into the modern science
system was based on the re-organization of universities which specialized with respect to academic
disciplines and corresponding scientific associations; the modern political system has been considered
to be based on the formation of competitive political parties and the incorporation of various interest
groups (Evans 1999); and according to Max Weber (1968) modern capitalism revolutionized the
economy on the basis of the institutionalization of the business firm which is different from a traditional
economy based on households. For a more general account on the importance of the 19th century for
the spread of formal organizations in society see also Türk (1995).

19
research institute may transform itself into an economic organization. Additionally, few

organizations may not be strictly related to exactly one systemic logic (for example, private

hospitals), and there are still organizations which cannot be related to any societal system at

all (for example, leisure clubs). Nevertheless, most organizations in society strictly accept

one societal system and its binary code as their main frame of reference.

Organization research has found profound evidence for the fact that organizations tend to

grow. It has also been shown that growth and increasing complexity are parameters which

stimulate organizational differentiation. According to Luhmann’s systems theory, these

processes strikingly reflect the functional differentiation of society. Many organizations, for

example, have established research departments, some of them have set up offices that deal

with legal issues, large organizations often engage in political lobbying, economic criteria

have to be considered by organizations of all kinds, and deviance from legal norms can

seriously threaten any organization. Organizations thus differentiate themselves into

departments or offices that concentrate on economic issues, legal norms, research, and so

on. A major task for management then is to adjust such diverse rationalities to the identity of

an organization, which, as we pointed out before, is defined through the specific rationality of

the societal system in which the organization is embedded. To some extent, systems theory

would thus support the basic idea of the new institutionalism that organizations are well

advised to copy the prevailing norms of their wider societal context. In contrast to the new

institutionalism, however, systems theory would stress that these norms are copied only to

the extent that they support the realization of ends which constitute the specific identity of an

organization as a business firm, as a research institute, or as a political party, for example.

From the perspective of Luhmann’s macro-sociological approach, organizations are not just

crucial for the reproduction of the differentiation of society into distinct societal systems. They

may also compensate for the sharp differences in the logic of societal systems because

organizations of any type are able to interact with each other (Hasse/Krücken 2005b: 189-

20
190). While economic and scientific rationalities, for example, cannot be synthesized at the

macro-level of society, which is characterized by very different societal systems, economic

and scientific organizations quite frequently set up inter-organizational relations. Depending

on their absorptive capacity, economic organizations can deal with research issues, they can

collaborate with academic partners, and they may translate and re-translate economic

considerations into research issues. Because something similar may be said with respect to

all other types of organizations and with respect to references to any societal system,

heterogeneous inter-organizational relations have the potential of mediating between

different social spheres and rationalities.

3. Accounting for heterogeneity: two examples

In the following section we will briefly discuss the implications of Luhmann’s systems theory

for the analysis of two general topics, which also figure prominently in neo-institutional

research: the expansion and transformation of the modern welfare state (3.1.) and recent

trends towards academic entrepreneurship (3.2.). Both examples show the fruitfulness of a

theoretical perspective, which assumes that the sources of societal and organizational

heterogeneity are to be found at the macro-level of society. Against the backdrop of the

macro-approach in neo-institutional theory, we will argue that the trajectories of the welfare

state do not necessarily follow the enactment of broader societal norms, but rather the

distinct inner logic and dynamics of the political system of society and its organizations. In

our second example we will focus on an issue which involves different societal systems,

hence triggering inter-organizational collaboration. Instead of assuming homogenizing forces

which lead to the evaporation of institutional boundaries, from the perspective of sociological

systems theory distinct logics of information processing and related identity concepts prevail.

3.1. The expansion and transformation of the modern welfare state

21
The modern welfare state seems to be a good example for pointing out similarities and

differences between the macro-approach in neo-institutional theory and sociological systems

theory. Both converge on highlighting the relevance of the welfare state for the

understanding of modern society. But while for Meyer the development is driven by the

diffusion of general societal norms, Luhmann emphasizes the specific rationality of the

political system as its driving-force.

From the macro-perspective both approaches take, welfare state dynamics cannot be

grasped by a comparative perspective, which emphasizes national differences and different

types of modern welfare states. From the comparative perspective, which has been most

convincingly elaborated by Esping-Anderson (1990), specific institutional configurations and

power relations on the one hand and varying functional requirements on the other hand are

of central importance here. As a consequence, many parameters have to be taken into

account as potential determinants of welfare state dynamics like the degree of

industrialization, family structures and demographic trends, economic growth and prosperity,

as well as unionization and the strength of social democrats.

From both a neo-institutionalist and a systems theory perspective, it is striking that

comparative welfare state researchers mainly refer to national differences and functional

requirements. In contrast, both macro-approaches focus on causes which can neither be

limited to individual nation-states nor to functional requirements of societal reproduction.

Following the neo-institutional approach by John W. Meyer and others one rather stresses

the embeddedness of modern nation states in a global society (McNeely 1995; Meyer et al.

1997). The emphasis is clearly on the significance of a global culture and its representation

by international organizations, and the impact of other welfare states as models or at least as

significant others is central (Hasse 2003). From this point of view, social policy has become

22
an integral part of the agenda of modern nation states (Strang/Chang 1993; Meyer 2007).

They have to adhere to broader societal norms of justice and progress and enact related

scripts of social policy in order to be regarded as a legitimate actor in society. Global

standards of social policy were codified by the UN declaration of human rights in 1948. Since

then, international authorities such as the UNESCO, the International Labor Organization

(ILO) and others address welfare issues to any modern nation state (Marshall 1981).

Additionally, welfare state issues are tackled by scientific experts and social movements both

of which are organized in international associations and networks. It thus may be concluded

that these institutions develop a standardized frame of reference, and any state risks its

social legitimacy, if it tends to ignore these contextual parameters. The driving-forces of the

expansion of the welfare state are to be found at the level of societal macro-structures, i.e.,

broader societal norms which mainly diffuse through international organizations. Different

degrees of exposure to the world culture and its internationally organized agents as well as

differences of power between those institutions which are not in accordance with global

cultural scripts may account for differences among nation-states.

A similar perspective may be applied when it comes to the transformation of the welfare state

which has been taking place since the 1980s.10 Historical data give evidence of a rather

uniform expansion of welfare state-expenditures until the end of the 1970s (Flora 1986).

Since then, however, the development seems to be more contingent. On the one hand, there

are factors which forcefully support the extrapolation of this trend. On the other hand, serious

concern about the sustainability of such a dynamic gained wide attention. As a consequence,

substantial changes have been observed - in some cases materializing as sudden quasi-

10
As both neo-institutionalism and systems theory focus on the long-term development of the welfare
state, they rather emphasize its expansion. The more recent experiences mentioned below, however,
could be seen as strong indicators for the “retreat of the state” (Strange 1996) and the expansion of
economic rationality in society. From the perspective of neo-institutionalism and systems theory one
could argue that these experiences could only be fully understood against the backdrop of a more
macro-historical and macro-sociological account. In addition, current discourses and practices could
be analyzed without altering the main conceptual tools and premises of both approaches. From a neo-
institutional point of view, Lee/Strang (2006) analyze public-sector downsizing in 26 OECD countries
as a global diffusion process. In a similar vein, one could argue from the point of view of Luhmann’s

23
paradigmatic shifts (Sweden at the end of the 1980s), in others lasting decades (Germany

from the 1970s until the present time). Sometimes these changes were implemented as

consensual projects (Finland in the 1990s); sometimes they were highly controversial

(England at the beginning of the 1980s). From a neo-institutional point of view, however, it

does not suffice to observe these transformations at the nation-state level. Instead, the

historical development of the welfare-state as well as more recent transformations have to be

seen as a globally orchestrated process, in which trans-national organizations, word-wide

diffusing role models, experts and consultants are of pivotal importance (Hasse 2003). The

OECD, for example, issued a dramatic report in 1981 on the limits of welfare state policies

(OECD 1981). Based on critical assessments like this, substantial re-definitions took place:

"Administration as Service" (OECD 1987) was established as a new “Leitbild”; issues of

service delivery were tackled; private alternatives to public bureaucracies were favoured; and

reforms were driven by new best practices such as "new public management" or "non profits

for hire". This paradigmatic change was accompanied by a replacement of models (from

Germany to New Zealand), international organizations (from ILO to IMF), and experts acting

on global scale (from Keynesian social engineers to more practically inclined political

consultants).

While neo-institutionalism conceptualizes welfare state developments as trans-national

processes, in which global models and scripts diffuse through a variety of channels, systems

theory emphasizes the effects of the functional differentiation of society. As a consequence,

its political system appears to be a distinct field which is based on a specific logic or

rationality, i.e., the application of the binary code “power/not in power”. In this, the political

system sharply differs from those of other societal systems. In addition, the internal

differentiation of the political system has to be taken into account. Internally, the system is

composed of (a) political decision makers (governments and office holders), (b)

administration and service deliverers, and (c) the public (as both voters and clients). Any of

systems theory that we can currently witness variation in political programs, while the code of the

24
these institutions of the political system contributes to the expansion of the welfare state.

Other societal systems are only relevant to the political system as an external resource for its

continuous reproduction. It is thus not surprising that systems theory puts a strong emphasis

on the societal risks of systems dynamics.

Following Luhmann’s “Political Theory in the Welfare State” (Luhmann 1990), the expansion

of the welfare state appears to be an inevitable consequence of the evolution of the political

system. The welfare state predominantly aims at the inclusion of persons and groups. On the

basis of political power law and money are used as means of effectuating the welfare state.

Structurally, its expansion is pushed by the interplay of the core institutions of the political

system and by referring to other societal systems: First, dense competition for scarce offices

is assumed to result in political programs, in which the societal environment is actively

scanned for themes and organized interests, which might offer opportunities to apply the

principle of welfare state politics. Mass media is considered here as an important mediator

between organized interests on the one hand and political parties and politicians on the other

hand. Second, administrative agencies and their experts actively support the identification of

needs due to their professional knowledge and due to micro-political interests. Third, legal

claims affect the relation between the public administration and the public. This fosters the

trend towards an expansion of welfare politics, too. As a consequence of this unprecedented

growth, severe problems occur in other parts of society. In particular, Luhmann has

highlighted negative economic side effects (due to the extensive use of money, but also due

to attempts at actively regulating the economy), the risk of overloading the law system (due

to the extensive use of law resulting in shortcomings of application and implementation), and

the expansion of state bureaucracies and professionals (as service deliverers and as

experts).

political system, in which the dominant rationality of the system is to be found, remains unchanged.

25
It should be noted that the starting-point of Luhmann’s analysis of the welfare state is quite

similar to the neo-institutional perspective. Instead of highlighting national variations, both

approaches emphasize structural features of modern society, which affect very different

nation-states. However, two very basic differences may be identified:

First, Luhmann refers to very general characteristics of the political system, its internal logic

and core institutions as driving forces of welfare state developments, which are to be found in

very different nation-states. Neo-institutionalism, instead, emphasizes trans-national,

“external” causes as triggering these developments. Though national differences are not of

prime theoretical concern for both approaches, they could either be explained through

specific national configurations of political institutions and their relevant societal environment

(systems theory) or through linkages of nation-states to trans-national discourses and

organizations (neo-institutionalism).

Second, the trend towards the transformation of the welfare state, which has occurred in very

different countries and which has been briefly discussed above, has to be conceptualized

very differently. While neo-institutionalists focus on the role agents of diffusion such as trans-

national organizations, experts and consultants play, from the point of view of systems theory

one has to stress that the discourses and concepts of these agents do not diffuse easily.

Instead, they have to be translated into the political system, and this happens according to

the logic and rationality of that very system, and not according to broader societal norms and

scripts. Therefore, the focus is rather on internal factors triggering change. Following the

distinction between codes and programs, one should assume that aspects related to the

former are a source of structural stability. Societal differentiation, competitive features of the

political system, and the interplay of its core institutions are not considered as objects of

change. However, there is a permanent variation of programs as they provide the political

system with information about how to apply its basic principles. Programs may vary

profoundly across time and space, and organizations, both within the political system and in

26
its relevant environment (like media organizations, business firms, and courts) do not simply

enact broader societal scripts. Instead, they play a very active and contingent role in the

variation of programs, for example those concerning the welfare state.

3.4 Academic entrepreneurship

Academic entrepreneurship is embedded in a more general reappraisal of the role

entrepreneurial activities should play in society. Entrepreneurship has increasingly been

seen as being beneficial with respect to broader socio-economic impacts; in particular, start

ups companies which contribute to the transfer of new knowledge are highly appreciated

(Thornton 1999). Universities figure most prominently in this broader discourse on

entrepreneurship. All over the world, their new economic responsibilities have become

visible. Economic parameters such as start up founding rates or the commodification of new

knowledge via patenting and licensing have become new evaluation criteria, and universities

have begun to actively get involved in these activities (OECD 2003). Though direct links

between academic researchers and industry have a long history in many fields, carried out in

addition to the main tasks of the individual researcher, it has now become an institutional

mission of the university as an organization. Based on the assumption that a direct

contribution to economic development has become a third academic mission of universities,

on a par with the traditional missions of teaching and research, academic entrepreneurship

seems to be at the core of a new, globally diffusing model for universities (see, for example,

Etzkowitz et al. 1998; Krücken et al. 2007).

While the new institutionalism emphasizes the match between academic entrepreneurship

on the one hand and wider social norms and expectations on the other, systems theory puts

more emphasis on aspects of societal differentiation and the distinct logics of societal

systems. The former perspective is well established in the context of this handbook. Here

one should mention neo-institutional research on entrepreneurship (Hwang/Powell 2005), on

27
inter-organizational networks among academia and industry (Powell et al. 2005), and on

universities and their embeddedness in wider social norms and expectations (Meyer/Schofer

2007). Therefore, we will only focus on how academic entrepreneurship might be conceived

from the point of view of systems theory. From that point of view one would assume that

distinct systems – in particular: economics, politics, and science – with distinct logics are

involved, which cannot be transcended.

First, systems theory considers business firms as a specific kind of organization, which is to

be characterized by the fact that normative expectations are directed towards economic

efficiency. Here, efficiency is a means to achieve legitimacy, and any business firm which

does not meet economic criteria in the longer run had to be evaluated as a problematic case.

This does not deny that the initial economic difficulties of an academic start up can be

accepted for some time, or that start ups may aim at new markets or at attracting new

investors instead of achieving short-term profits. However, systems theory assumes that start

up companies get into serious problems, if they are evaluated as hybrid organizations which

serve rather general and diffuse societal needs and expectations, instead of aiming at

economic success in the longer run. Start ups from academia may thus be characterized by

a specific economic program (i.e., the marketing of new knowledge which is genuinely risky),

but they can be considered as being rather conventionally related to the binary coding of

economic activities through money.

Likewise, systems theory emphasizes that the political dynamics fostering academic

entrepreneurship have to be analyzed like those of any other political field. These dynamics

are related to power issues and are characterized by the pursuit of a specific rationality,

which differentiates the political system from other parts of society. In addition, one would not

expect that innovation politics and policies are breaking away from the traditional means of

effectuating the welfare state, i.e., law and money. Actively contributing to academic

entrepreneurship is thus a supplement of political programs, which inform the political system

28
and its organizations about where, when and how to apply the binary code of politics.

Systems theory would stress that politics and policies fostering academic entrepreneurship

are exclusively determined by political considerations. It assumes that negative side effects

with respect to science and the economy only affect political decision making to the extent

that they make a political difference. For example, the political promotion of start ups may

have adverse economic implications. Financial subsidies by the state may negatively affect

the development of a venture capital market, and state-funded start ups find it harder to

attain an economic reputation, which is important in order to attract funding from venture

capitalists. In a similar vein one may expect long-term negative effects on science if short-

term socio-economic effects, which can be labelled as the outcome of political decision-

making and thus be converted into political power, become the dominant goal of science

politics and policies.

Finally, the same perspective can be applied to research organizations, which are assumed

to process information along the binary code “true” vs. “false”. Issues of academic

entrepreneurship are framed with regard to the code and programs of the science system,

while material effects of start ups and positive socio-economic impacts are considered to be

less important. This implies two things: First, at the level of the individual researcher one

should assume that the specific incentive structure of that very system makes him or her

more prone to conducting activities which can be mapped by conventional indicators of

successful scientific action such as peer-reviewed publications. Publications have no direct

equivalent in other parts of society. On the other hand, broader societal norms and the

criteria of other systems – like the general and, in particular, political emphasis on

entrepreneurial activities – have to pass this bottleneck in order to become relevant among

scientists. Second, also at the organizational level one has to take a rather skeptical view of

the repercussions of the current trend towards academic entrepreneurship. Most studies on

technology transfer offices at universities suggest only very moderate effects on

entrepreneurial activities, and following Meyer/Rowan (1977) transfer offices could be seen

29
as a prime example of the loose coupling between formal and activity structures of university

organizations (Krücken 2003). According to systems analysis, however, referring to “loose

coupling” does not suffice as it does not explain why most university organizations do not

fully embrace academic entrepreneurship. Following that type of analysis, one would rather

assume that the degree of coupling is closely related to the identity of an organization, which

itself is a function of the specific societal system, in which it is embedded.

To summarize, from the point of view of systems analysis academic entrepreneurship has to

be considered as creating an opportunity for societal systems and their organizations. Within

different systems, academic entrepreneurship might lead to variations at the level of their

programs. The hypothesis, however, is, that variations at the level of programs can hardly

affect the identity of any of the systems involved. For system theorists, the mutual adjustment

of societal systems through dense inter-organizational collaboration between scientific,

political and economic organizations cannot be equated with the evaporation of systemic

boundaries. Though such collaborations are important as they mediate between different

systems and make their specific rationalities visible, they need to be conceptualized primarily

as opportunity structures, which can be exploited by any of its participants. While new

institutionalists might expect processes of mutual adjustment and isomorphic tendencies,

which may alter organizations profoundly, systems theorists would rather assume that the

impact of such collaborations will lead to new avenues for exploring the dominant rationalities

of the organizations involved.

4. Conclusion

Sociological systems theory in the way it has been developed by Niklas Luhmann can play a

crucial role in coming to terms with the heterogeneity and variety at the macro-level of

society. In this, it is a relevant antidote to the traditional neo-institutional emphasis on

30
homogenizing forces. Instead of recurring to the role of purposive actors as in the concept of

institutional entrepreneurs, sociological systems theory stresses the conceptual links

between organizational analysis and wider societal fields and their developments, and so

refers to the very starting-point of organizational institutionalism. With the help of two

examples we tried to exemplify the fruitfulness of that approach. One could see, first, that the

neo-institutional emphasis on broader societal norms and their diffusion in the development

of the welfare state has to be complemented by a perspective, in which the distinct logic of

one societal system, i.e., politics, and the role of political organizations is highlighted. With

our second example we enlarged the perspective by focussing on how one issue, academic

entrepreneurship, is perceived and processed according to the distinct logics of different

societal systems and their organizations. This, again, complements the traditional neo-

institutional emphasis on homogenizing forces in society.

According to our analysis, though both approaches can hardly be integrated at a meta-

theoretical level, they can be used as guidelines for re-establishing a macro-perspective on

the interconnectedness of societal and organizational developments. While neo-institutional

theory is particularly good at analyzing diffusion processes, which transcend sectoral

boundaries of society and shape all units of analysis, systems theory instead focuses on

differences between societal systems and their organizations, which cannot be transcended.

At the interface of these very different paradigms a fascinating agenda for future research on

the societal embeddedness of organizations might evolve. As we tried to show, accounting

for heterogeneity does not necessarily lead to a reappraisal of individual agency. By referring

to sociological systems theory, organizational institutionalism might do better as we can

combine the more recent emphasis on heterogeneity with the traditional strength of

organizational institutionalism which lies in its focus on the co-evolution of organizations and

their societal environments.

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