How does Institutional Theory explain digital transformation?

Institutional theory provides a lens through which to understand how digital transformation takes place within organizations. This theory suggests that organizations are influenced heavily by the institutional environment in which they operate, which includes the norms, rules, and practices that shape their behavior. With the rise of digital technologies, organizations face pressure from the institutional environment to adopt and integrate these technologies into their operations. This pressure can come from various sources, such as industry competitors, regulatory bodies, or societal expectations. Institutional theory helps explain why organizations engage in digital transformation initiatives, as they seek to conform to the prevailing norms and practices of the digital era. Additionally, it highlights the importance of legitimacy, as organizations that fail to embrace digital transformation may face reputational, competitive, or even survival risks, as they become seen as outdated or irrelevant. Overall, institutional theory provides insights into the motivations and consequences of digital transformation within organizations.

Institutional Theory Digital Transformation Organizational Change Technology Adoption Isomorphism