Chapter 2: The Neo-Institutionalist Approach

In addition to neo-institutionalism (NI) (Delreux, 2024), there have, of course, been other theories applied to the analysis of the European project, such as institutionalism and intergovernmentalism (Jones, 2018), new intergovernmentalism (Falkner, 2016), liberal intergovernmentalism (Borzel & Risse, 2018), federalism (Liargovas & Papageorgiou, 2024), functionalism, neofunctionalism (Borzel & Risse, 2018) and postfunctionalism (Schmidt, 2024), transactionalism and new supranationalism (Falkner, 2016). Consensus is missing as to which theory is the most suitable for the analysis of the European project. For instance, Falkner (2016) maintains that new intergovernmentalism may be emerging as a dominant theory in European Studies, but Borzel and Risse (2018) argue that neofunctionalism, postfunctionalism and liberal intergovernmentalism are the key theories. However, many of these approaches are tightly interrelated and some share nearly identical features, such as neo-institutionalism and postfunctionalism (Schmidt, 2024).

The analysis in this book of the role of European cooperation in higher education, represented by the initiatives of the European Higher Education Area (EHEA), in understanding the evolving mission of the European project in the early 2020s is informed by NI, given the focus of this approach on (formal) institutions (the EHEA in this case) that ‘operate and develop mobilities, collaborations, interdependencies and interrelationships between central and state institutions, in shaping the right climate for transactions and policy development’ (Liargovas & Papageorgiou, 2024, p. 13).

This chapter serves as a guide to NI as an underlying theoretical frame for this book. This chapter reviews relevant theoretical literature as well as examples of empirical studies that have been informed by NI in order to detail the essence of this theoretical approach, its development, current strands, limitations and potential. The chapter also explains how the analysis in this book attempts to turn the limitations of the theory into opportunities for analysis and what potential the theory has got particularly for the analysis of the research findings which are presented in this book.

Institutionalism is an umbrella term used in political science and related fields to analyse organisational behaviour by examining how institutions interact with one another and with the society (Ansell, 2021). We can refer to institutionalist scholarship as old institutionalism due to the emergence of the ‘new’ institutionalist theory in the second half of the 20th century. Old institutionalism emerged in the early 20th century and was influential in the development of the American political science. The roots of ‘old’ institutionalism are based on the establishment of the political science discipline in the late 19th century and the works of a few classical sociologists, such as Max Weber and Emile Durkheim (Peters, 2019).

Overall, institutionalist approaches (including both their old and new versions) can be located within the broader context of political science when we look at public policy theories. Public policy theories, such as the Advocacy Coalition Framework, the Multiple Streams Framework, the Network Approach and the Punctuated Equilibrium Theory (Sabatier & Weible, 2014), focus on the processes through which policies are developed, implemented, and evaluated. These theories emphasise the importance of policy actors, such as interest groups, political parties, and bureaucracies, in shaping policy outcomes. These public policy theories also consider the role of policy feedback and evaluation in shaping future policy decisions. Old and new institutionalism provides an overall understanding of the political environment for policy processes with the focus on institutions rather than looking specifically at how policies are developed and implemented. For instance, the Advocacy Coalition Framework emphasises the role of interest groups and coalitions in shaping policy outcomes (Sabatier & Jenkins-Smith, 1993), while the Multiple Streams Framework suggests that policies are the result of the convergence of policy problems, policy solutions and political opportunities (Zahariadis, 2007). Overall, institutionalist approaches and the public policy theories mentioned above offer complementary perspectives on the study of politics and provide important insights into the workings of government and policymaking processes.

Scholarship on both the old and new institutionalist approaches is complex. Consensus is missing as to what an institution is, what exactly new/neo institutionalism means and how different it is from the old version of institutionalism (Cairney, 2019). Nevertheless, the below is an attempt to capture and summarise key principles of the old and new versions of institutionalist approaches and, in particular, highlight key principles on which NI rests, as this is essential for the analysis later in this book.

Old institutionalism emphasised the role of law in governing, the role of structures, holism and historicism (Peters, 2019). Apart from these, old institutionalism had a strong normative objective with a concern for ‘good governance’ (Peters, 2019, p. 13); it also focused on assessing formal institutions and how they are responsible to the government (Rhodes, 1995). Old institutionalists were particularly interested in the role of institutions in maintaining political stability and preserving democratic norms. Overall, old institutionalism was not about theory building as it was rather a descriptive approach instead of a theory development platform (Shepsle, 1989).

NI, because it emerged as a response to the shortcomings of the earlier institutionalist approach, emphasises different aspects of institutional behaviour and development. NI is a theoretical stance that enables the analysis of organisational behaviour by focusing on how organisations, both formal and informal, interact among one another and with a wider society, and more importantly, how organisations change under the influence of wider processes – in other words, contextual factors that influence these organisations and are, in turn, influenced by them (Peters, 2019).

The behavioural and rational choice movements which emerged in the 1950s in political science can be considered as the background of the NI approach. Those movements focused on the development of the NI theory and an anti-normative bias (Peters, 2019). NI is opposed to the normative character of the old institutionalist approach, concerned with promoting ‘good governance’ (Peters, 2019, p. 13). According to Peters (2019), the NI emphasises methodology and theoretical advancement.

The term NI was introduced by Marc R. Tool in his doctoral thesis in 1953 (Tool, 1953). NI was developing from Clarence E. Ayres' integration of Veblen's evolutionary theory of institutions with John Dewey's theory of instrumental valuation (Bush, 2009). Gruchy's (1984) work offered another key development for NI as it provided a holistic approach to institutional economics. Comparatively, Gruchy's take on NI was more encompassing than Tool's explanation (Almeida & De Silva, 2020). However, these perspectives on NI developed with no clear research programme and no methodology (Almeida & De Silva, 2020). Peters (2019, p. 2) states that ‘new institutionalism is not a single animal but rather a genus with number of specific species within it’. Whereas all (neo)-institutionalists agree that institutions are important, there is no consensus on how and why they matter (Cairney, 2019).

The above suggests that there are differences between the old and new institutionalist approaches. Unlike old institutionalism, which focused on formal institutions such as legislatures, courts, and executives (Judge, 2008), NI recognises both formal and informal rules. The NI approach gained a lot of popularity in the late 1980s, and seminal studies, including foundational texts by DiMaggio and Powell (1983), Hall and Taylor (1996) and Shepsle (1989), were developed during this period. Given that old institutionalism focused only on a limited range of formal institutions suggests that the view of institutions in old institutionalism was quite limited. Therefore, one major difference of NI is its definition of institutions which comprises both formal and informal rules and ways of governing (Cairney, 2019; Hadler, 2015). NI deals with a variety of state and societal institutions that shape relations of political actors with other power groups by defining their interests (Steinmo et al., 1992). For example, the analysis of institutions in NI may include ‘the rules of electoral competition, the structure of party systems, the relations among various branches of government, and the structure and organization of economic actors like trade unions’ (Steinmo et al., 1992, p. 2). NI's view of institutions is rather flexible and inclusive compared to old institutionalism's rigid definitions.

How and why institutions change is the main question that is scrutinised by NI. NI has made the case for the characteristics of institutional change that will be discussed below. Overall, NI has focused more on the rules than organisations themselves, informality of their functioning rather than formality, as well as a dynamic view of institutional development (Lowndes, 2010), demonstrating the necessity of conceptualising institutions as independent variables (Rinas, 2021).

Such an interconnected and dynamic nature of modern organisations and their proneness to influences is the very reason for the recent preference for the term ‘organisations’ in the scholarship on NI, rather than ‘institutions’ which was a more common term in the earlier version of this theoretical approach – institutionalism (Peters, 2019). Nevertheless, in this book, the terms institutions, organisations, stakeholders and actors are used interchangeably to reflect the rhetoric of all institutionalist approaches as well as the language used in the empirical data sourced for the analysis (see the next chapters).

NI has provided theory development through empirical studies on its four strands which are discussed below. The historical, sociological, rational-choice strands and – recently – the discursive strand of NI have contributed to the advancement of this theory and related literature by employing a variety of methodologies. These four strands have also been useful in shaping the foci of analyses in contrast to old institutionalism which lacked causal mechanisms to explain the complexity of policy and political processes.

There are four key interconnected strands of NI: historical, sociological, rational choice (Peters, 2019) and discursive NI (Schmidt, 2014). All these four strands consider institutions as the main variables in analysing political phenomena.

The historical strand of NI focuses on the importance of the historical context and the path-dependent nature of institutional development, in which past decisions and events shape current institutional structures and practices. This strand of NI emerged as a reaction to behaviouralism (Lecours, 2005). The behaviouralist movement in political science became popular in the 1950s and 1960s, focusing on examining only observable behaviour of political actors (Easton, 1965). Behaviouralism advocates that the political behaviour of individuals should be studied instead of that of organisations or organisational units.

The historical strand of NI assumes that institutional development follows a particular path (Mahoney, 2000; Pierson & Skocpol, 2002). Path dependency means that the timing of any developmental incidents crucially affects their consequences. This means that path dependence creates a continuous institutional path in organisational development due to the logic of increasing returns (Mahoney, 2000). The historical strand rejects the idea that similar forces operating in similar ways will produce the same outcomes. Therefore, this strand of NI underlines the importance of ‘critical junctures’ which can be defined as ‘brief phases of institutional flux… during which more dramatic change is possible’ (Capoccia & Kelemen, 2007, p. 341). As Pierson (2000, p. 75) argues, ‘what makes a particular juncture critical is that it triggers a process of positive feedback’. Institutional change happens through external shocks and institutional tensions (Lecours, 2005). Institutional structures make institutions resistant to evolution and change which can take many decades. By contrast to rational-choice NI discussed below, historical NI sees institutions as the processes of change with no defined end points (Farrell, 2018). Path dependency is an important factor to consider when analysing the role of higher education in the European project. Following the logic of the historical strand of NI, the situation post-2020, which is the focus of this book, is rooted in the pre-2020 developments.

The sociological strand of NI focuses on social elements of institutions that include ‘symbol systems, cognitive scripts and moral templates that provide the frames of meaning guiding human behaviour’ (Hall & Taylor, 1996, p. 947). For sociological NI, institutions are organising myths (Farrell, 2018). Originating from the works of Weber and Durkheim, sociological NI has placed its prime focus on explaining interaction between organisations and individuals. Individuals play an important role in shaping organisational responses (Ansell, 2021; Hall, 2019). Sociological NI assumes that organisations follow social expectations in their organisational environments, which consist of individuals that define the organisational field (DiMaggio & Powell, 1983).

The emphasis of the sociological strand on the interaction between organisations and individuals is not the prime focus in this study, but we recognise the paramount role of individuals in shaping organisational responses from the Bologna stakeholders in each of the four countries that founded the EHEA. Hence, the individuals that represent these EHEA stakeholders are, sine quaestione, valuable sources of information about how these organisations form their responses.

The rational-choice strand of NI is based on ‘methodological individualism’ and explains political outcomes as aggregated decisions of political players (i.e. individuals and/or organisations or their units) involved. This strand mainly borrows its ideas from economics with a close look on the origins of US congressional institutions as theorised by American scholars (Bell, 2002). According to Rakner (1996), political organisations can include high-level policymakers such as government ministers, elected officials and others, from bureaucrats to low level policy actors such as local governments, think thanks, labour unions. Political actors can be a diverse group of individuals and organisational units who have a role in shaping policy and politics.

The rational-choice strand of NI assumes that actors are rational and their behaviour ‘takes the form of choices based on either intelligent calculation or internalised rules that reflect optimal adaptation to experience’ (Shepsle, 1989, p. 1340). Policymakers are expected to confirm with the rules and norms of an institution following a ‘logic of appropriateness’ (March & Olsen, 2006, p. 7). It is often individuals within organisations, whose preferences shape actions within the institutional context (Dowding & King, 1995). Also, their preferences are determined by the institutional environment (Bell, 2002). From the perspective of the rational-choice NI, institutions can be defined as structures or equilibria (Farrell, 2018). Structures are ‘forces which conduct actors to select one equilibrium or another’ and equilibria are ‘sets of strategies from which no actor has any incentive to defect if no other actor defects’ (Farrell, 2018, p. 27). Policymakers shape organisations based on rational objectives and they influence shaping institutional environments based of these objectives (Bell, 2002).

One example on these can be on the processes of European integration. Graziano and Vink (2017, p. 40) eloquently explicated that the rational choice strand highlights ‘the increasing political opportunities provided by European integration’ and resulting ‘strategic organizational adaptation displayed by interest groups… when domestic political actors “rationally” use European resources in order to support predefined preferences’. This example shows how the rational calculations of various policymakers can shape political institutions that represent the European project, relying on higher education stakeholders in shaping its mission.

The discursive strand of NI emphasises the role of discourse in institutional change (Carstensen & Schmidt, 2015; Schmidt, 2008, 2010, 2011, 2014; Widmaier, 2015). This strand suggests that it is specifically discursive processes that are beneficial to unravel ‘why some ideas become the policies, programs, and philosophies that dominate political reality while others do not’ (Schmidt, 2008, p. 309). These considerations have informed methodological choices for the project reported in this book as the review of official communications of the Bologna stakeholders was accompanied by interviews with the representations from key Bologna stakeholders to find out more information about policy decisions spelled out in the official communications.

The discursive strand of NI advocates the idea that discourse can be coordinative and communicative (Schmidt, 2008). Coordinative discourse is associated with the discourse of broader policy actors who engage with the development of policy ideas, such as in the case of government representatives who can align their actions and coordinate their efforts to achieve mutually beneficial outcomes (Schmidt, 2010). In contrast, communicative discourse relates to the discourse promoted by a variety of political actors who deal with ‘formulation, modification and elaboration of ideas to persuade the public’ (Schmidt, 2011, p. 171). Coordinative discourse happens between different policy actors, for instance, between the government and interest groups, while communicative discourse takes place between the political actors and the public (Schmidt, 2008).

Political actors use coordinative discourse to establish shared meanings and understandings that guide their actions and interactions with others. This can involve the use of shared terminology, symbols and narratives that create a sense of common purpose and identity among actors. Communicative discourse is directed to the public on the necessity of selected policies or actions of the political actors (Schmidt, 2008). Ideas that shape discourse come in various forms: frames, narratives, stories, memories (Schmidt, 2014). Institutional rules and norms are reflected in the ideas developed in a policy discourse that can be more flexible than organisational structures themselves (Cairney, 2015). Similarly, to the other three strands of NI that focus on organisational dynamics, the discursive strand is also focused on organisational change and can, arguably, be viewed sometimes as a contextual background of the organisational processes studied by other strands of NI, as discourse production is always part of what organisations do.

There is no perfect theory for studying organisational processes and political phenomena; otherwise, we would have singled it out a long time ago, disregarding all other approaches to such an analysis. Like any other theoretical direction, NI has been subject to criticism. It is important to review this criticism to develop a better understanding of NI and its applicability to the analysis of countries' memberships in the EHEA and their link to the evolving European project. While some criticism of NI is about its core assumptions, other critical points are more about the application of NI.

First, as discussed above, there is a huge diversity in NI which can be attributed to the new institutionalists themselves, particularly those setting off on a journey to make sense of NI (Lecours, 2005). Apart from different assumptions about what institutions are, why they matter and how to explain change and continuity in an institutional setting, there is no consensus on how to identify which branch of NI is most suited for a particular study. According to Peters (2019), on the one hand, different strands of NI are associated with quite different aims for analysis that may question the potential of the NI theory to provide holistic answers to any policy change. On the other hand, scholarly efforts to maintain the boundaries of the four strands may fall short on not recognising unavoidable overlaps among the aims of the four strands. For this reason, the analysis that follows in this book is informed by all four strands, although the rational-choice strand will dominate the analysis, given the emphasis on strategic decisions of the Bologna stakeholders.

The second point of criticism of NI mainly relates to its rational-choice strand's assumption that policy actors are rational beings. The so-called bounded rationality idea, developed by Simon (1990), explains this. Simon (1990) argues that actors have cognitive and resources-related limitations which prevent them from considering and calculating all possible alternatives. Therefore, bounded rationality limits actors in their effort to maximise utility within the institutional environment. This also relates to the rational-choice NI's assumption that external factors can cause ambiguous and multifaceted preferences of policy actors (Hall & Taylor, 1996). This criticism may also be relevant to other strands of NI. However, sourcing insights from all four strands should limit the drawbacks explained in this second point of criticism of NI.

Third, the growth of the feminist voice in NI has criticised the gender blindness of the institutionalist literature arguing for the necessity of bringing in a social justice lens, such as the gender lens, into the field of organisational analysis (Kenny, 2007; Mackay et al., 2010; Mackay & Waylen, 2009). These ideas later triggered the application of NI in the analysis of such issues as the impact of institutions on women's political participation (Huang, 2018) and gender mainstreaming in the EU (Minto & Mergaert, 2018).

The last major point of criticism of NI is related to its application, unlike the previous three points listed above which were more about fundamental ideas of NI. NI has been vigorously challenged in recent years by the scholars of organisation studies. Some organisation studies scholars argued that the definition of institutions ended up being blurred (Alvesson & Spicer, 2019; David & Bitektine, 2009) as ‘institutions have become everything’ (Alvesson & Spicer, 2019, p. 205). While we see the point that the nature of institutions has become all-encompassing, the study reported in this book focuses on a concrete list of organisations that are recognised on the EHEA website as Bologna stakeholders for each country.

Aside from this, some scholars criticise NI for not accounting for all the processes of institutionalisation and not considering the role of individuals within these institutionalisation processes (Hasselbladh & Kallinikos, 2000). Clearly, this criticism cannot relate to the sociological strand of NI, as it is explained earlier that its focus is predominantly on the role of individuals in organisations, which is something considered in the methodology of the study that is reported in this book.

The three points of criticism of NI explicated above are important to be aware of, given that NI informs the study discussed in this book. However, as mentioned before, the limitations of NI should not be viewed as drawbacks of the theory per se, given that there is no theory in political science that has not faced criticism. Rather, these limitations should be used as additional points of analysis of the matter in focus.

In terms of NI's applicability, it has served as a useful theoretical lens for different areas of scholarship, including political science, economics, sociology and organisational studies. It has produced rich literature on institutions, their impact and how they shape individuals. Clearly, this evident flexible applicability of NI in different areas of research is a great advantage of this theory. Various scholars discussed the applicability of the NI theory (Bell, 2002; Cairney, 2015; Peters, 2019). For example, NI has been applied to the study of policy networks which include diverse actors and their interactions in a given policy environment (Bell, 2002). Therefore, institutional elements can be crucial for examining policy networks. Another example of NI's flexible applicability is its adoption in entrepreneurship literature (Zhai & Su, 2019). Scholars have focused on things like institutional drivers of entrepreneurship (Estrin & Mickiewicz, 2011) and the process of institutional entrepreneurship (Ansari & Phillips, 2011). One more example is from the literature on the organisational theory studies. Scholars have adopted the NI lens to examine, for instance, corporate social responsibility (Paynter et al., 2018) and corporative advantage (Bresser & Millonig, 2003).

This book applies NI to the analysis of countries' membership in the EHEA and its wider strategic importance for the development of the European project. The book is focused on a very particular range of institutions, identified through their relationship to the Bologna Process (BP). As explained elsewhere in the book, key organisations related to the implementation of the BP in the four founding countries of the EHEA, pre-identified on its official website (EHEA, 2023). They matter due to them shaping the nature of the memberships of the signatory countries in the EHEA and their strategic importance.

The emphasis on this strategic importance is aligned closely with the principles of the rational-choice strand of NI, given its preoccupation with rationalising actors' choices as in the case here – the strategising behind continuing memberships. This is not to disregard the bounded nature of policy actors' rationality (Simon, 1990) but rather to uncover what is possible in the rational decisions that have been made by relevant policy actors. While the rational-choice strand of NI dominates the analysis that follows in this book, the analysis does not overlook the overlaps among the four strands of NI. Indeed, the analysis that follows recognises the importance of the historical strand in presenting and relying on important contextual information about the development of Europe (see the next chapter) which is key for understanding how Europeanisation politics features in the strategies of Italy, France, Germany and the United Kingdom in continuing their roles in the EHEA. The methodology for data collection for this book (e.g. interviews with representatives of key stakeholders) is, in part, informed by sociological NI which emphasises the role that individuals play in shaping organisational responses (Peters, 2019). Finally, the data gathered from the interviews and stakeholders' official communications cannot overlook the fact that the discourse created by these organisations and individuals that represent them shapes the essence of our understanding of the processes that are analysed. This is precisely what the discursive strand of NI is preoccupied with. Finally, given the reliance of the book on the rational-choice strand predominantly and the recent growth of the criticism of this strand advocating the idea that the issues of social justice should feature more in NI analyses, the book addresses this in, for instance, analysing the response of the Bologna stakeholders in the founding countries of the EHEA to the invasion of Ukraine.

Evidently, despite the criticism that NI has faced, it remains a popular and influential framework for understanding the workings not only of organisations per se but also of the wider society. This is due to the inextricable link between the two domains.

This chapter has offered an extensive explanation of the NI theory which informs the analysis in this book, focused on the role of European cooperation in higher education, represented by the EHEA initiatives, in understanding the evolving mission of the European project in the early 2020s.

This explanation of NI was constructed through a review of relevant theoretical literature as well as empirical studies that have applied NI. This chapter has also explained how the analysis in this book attempts to turn the recognised limitations of the theory into opportunities for analysis and what potential the theory has got particularly for the analysis of the research project which is presented in this book.