The Interplay Between Formal and Informal Institutions in Projects

Abstract

In projects, various kinds of formal and informal institutions are crucial for imprinting and controlling behavior. The interplay and potential conflict between these two types of institutions have attracted increasing scholarly and managerial attention, but conventional institutional analyses are hampered by the lack of effective methodological instruments for understanding these institutions and examining their fit (or misfit). Underpinned by the theoretical argument that institutions governing projects are networks, this study employs the methodology of social network analysis (SNA) to capture and analyze institutional interplay. We use four construction projects to illustrate the interplay between formal and informal institutions in projects and to show how this interplay affects project performance. Our findings reveal that, in general, performance is better when there is a better fit—which indicates the extent of interplay—between a project’s formal and informal guiding institutions. We also show how project managers can use SNA to diagnose formal and informal institutions, enhancing their fit and thereby improving project performance. The results presented here have implications for the role of these two institutional types and for how the fit between them can be improved through conscious effort.