Institutional theory is a framework that examines how institutions—defined as established laws, practices, and norms—shape the behavior of organizations. It emphasizes the influence of social, cultural, and political factors on organizational structures and practices, suggesting that organizations often conform to these external pressures to gain legitimacy and stability. This theory highlights the importance of isomorphism, where organizations within the same field become similar over time due to coercive, mimetic, or normative pressures. By understanding these dynamics, researchers can better analyze how organizations adapt to their environments and the role of institutions in shaping economic and social outcomes.