This paper examines the "new institutional economics" approach to organizational analysis. Whilst acknowledging the benefits of the approach, especially in micro analysis, the paper discusses five areas of difficulty: the fundamental concepts of transaction and bounded rationality; the inadequate treatment of power relations; the over-simplified treatment of norms and values; the ahistorical treatment of organizational context; and the problematic status of functional explanations. The paper argues instead for an interest-interdependence approach, building upon the work of Blau and more recently Coleman.
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