Institutions as context-sensitive control superstructures for firms

This paper addresses the lack of context-sensitivity in institutional analysis by introducing control process theory. It suggests that institutions can be seen as control process superstructures that provide a specific environment within which control action is undertaken for a principal–agent relationship. This view is not meant to be a sensationalist departure in opinion from the analysis of institutions or on the nature of the firm but, rather, a simple manner to understand the connections and relevance contained therein within an overarching and intuitive framework that emphasizes contextual sensitivity. The paper also suggests how this approach informs the nature and type of control action available to a principal within an instantiated institution and, further, how it allows the consideration of soft knowledge in devising control action.