Informal Governance and the Erosion of Meritocracy: How Nepotism Undermines Institutional Efficiency in Transitional Public Organizations

Depiction on institutional theory and organizational justice literature, this study conceptualizes nepotism not merely as a form of corruption but as an informal institutional logic that competes with formal meritocratic systems. We develop a theoretical framework explaining how clan and politically based favoritism disrupts recruitment, promotion, and accountability structures, thereby weakening institutional efficiency and public trust. Using qualitative analysis combined with secondary governance indicators and institutional reports, we examine how informal relational networks override formal employment rules in a transitional European public administration. The results suggest that nepotism operates through three key mechanisms: distortion of meritocratic selection processes, erosion of perceived procedural justice, and weakening of accountability chains. These mechanisms jointly reduce employee motivation, institutional performance and citizen trust. By reframing nepotism as an informal governance system rather than solely a corruption outcome, this study contributes to management and governance literature by explaining how competing institutional logics shape organizational effectiveness in transitional contexts. The findings offer implications for theory development on informal institutions and for policy reforms aimed at strengthening merit-based public administration systems.