Institutionalization is a management strategy that differs from traditional management in that organizational structures are designed to be more flexible, participatory, and free of hierarchy and detail. Additionally, institutionalization emphasizes the efficient application of professional management strategies. In other words, institutionalization refers to creating a functional mechanism inside the firm. The textile industry in Yemen is vital to the nation's economy since it substantially contributes to economic development and creates jobs. Institutionalization, which is the process of establishing and adhering to formal rules, processes, and practices inside organizations, might affect its effectiveness. There are several other aspects as well. Within the framework of the Yemeni textile industry, the purpose of this research is to explore the influence that institutionalization has on the performance of employees. This research demonstrates the need to establish successful institutionalization within the Yemeni textile industry based on the literature review conducted before this study. Policymakers, managers, and industry stakeholders are urged to build and implement strong institutional frameworks that enable employee involvement, empowerment, and appreciation. These frameworks should be designed to maximize staff productivity. By doing so, businesses can improve their employees' performance, increase their productivity, and contribute to the continued expansion of the textile industry in Yemen.