ORGANIZATIONAL ECOLOGY

1. ORGANIZATIONAL ECOLOGY Organizational ecology theoryprovides macro-level explanations for rates of organizational population change. In common with evolution, variation-selection-retention dynamics result in growth of a neworg’l formadapted to a specific environmental niche. Michael Hannan and John Freeman launched their program by in 1970s, based on human ecology principles developed by Amos Hawley, a UNC sociologist. Carroll & Hannan (2000) manifesto called for creation of corporate demography as a discipline. As it gained academic legitimacy through numerous publications, OET grew to a high density of scholars, courses, and students. It’s an example of how an aggressively pursued theory construction agenda can ultimately achieve successful institutionalization.

2. Forms of Organizations Population comprised of all the orgs with an identical form FORMdf A blueprint for action: “rules or procedures for acting upon inputs in order to produce an org’l product or response.” • Altho four attributes are mission, authority structure, technology, market strategy, empirically org forms are equivalent to an industry • EX: Newspapers, unions, semiconductors, banks, day-care centers, restaurants, HMOs, automakers • C&H (2000) reformulated form as a socially constructed identity based on institutional “codes” (rules & signals) specifying the features are legitimated by other population members • College program accreditation by peer institutions • Brewpubs & microbreweries are new identities distinct from traditional mass-produced beer makers

3. Core Concepts OET’s core concepts drawn from bioecology (niche, carrying capacity, competition), with institutional additions (legitimation) • FOUNDING of orgs de novo, merger, spin-off, in-migration • MORTALITY thru disbanding, merger, out-migration • INERTIA Inflexibility means most orgs unable to change form by adapting to new environmental conditions • Wright Bros bike shop into airplane factory was exceptional • DENSITY total N of orgs in the population at time t • LEGITIMATION org form becomes institutionalized, socially taken-for-granted (constitutive legitimation) • COMPETITION rivalry within an industry for resources

4. Growth Dynamics OET explains org population growth dynamics by the nonlinear impact of changing population size on subsequent new-form founding and mortality rates. The density-dependence model involves interaction between opposing legitimation and competition processes. • Population change occurs via selective replacement of existing organizations by a newly founded org’l form, not by adaptive changes of existing orgs • At low population density, the new org’l form struggles to acquire legitimacy • Once sufficiently legitimated, form expands rapidly in its niche as plentiful resources (capital, skilled workers) attract entrants to exploit those opportunities • With higher population density, rising resource competition slows the founding rate, and resource scarcity increases the new form’s mortality rate • After overshooting its niche’s carrying capacity, the population density crashes, then recovers to stabilize at a density sustainable by the environment

5. Growth Graphs Density dependence equations yield curvilinear rate patterns: Founding rate Mortality rate Time Time Combine these founding-mortality rates for population growth trend: Carrying capacity Population N Time

6. Logical Coherence Peli et al. (1994) used first-order logic to uncover an inferential flaw in Hannan & Freeman theory linking three propositions to the first theorem: Inertia Assumption 1:Selection in populations of orgs favors forms with high reliability of performance & high levels of accountability.(hi_rel ∩ hi_acc → hi_survival chance) Assumption 2:Reliability and accountability require that organizational structures be highly reproducible. (hi_rel ∩ hi_acc → hi_reproducibility) Assumption 3: High levels of reproducibility of structures generate strong inertial pressures. (hi_reprod → hi_inertia) Theorem 1: Selection within populations of orgs favors organizations whose structures have high inertia. (hi_inertia → hi_survival chance) (A3) Reproducibility (A2) Reliab/Account. (A1) Survival Chance To enable the transitive deduction A3 → A2 → A1 → T1, two propositions must reverse causal directions: A3 & A2 (or else A1 & T1). Instead, Peli et al. save T1 by restating bi-directional implications for A2 (the more reliable/ accountable an org, the more reproducible it is and vice versa) & A3 (high reproducibility is always accompanied by high inertia and vice versa).

7. Liabilities Rates of founding, growth, and mortality vary with orgl age & size. Several liabilities affect these vital rates, form’s environmental fit NEWNESS - younger orgs fail more, due to internal lack of trust, selection processes favoring reliable orgl structures SMALLNESS - smaller orgs fail more, due absence of slack resources, poor economies of scale in production Adolescence peak mortality follows “honeymoon”, exhaustion of initial capital and participant enthusiasm Obsolescence older orgs more susceptible to external shocks as inertia prevents adapting to changed environment Senesence persistence of routines & structures reduces older org’s efficiency even in stable environments Research findings are mixed, often lacking size data; newness liability may occur because most young orgs are also very small

8. Theory Critiques OET criticized for simplification, ambiguity of density as proxy for both unobserved legitimacy and competition effects • Legitimacy may matter most at beginning of a new form, not later • Within population, some orgs are less vulnerable to competition • Older, larger orgs may be more adaptable, less inertial than believed • Density may hide effects of other influences on population dynamics, e.g., institutional interdependencies, social networks, learning opportunities, entrepreneurial activities • Institutionalists (Zucker 1989; Baum & Powell 1995) demanded direct measures of socio-political legitimation, e.g., events which may be unrelated to new form population density • EX Road races gained wide acceptance for 1900s automobiles • Hannan & Carroll terse reply that (a) OE does include some measures of institutional environments (b) stronger theory is created when analysts use concepts that are generalizable across diverse populations

9. Empirical Evidence OE researchers generated an exceptional volume of empirical studies by applying event history methods to data on diverse org’l populations. Although results usually supportive, much remains to be learned about ecological & demographic processes of organizational change. After initial discovery of density dependence…, many other analyses were conducted. … on a highly diverse set of populations, the overwhelming majority of these tests yield the non-monotonic patterns described above. … The disconfirming tests have apparently come from analyses of data produced by flawed research designs, notably left-truncated observation schemes that exclude the early history of a population.” (Carroll & Hannan 2000:218-19) Baum & Amburgey (2002:322) concluded that OE researchers sacrificed precision & realism to gain broader generality in density dependence and inertia studies. “Accumulated empirical estimates for such variables as org’l age, size, and density reveal little about theoretical explanations underlying the empirical regularities. This fosters skepticism regarding the inferred processes because supportive findings cannot be interpreted precisely, and contradictory findings are difficult to account for on theoretical grounds.”

10. Theory Comparisons Evolution and OE theories are very similar at population level OET structural inertia principle assumes little adaptability by individual orgs to survive by changing – an MBA’s nightmare! But evolutionists see potential for restructuring (by changing routines), enabling orgs to survive by adaptive transformation Institutional isomorphism originally contrasted with OET diversification; now they borrow one another’s concepts Instead of org’l forms converging around one common type, quex is “Why are there so many kinds of organizations?”(Hannan and Freeman 1976:936) Communities of orgs rarely remain in long run equilibrium because high rates of vital processes  great population turnover Uncertain & rapidly changing org’l environments steadily generate new resource niches entered and colonized by new org forms

11. An Ecological Theory of Association Organizational ecology theory is premised on an atomistic actor model that ignores the interorganizational networks linking competitor firms. J. Miller McPherson’s multilevelecological theory of associationexplains temporal changes in membership composition -- of voluntary assns, social movements, religious cults – by the interplay between organizational characteristics & individuals’ joining-departure behaviors. • Organizations compete ecologically within a niche space defined by the social attributes of people living in a community. They seek to acquire control over the resources (participation, money, time, political support, legitimation) held by potential members possessing the assn’s target demographics. • Interpersonal connections through social networks of kin, friends, acquaintances are mechanisms to recruit replacements & new assn members.

12. Homophily → Homogeneity • Homophily principle:people prefer to associate with others with similar sociodemographic attributes (gender, age, race, religion, class). • H0: Probability of a tie between two persons decreases with social dissimilarity, i.e., greater distance in a multidimensional space • Via network recruitment, most new members’ attributes replicate older ones’ • Although assn recruits members within a niche, boundaries should spread outward as people’s contacts span niche edges to recruit diverse new persons • Yet most assns remain highly homogeneous in their social characteristics • McPherson: Assn homogeneity is reinforced by network-mediatedselective attrition: • Longer membership durations at niche centers, where denser ties occur among assn members • Higher departure rates at niche edges where intra-assn ties are sparser & assns compete fiercely recruit new members YUPPIE ASS’N S E S YOUNG ADULT CLUB HIGH SCHOOL GROUP AGES OF TARGET MEMBERS

13. Competitive Dynamics • Assns are “hyperboxes” in K-dimensional spaces as defined by member attributes. Competition produces a push-pull dynamic equilibrium: • Assns are pushed away from highly overlapped regions where competition creates difficulties to recruit new members & hold old ones • Assns are pulled into under-abundant regions by better opportunities to recruit more members than they lose through competition Data to support social ecology hypotheses came from McPherson’s 10-town Nebraska study in 1980s; he proposes to replicate using 2004 GSS hypernetwork. Hypernetwork: a two-mode matrix linking row persons to column assns. Respondents identify their associations, whose informants are then surveyed. Assns are weighted by member-size to estimate organizational population parameters. EX: Both 1991 National Organizations Study & 1998 National Congregations Study used GSS respondents to generate org lists, thus selected proportional to their size.

14. References Baum, Joel A. C. and Terry L. Amburgey. 2002. “Organizational Ecology.” Pp. 304-326 in Blackwell Companion to Organizations, edited by Joel Baum. Malden, MA: Blackwell. Baum, Joel A.C. and Walter W. Powell. 1995. “Cultivating an Institutional Ecology of Organizations.” American Sociological Review 60:529-538. Carroll, Glenn and Michael T. Hannan. 2000. The Demography of Corporations and Industries. Princeton, NJ: Princeton University Press. Hannan, Michael T. and John Freeman. 1977. “The Population Ecology of Organizations.” American Journal of Sociology 82:929-964. Hannan, Michael T. and John Freeman. 1984. “Structural Inertia and Organizational Change.” American Sociological Review 49:149-164. Hannan, Michael T. and John Freeman. 1988. “The Ecology of Organizational Mortality: American Labor Unions, 1836-1985.” American Journal of Sociology 94:25-52. Hannan, Michael T. and John Freeman. 1989. Organizational Ecology. Cambridge, MA: Harvard University Press. Peli, Gabor, Jeroen Bruggeman, Michael Masuch and Breanndan O. Nuallain. 1994. “A Logical Approach to Formalizing Organizational Ecology.” American Sociological Review 59:571-593. Zucker, Lynne G. 1989. “Combining Institutional Theory and Population Ecology: No Legitimacy, No History.” American Sociological Review 54:542-545.