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Henrich R. Greve INSEAD Chair of Organization and Management Theory Professor of Entrepreneurship PowerPoint Presentation
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Being in the Right Place: Communities and Organizations. Henrich R. Greve INSEAD Chair of Organization and Management Theory Professor of Entrepreneurship. Overall Agenda. Firm and Community The community as a node connecting information flows The community as a birthplace of firms

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Presentation Transcript
overall agenda
Overall Agenda
  • Firm and Community
    • The community as a node connecting information flows
    • The community as a birthplace of firms
    • The community as a supporting structure for firms
node connecting information flows
Node Connecting Information Flows
  • Industrial cluster model
    • Each industry involves a set of information flows useful for founders and those operating firm
    • Suppliers similarly involve information flows
    • Communities with the greatest intersection of these information flows become clusters with competitive advantage
  • Is this old-fashioned? Is it contrary to smooth information flow assumptions in some of our theoretical views, like resource based view?
a hard to find innovation
A hard-to-find innovation?

Post-Panamax Container Carrier: Not a subtle way to save 30+ % of total unit costs per journey

overall agenda1
Overall Agenda
  • Firm and Community
    • The community as a node connecting information flows
    • The community as a birthplace of firms
    • The community as a supporting structure for firms
birthplace of organizations
Birthplace of Organizations
  • Start with observations on community organization:
  • Santa Clara, CA the resort town versus Ventura, CA the oil town (but both had oil)
    • Molotch et al AJS 2000: Community organizations “harbor memory traces … through something like a social structure can transpose itself from one time to the next and one institutional realm to the next”
  • Northern Italy versus Southern Italy
    • Putnam et al. 1993: “one could have predicted the success or failure of regional government in Italy in the 1980’s with extraordinary accuracy from patterns of civic engagement nearly a century earlier”
community organizing capability
Community Organizing Capability?
  • Early organizational founding leaves traces:
    • Exemplar organizations
    • Network of individuals trained in founding and running them
    • Cultural elements (stories, justifications)
  • Polya urn: Subsequent foundings draw on the same background
    • More nodes in network
    • Tighter connections between network
    • Stronger cultural background
  • But only in communities with early start – so divergence
mutual organizations in norway 19 th and 20 th century
Mutual Organizations in Norway, 19th and 20th century

Savings bank foundings

Cooperative foundings

some evidence financial mutuals create retail coops 50 years later
Some Evidence: Financial Mutuals Create Retail Coops, 50+ Years Later

Regression of Cooperative founding

Average Treatment Effects

the extension commercial firms
The Extension: Commercial Firms
  • Is there a generalized founding capability in communities?
  • If so, it should be shown by foundings having spillovers across forms of organizations, rather than within
  • Argument has been made based on general institutional conditions:
    • North (1990), Putnam et al (1993), Krugman (1991)
  • Argument has been made in negative direction:
    • Acemoglu et al. (2002) on disease, Kitchelt and Bustokova (2009) on clientele states, Kuran (2011) on corporate role in law
  • Our argument is specifically organizational
overall agenda2
Overall Agenda
  • Firm and Community
    • The community as a node connecting information flows
    • The community as a birthplace of firms
    • The community as a supporting structure for firms
supporting structure for firms
Supporting Structure for Firms
  • Close link of trust between firm and customers often overlooked; easier to notice when it is broken
  • Earlier work on stigmatization showed how it can unravel and create a crisis when firm breaks community norms
  • Jonsson, Greve, Fujiwara-Greve ASQ 2009: Skandia insurance firm broke community norms by giving relatives of managers cheap apartments to rent --> Loss of customers in mutual funds owned by other insurance firms, as well as other firms with characteristics resembling Skandia.
  • Fujiwara-Greve et al.: Skandia also suffered significant losses from scandal; was sold in the end.
bank runs and communities
Bank Runs and Communities
  • Bank runs are contagious: often occur as a reaction to bank runs elsewhere
  • Empirics: Most banks do not experience runs; runs are not predicted by bank characteristics
  • So look outside bank, to community:
    • Demographically diverse communities lack internal networks that drive spread of the “problem” – safer
    • Economically unequal communities have spread of problem plus distrust in others - riskier
sources of fragmentation 1893 usa
Sources of fragmentation, 1893 USA
  • Heavily agrarian especially in Mid-West and West, much immigration
    • Race
    • Religion
    • Wealth inequality
  • These are community characteristics “outside” organization; cannot easily select away
  • Religion especially important because of congregation and communication / networks
the extension exit voice loyalty
The Extension: Exit, Voice, Loyalty
  • We have heard this before: Hirschman
  • Two modern updates:
    • Take seriously the structure of the community side: how are they linked in the communication side, and the mobilization structures? See them as potential social movements, for or against.
    • Take seriously the structure of the firm side: how are they linked in stigmatization structures? Who will be blamed when something happens? See them as linked subjects of social control agents.