Ecological Approaches

1
Ecological Approaches

• Why are there so many kinds of organizations?
• Org ecologists explain how social, economic, and
  political conditions affect the relative
  abundance and diversity of organizations and
  account for their changing composite over time
• Empirically oriented Cumulative findings

2
Ecological Approaches

• Three common observations
• Diversity is a property of aggregates of
  organizations that has no analogue at the level
  of the individual organization
• Organization often have difficulty devising and
  executing changes fast enough to meet the demands
  of uncertain, changing environments
• The community of organizations is rarely stable

3
Ecological Approaches

• Research Focus
• Population and community levels
• Rates of founding and failure as diversity
• Population
• A set of organizations engaged in similar
  activities and with similar patterns of resource
  utilization
• Forms as a result of processes that isolate or
  segregate one set of organizations from another

4
Ecological Approaches

• Organizational communities
• Functionally integrated systems of interacting
  populations
• The outcomes for organizations in any one
  population are fundamentally intertwined with
  those of organizations in other populations that
  belong to the same community system

5
Ecological Approaches

• Structural inertia theory vs critics
• Determinism and loss of human agency
• Determinism opposed to voluntarism or probablism
• Level of analysis
• Individual actions to organizations vs
• Individuals actions to organizational populations
• Changes in organizational populations
• Variation, selection, retention, and competition

6
Ecological Approaches

• Assumptions
• Individuals do matter
• But individual cannot always determine in advance
  which variations will succeed
• Individuals have difficulty changing existing
  organizations strategies and structures quickly
  enough to keep pace with the demands of
  uncertain, changing environments

7
Demographic Process

• Traditional approach to founding and failure
• Individual traits?
• Managerial inexperience, incompetence, inadequate
  financing?
• Ecological approach
• Volatile nature of organizational populations and
  communities
• Focus on socio, economic, and political factors

8
Kelly Amburgey (1991)
9
Structural Inertia Theory

• What is the main thesis of this theory?
• How does this theory view organizations?
• What are two main questions?
• 1) How changeable are organizations?
• 2) Is change beneficial for organizations?

10
Structural Inertia Theory

• Organizations are relatively inert entities for
  which adaptive response is not only difficult and
  infrequent, but hazardous as well
• Change in individual organizations are viewed as
  contributing less to population-level change than
  organizational founding and failure

11
Structural Inertia Theory

• Organizational ecologists focus on the influence
  of organizational and environmental factors on
  rates of organizational changes, as well as the
  survival consequences of different kinds of
  changes

12
Structural Inertia Theory

• Selection processes explain change in
  organizational populations
• Inertia is viewed as consequence of selection
  processes, not antecedent
• Organizations with inert features are more likely
  to survive

13
Structural Inertia Theory

• Core and Periphery Structure
• Core features have higher levels of inertia,
  lower levels of change
• Organizations may change change
• Inertia relative to environmental change
• Structures of organizations have high inertia
  when the speed of reorganization changes in core
  featuresis much lower than the rate at which
  environmental conditions change

14
Age and Size Dependence in Rate of Organizational
Change

• Organizational age and size resistant to change
• But could organizations be fluid with age and
  size?

15
Fluidity with Age and Size

• But could organizations be fluid with age and
  size?
• Singh et al (1988)
• Discontinuous pattern of org change
• Left-censored organizations
• Theoretical support
• Internal complexity, differentiation,
  specialization are associated with the adoption
  of innovation (Haveman, 1993)
• Slack resource theory
• Size and market power

16
Repetitive Momentum

• Organizations history of change (Amburgey and
  colleagues)
• Organizational learning routinizes change
• Repetitive momentum
• The tendency to maintain direction and emphasis
  of prior actions in current behavior
• Address a dynamic effect of prior change
• The likelihood of change high immediately after
  each additional change, but declines with
  increases in the time since that type of change
  last occurRed

17
Future research on size and age

• Age and size reveal little coefficients
• Attention to how age and size affect rates of
  change or the conditions under which fluidity,
  inertia, or momentum will predominate
• Use of more direct measures of the underlying
  processes

18
Is Change Beneficial?

• Relationship between core features and liability
  of newness (Stinchcombe, 1965)
• Attempting core change to survive produces a
  renewed liability of newness by robbing an
  organizations history of survival value
• Reliability, accountability, legitimacy
  undermined
• Structural inertia theory predicts that
  organizations may fail as a result of their
  attempts to survive

19
Organizational Change and Failure

• Organizations do not necessarily fail as a result
  of their efforts to change
• But they do not necessarily improve their
  organizational survival chances, either
• More research needed in
• Adaptiveness of organizational change
• Left-censored organizations
• Right-censoring problem
• On-going organizational performance

20
Reconciling Adaptation and Selection

• Organizations appear to change frequently in
  response to environmental change, and often
  without any harmful effects
• Rates of change are often not constrained by age
  and size as predicted by structural inertia
  theory
• The evolution of organizational populations
  shaped jointly by processes of selection and
  adaptation and their interaction

21
Organizational Learning

• How experiential processes shape organizational
  survival
• How ageing influences organizational failure by
  modelling more directly experiential learning
  constructs invoke by the liability of newness and
  ageing hypotheses

22
Organizations Operating and Competitive
Experience

• Learning curve
• Competency traps
• Exploration of new routines and exploitation of
  old ones (March, 1991)
• Experiential processes in organizational
  adaptation and selection processes
• Between-organization differences in learning

23
Key Topics Key Variables Key Predictions Key Predictions
Organizational Founding Spatial heterogeneity Variation in social, institutional and economic conditions across regions produce unobservable region-specific proneness to experiencing the founding of particular organizational forms Variation in social, institutional and economic conditions across regions produce unobservable region-specific proneness to experiencing the founding of particular organizational forms
Entrants similarity to incumbents Avoidance of direct competition pushes entrants away from similar organizations, while complementary differences pull them together agglomeration economies pull entrants toward competitors Avoidance of direct competition pushes entrants away from similar organizations, while complementary differences pull them together agglomeration economies pull entrants toward competitors
Age Dependence Organizational age Liability of newness failure rates decline with age as roles and routines are mastered and links with external constituents are established Liability of newness failure rates decline with age as roles and routines are mastered and links with external constituents are established
Liability of adolescence failure rates rise with age until initial buffering resource endowments are depleted, then decline with further increase in age Liability of adolescence failure rates rise with age until initial buffering resource endowments are depleted, then decline with further increase in age
Liability of obsolescence failure rates increase with age as their original fit with the environment erodes Liability of obsolescence failure rates increase with age as their original fit with the environment erodes
Liability of senescene failure rates increase with age as internal friction, precedent and political pacts accumulate, impending action and reliable performance
24
Key Topics Key Variables Key Predictions Key Predictions
Size Dependence Organizational size Liability of smallness failure rates decline with size, which buffers organizations from threats to survival Liability of smallness failure rates decline with size, which buffers organizations from threats to survival
Structural Inertia Organizational change Change structural inertia increases as organizations age and grow, lowering rates of organizational change Change structural inertia increases as organizations age and grow, lowering rates of organizational change
Failure the failure rate increases after a core change, but then declines with the passage of time the disruptive effects change increase (decrease) with organizational age (size) Failure the failure rate increases after a core change, but then declines with the passage of time the disruptive effects change increase (decrease) with organizational age (size)
Organizational Momentum Cumulative organizational change The rate of an organizational change of the same type increases with the number of prior changes of the same type, but then declines with the passage of time since the last change of the same type The rate of an organizational change of the same type increases with the number of prior changes of the same type, but then declines with the passage of time since the last change of the same type
Organizational Learning Organizational operating experience Initial increases in operating experience lower failure rates as organizations move down learning curves for their routines, but further increases reduce responsiveness to changing environmental demands, raising failure rates Initial increases in operating experience lower failure rates as organizations move down learning curves for their routines, but further increases reduce responsiveness to changing environmental demands, raising failure rates
Organizational competitive experience The greater an organizations historical exposure to competition, the lower its failure rate
25
Niche Width Dynamics

• Specialists vs Generalists
• Resource Partitioning
• In environments characterized by economies of
  scale, competition among generalists to occupy
  the center of the market where resources are most
  abundant frees peripheral resources that are most
  likely to be used by specialists
• Increasing market concentration increases the
  failure rate of generalists operating in the
  center of the market and lowers the failure rate
  of specialists operating at its periphery

26
Niche Width Dynamics

• Specialists vs Generalists
• Resource Partitioning
• In environments characterized by economies of
  scale, competition among generalists to occupy
  the center of the market where resources are most
  abundant frees peripheral resources that are most
  likely to be used by specialists
• Increasing market concentration increases the
  failure rate of generalists operating in the
  center of the market and lowers the failure rate
  of specialists operating at its periphery

27
Population Dynamics and Density Dependence

• Population dynamics
• The number of prior foundings and failures in a
  population
• Density dependence
• The number of organizations in a population

28
Elaborations of the Density Dependency Model

• Criticisms
• assumption (equal competition) questioned
• methodology questioned unobserved heterogeneity
  in population
• Weighted emphasis on generality
• Elaborations (Table 1.2.6)
• Legitimation and population
• Focus on organizational-level differences within
  populations

29
Density and Institutional Processes

• Cognitive
• Zucker (1977) institutionalization is a
  cognitive phenomenon reflected in
  taken-for-granted assumptions
• Density dependence theory
• Emphasizes only cognitive legitimacy
• Legitimacy defies measurement focus on
  observables
• Indirect measurement vs direct measurement
• Legitimation variable or process?

30
Density and Institutional Processes

• Sociopolitical
• Meyer Rowan (1977) and DiMaggio Powell (1983)
  legitimacy is embedded in relational networks
  and normative codes of conduct
• Institutionalization as both a sociopolitical
  process through which certain organizational
  forms come to be regarded as obligatory, and as a
  state in which organizational forms are
  buttressed by legal mandate or by widely shared
  cultural, professional and political norms and
  values.

31
Institutional Embeddedness and Sociopolitical
Legitimacy

• Baum Oliver (1992)
• Argues that density dependence model focuses
  exclusively on cognitive legitimacy and
  interdepencies among organizations within
  populations and neglects the evolution of a
  populations interdepencies with surrounding
  organizations and institutions
• Institutional embeddedness
• Interconnections between a population and its
  institutional environment (Dimaggio Powell,
  1983 Fombrun, 1986 1988)

32
Institutional Embeddedness and Sociopolitical
Legitimacy

• Baum Oliver (1992)
• Relational density
• The number of formal relations between the
  members of a population and key institutions in
  the populations environment
• Tests proxy-vs-process prediction
• Proxy view supported
• Ecological explanations of the underlying
  institutional processes suggested

33
Non-density-based Measures of Legitimacy

• Certification contests, certification,
  accreditation, credentialing activities signal
  reliability, raising the sociopolitical
  legitimacy of organizational forms as well as
  their cognitive legitimacy
• Print media as basic source of information
  diffusion

34
Density and Competitive Processes

• Logic
• If all organizations in a population are not
  equal competitors, then population density may
  not provide the most precise measure of the
  competition faced by different organizations in a
  population
• Localized competition
• Level of analysis
• Organizational niche overlap

35
Localized Competition

• Organizations compete most intensely with
  similar-sized organizations
• The emergence of large organizations should be
  accompanied by a decline in the number of
  medium-sized organizations, while small ones
  flourish as their most intense competitors are
  removed from the environment
• Size-localized competition may also play a role
  in the consolidation of organizational
  populations over time

36
Localized Competition

• Localized competition models imply a pattern of
  disruptive or segregating selection in which
  competition between like entities for finite
  resources leads eventually to differentiation
• This mode of selection increases organizational
  differentiation by producing gaps in the
  distribution of the members of a population along
  some organizational dimension

37
Level of Analysis

• Location as a key factor
• Appropriate level of analysis selected
• Different levels of spatial aggregation imply
  different assumptions about how general processes
  of legitimation and competition unfold
• Competitive processes in organizational
  population may be heterogeneous, operating most
  strongly in local competitive arenas
• The greater the geographic segmentation of a
  populations environment, the more geographically
  localized competitive processes in the population
  will be

38
Level of Analysis

• The greater the geographic segmentation of a
  populations environment, the more geographically
  localized competitive processes in the population
  will be (Carroll Huo, 1986)
• Institutional and political constraints
• Nature of a populations activities
• Any thoughts on level of analysis?

39
Organizational Niche Overlap

• Baum Singh (1994)
• Resource overlap model
• The potential for competition between any two
  organizations is directly proportional to the
  overlap of their targeted resource bases, or
  organizational niches
• Each member of a population conceived as
  occupying a potentially unique organizational
  niche that delineates its location in a
  multidimensional resource space
• Organizational niche the intersection of
  resource requirements and productive capabilities
  at the organizational level
• Organizational niche is a result of adaptation

40
Accounting for Concentration

• Common path
• Slow growth
• Rapid increase to a peak
• Decline in the number of population numbers
• Increased competition
• Density dependency model
• Project the shape of the growth trajectory
• Limited in explaining later decline in numbers
  and increase in concentration
• 5 elaborations

41
Density Dependence Model

• Density delay
• Delayed population density effect
• Mass dependence
• Population mass the sum of the sizes of all
  organizations in the population population size
  weighted by organizational size
• Competitive intensity
• The sum of the age x size interaction for all
  population members

42
Density Dependence Model

• Changing basis for competition
• Coupled clocks
• Density becomes decoupled from legitimacy and
  competition as a population matures
• Dynamic selection and scale-based selection

43
Changing Basis of Competition

• Coupled-clocks
• Dynamic Selection and Scale-based Competition

44
Population-level Learning

• Exploitation (individual organizations)
• Exploration (population-level)
• Levinthal and March (1993)
• the best strategy for any individual
  organization is often to emphasize the
  exploitation of successful exploration of others

45
Population Operating and Competitive Experience

• An organization may be able to use other
  organizations operating experience to improve
  its efficiency
• Advantages
• An organization has a limited ability to learn
• An organization has limited resources to
  experiment
• A great deal of variety without violating
  internal or external standards of consistency and
  reliability

46
Key Topics Key Variables Key Predictions
Niche width Dynamics Specialist strategy Exploit a narrow range of resources and are favored in fine-grained and concentrated environments
Population Dynamics Generalist strategy Tolerate widely varying environmental conditions and are favored in coarse-grained, high variability environments
Prior foundings Initial increases in prior foundings signal opportunity, stimulating new foundings, but further increases create competition, suppressing new foundings
Prior failures Initial increases in prior deaths free up resources, stimulating new foundings, but further increases signal a hostile environment suppressing new foundings
Density Dependence Population density Initial increases in density increase the institutional legitimacy of a population, increasing foundings and lowering failures, but further increases produce competition, suppressing foundings and increasing failures
Population-level Learning Population operating experience An organizations failure rate declines as a function of the operating experience of its population at the time of its entry and of the populations increasing operating experience after the organizations founding
Population competitive experience An organizations failure declines as a function of its populations history of competitive outcomes at the time of its entry and of the populations increasing competitive experience after the organizations founding
47
Big OT questions

• Why do organizations exist?
• Why are firms the same/different?
• What causes changes in organizations?
• Why do some firms survive and others dont?
• Emerging issue?