Organizational Ecology (empirical study)

Do larger organizations generate stronger competition?

Organizational ecology is regarded by many to be a theory of small organizations
– most organizations are small
– large organizations are seen to be less susceptible to selection pressures, therefore resource dependency theory or institutional theory would be more appropriate (Scott, 1987)
– – However large organizations wield great political and economic power and show richest aspects of collective behavior (Perrow, 1986)
– – Even if individual large organizations can avert selection pressures, large organizations affect the evolution of entire organizational populations, eg. create or prevent competitive pressure

In this study, the authors discuss why larger organizations may generate stronger competition, or why competition may depend on the number of organizations, regardless of their sizes
– empirical evidence of the effects of organizational size and numbers on founding and failure rates in the early American telephone industry

They find a consistent but unexpected pattern of results in both founding and failure rate
1) increases in population density depressed the founding rate and increased the failure rates, as predicted by the niche heterogeneity argument
2) effects were robust when population mass was controlled -> greater competition was generated by greater numbers of organizations, regardless of sizes
3) however, be careful that density-dependent models may be very sensitive to specification error (including control variables)
4) population mass, with the no. of organizations controlled, had a mutualistic effect on both founding and failure rate -> not only did larger organizations not generate stronger comptititon, they actually increased the viability of other organizations

Why:
1) because these companies operated in segregated market segments, they often worked together by connecting their lines (Atwood, 1984; Fischer, 1987) and weak organizations could gain many of other strengths by becoming affiliated with one.
2) estimates of mass dependence show that as any organization in the sample grew in size, it increased the viability of other organizations throughout the region -> generate diffuse mutualism where such interdependencies arise, the viability of each constituent organization strongly depends on the growth and survival of the larger organizations in the community

Large firms afect the evolution of their communities through 2 processes:
1) large firm promoted its interest and thus interest of the community by facilitating the process of organization building
2) a large organization protected its community from exogenous shocks, using its resources to maintain the viability of its community
-> speculate that the concentrated organizational community will have a selection advantage

Density dependence in the evolution of populations of newspaper organizations

A model of density (no. of organizations) dependence is proposed to explain organizational evolution ( regularities in the growth and decline of organizational population), and find both rates of founding and mortality in organizational populations are nonmonotonic functions of population density by analyzing 9 populations of newspaper organizations in 3 countries.

No. of organizations in a population typically follow a concave pattern of growth and decline:
1) organizational populations exploit ephemeral resources, growing rapidly while the resource abounds and then declining as it fades (firms that serve immigrant communities)
2) organizational forms embody historically specific social and material technologies (new technologies emerge and social conditions change)
3) characteristic growth trajectory reflects the operation of opposing processes of legitimation and competition (density dependent). ->  At low density, growth in numbers mainly legitimates a population and the organizational form it uses. But when density is high relative to resources, increases in density mainly strengthen processes of competition.
** The three scenarios are compatible with each other to explain the evolution of any particular organizational population. Nonetheless, although some rudimentary controls for resource fluctuations and historical obsolescence will be introduced, we concentrate here on the density dependent processes of legitimation and competition

Suggestion:
Even after controlling for ephemeral resources and historical obsolescence, organizational density consistently had nonmonotonic effects, though more consistently on founding processes than mortality processes -> legitimation affects both founding rates and mortality rates strongly, but that competition has more powerful effects on founding than on mortality
-> density alone can explain the growth and stability parts of the trajectory, but not the eventual decline <-negative effect of age of the population on the founding rate exerts a gradual but accelerating downward pull on population size.

Organizational mortality in European and American automobile industries. Part I: Revisiting the effects of age and size

Recent research on organizational mortality controls for the effect of age-varying organizational size and yields divergent results. Some studies find that aging lowers mortality rates; others find the opposite pattern.

-> We argue that this divergence reflects partly an overly simple specification of the effects of age and size. We argue that the effects of size on mortality rates differ by age group.
-> Using complete data on organizational populations of automobile manufacturers in Britain, France, Germany, and the United States, we find that specifications with such age-variation improve over the usual specifications: the results for the American, French, and German populations indicate that age dependence is negative for the largest organizations and positive for small ones. The pattern is the reverse in the British population.

Organizational mortality in European and American automobile industries Part II: Coupled clocks

This paper presents the results of research on the effects of organizational level and population or industry-level clocks on organizational mortality rates.

-> It reports estimates of a model in which the effect of organizational age varies by organizational size and the effect of density varies by population age. 
-> data on the mortality experiences of all firms reveals complex patterns of effects of organizational age and size. The results concerning density and population age generally support a recent extension of the theory of density-dependent organizational evolution.

Organizational mortality in the newspaper industries of Argentina and Ireland: An ecological approach

The paper use historical data about 19th century Argentinian press and the 19th&20th Irish press to explore the plausibility of an environmental model of selection in populations of organizations.

-> though event-history methods, they show the newspapers suffer high mortality in their early years + major variation in death rates occurs in the early ages of organizational life (environmental selction)
-> environmental dimensions like industry maturity and general economic expansion enhance survival, but timing of birth in business cycles not. (newspapers born under conditions of political turmoil are outlived by the ones born under stable conditions.) -> indirect evidence of ecological formulations

 

A time to grow and a time to die: Growth and mortality of credit unions in New York City, 1914-1990

One vision of organizational evolution suggests that old and large organizations become increasingly dominant over their environment. A second suggests that as organizations age they become less able to respond to new challenges.

-> In this article the authors investigate which of these visions best characterizes the evolution of state-chartered credit unions in New York City from 1914 through 1990 by analyzing the effects of organizational age, size, and population density on rates of organizational failure and growth.
-> The authors find evidence that old and small institutions are more likely to fail, while young and small organizations have the highest growth rates. -> existence of a liability of aging

Organizational populations have clearly differed in the rate at which environmental change has rendered core competencies obsolete (especially in case which the competencies of organizations are tied closely to their core technologies):

– industries such as microcomputer manufacturers have seen a rapid succession of “competence destroying” technical changes (Anderson 1995)
– industries such as beer brewing have been characterized by extraordinary stability in the core technology (Swaminathan and Carroll 1995)
-> obsolescence if effect of aging be strong in microcomputer while weak in brewing / senescence if age dependence as strong for populations facing placid technical environments as those facing continuing competence destroying changes.

 

Bigger may be better, but is older wiser? Organizational age and size in the New York life insurance industry

Do we live in a world of dominant monopolies and oligopolies, or a world marked by constant flux and turnover of cohorts of organizations?
-> effects of organizational size and age on growth rates and failure rates

Theorists tend to agree that organizational growth and aging processes increase organizational inertia, but they disagree on the effect of that inertia on failure rates.

-> This paper explore the effects of organizational size and age on failure rates among New York life insurance companies between 1813 and 1985.
-> find that organizational size affects failure rates nonmonotonically, but over the actual range of sizes, large size almost always lowers failure rates.
->  also find a strong liability of aging, this runs counter to ecological theories of liabilities of newness and adolescence.
-> an empirical test of the relative effects of age during periods of environmental turbulence and calm indicates that organizational inertia is especially problematic during turbulent times. -> suggests that the liability of aging occurs more through obsolescence than senescence, at least in the population of insurance companies.

 

Does entry size matter? The impact of the life cycle and technology on firm survival

A wave of empirical studies show that smaller-scale entry is confronted with a lower likelihood of survival than their larger counterparts.

-> this paper examine whether the relationship between size of a firm when entering an industry and the likelihood of survival holds under different technological conditions and across the different stages of the industry life cycle.
-> the empirical evidence suggests that the relationship between firm size and the likelihood of survival is shaped by technology and the stage of the industry life cycle.
-> While the likelihood of survival confronting small entrants is generally less than that confronting their larger counterparts, the relationship does not hold for mature stages of the product life cycle, or in technologically intensive products. In mature industries that are still technologically intensive, entry may be less about radical innovation and possibly more about filling strategic niches, thus negating the impact of entry size on the likelihood of survival. 

 

Strategies for survival in fast-changing industries

Technology strategy variables tend to predominate as predictors of survival in the fastchanging rigid disk drive industry.

-> here test the hypothesis that the technological and market strategies of a new entrant are highly interrelated and that their joint effect plays an important role in a firm’s probability of survival
-> we propose that firms that target new market segments with an architectural innovation will tend to be more successful than those that target existing markets or innovate in component technology, even after controlling for all the compeing predictors of survival.
-> by tracing the main technical elements of a dominant design in the rigid disk drive industry over time, and provides a much more rigorous definition of the concept of a dominant design than we have had in the past.
-> find the notion of first-mover advantage is not applicable in the rigid disk drive industry. Instead, we propose the idea of an entry-window tightly linked to the emergence of the dominant product design as defined.

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