Organizational ecology
From Wikipedia, the free encyclopedia
Organizational Ecology (also Organizational Demography and the Population Ecology of Organizations) is a theoretical and practical approach in the social sciences that is especially used in organizational studies. Organizational Ecology uses a biological analogy and statistical analysis to try and understand the conditions under which organizations emerge, grow, and die.
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[edit] Introduction to Organizational Ecology
Introduced in 1977 by Michael Hannan and John Freeman in their American Journal of Sociology piece The population ecology of organizations and later refined in their 1989 book Organizational Ecology, organizational ecology examines the environment in which organizations compete and a process like natural selection occurs. This theory looks at the death of firms (firm mortality) and the founding of new firms (firm founding), as well as population growth and change.
The theory holds that organizations that are reliable and accountable are those that survive (favored by selection). A negative by-product, however, of the need for reliability and accountability is a high degree of inertia and a resistance to change. A key prediction of Organizational Ecology is that the process of change itself is so disruptive that it will result in an elevated rate of mortality.
Organizational Ecology also predicts that the rates of founding and the rates of mortality are dependent on the number of organizations (density) in the market. The two central mechanisms here are legitimation (the recognition of that group of organizations) and competition. Legitimation generally increases (at a decreasing rate) with the number of organizations, but so does competition (at an increasing rate). The result is that competitive processes will prevail at high numbers of organizations, while legitimation at low numbers. The founding rate will therefore first increase with the number of organizations (due to an increase in legitimation) but will decrease at high numbers of organizations (due to competition). The reverse holds for mortality rates. The exact way in which these rates are dependent on the number of organizations in the market also depends on the 'carrying capacity' of a particular market niche.
Other lines of research investigate how the rate of mortality depends on organizational age, size, competitive conditions at founding, and the position in the market niche.
Organizational Ecology has over the years become one of the central fields in organizational studies, and is known for its empirical, quantitative character. Ecological studies usually have a large-scale, longitudinal focus (datasets often span several decades, sometimes even centuries). The book The Demography of Corporations and Industries by Glenn Carroll and Michael Hannan (2000) currently provides the overview of the various theories and methods in Organizational Ecology.
Organizational ecology theorists include Michael Hannan, John Freeman, Glenn Carroll, William Barnett, James Wade, Joel Baum, Stephen Mezias, Henrich Greve, Heather Haveman, Howard Aldrich, Andrew Henderson, Alessandro Lomi, Xavier Martin, Will Mitchell, Anand Swaminathan, Lyda Bigelow, Marc-David Seidel, Stanislav Dobrev and Terry Amburgey.
[edit] Niche Theory
Before the niche theory there was a notion that an organization with a generalist structure is better suited to unstable environment. And vice versa a specialist organization in certain and stable environments “is optimal over an entire set of configuration” (Hannan and Freeman 1977: 946). However, the notion “is too simplistic” (Hannan and Freeman 1977: 946). So Hannan and Freeman feel necessary to develop the niche theory.
As we might see at the picture population A occupies broad niche whereas population B concentrate on a narrow band of environmental variation. The distinction between these populations might clarify the difference between generalism (population A) and specialism (population B) which are important concepts for niche theory.
Generalist organizations maximize their exploitation of the environment and accept the risk of having that environment change (Hannan and Freeman 1977: 948). On the other hand specialist organizations accept a lower level of exploitation in return for greater security (Hannan and Freeman 1977: 948).
Hannan and Freeman (1977) evaluate generalist and specialist organizations by adding another concept i.e. excess capacity. An example of the excess capacity is employing legal staff even when are no work for it e.g. no litigations (Hannan and Freeman 1977:948). The scholars operate the concept of excess capacity to answer why “under stable environmental circumstances, generalists will be outcompeted by specialists” (Hannan and Freeman 1977:949). Niche theory states that “specialism is always favoured in stable or certain environments” (Hannan and Freeman 1977: 958) as excess capacity of specialist firms makes them more reliable and flexible (Hannan and Freeman 1977: 948).
However, the main contribution of the niche theory is probably an idea that “generalism is not always optimal in uncertain environments” (Hannan and Freeman 1977: 958). The exception is produced by environments which “place very different demands on the organization, and the duration of environmental states is short relative to the life of the organization” (Hannan and Freeman 1977: 958).
Thus the niche theory explains variations in industry structure in different industries. The theory shows how different structures in different industries (generalist vs specialist organizations) are formed by relevant environments. However, the conclusion of niche theory might be undermined by “simply poor sociological craftsmanship rather than poor theory” (Young 1988: 21). The critique of the research design by Young will be discussed later.
[edit] Resource-partitioning model
The relationship between generalists and specialist organizations is further developed by resource-partitioning model which includes the concepts of concentrated (competitive) and unconcentrated (non-competitive) markets (Carroll 1985).
The figure depicts two environments. Environment A stands as a competitive market and environment B represents non-competitive market. Carrol claims that “in environment B, despite the very concentrated generalists market, the resource space outside this market is larger than in environment A, where the generalist market less concentrated” (Carrol 1985:1272). However the truth of the claim is not so obvious. But if it is true then we might accept Carrols conclusion that “more available resources should translate into better chances of success for specialist when they operate in the more concentrated market [environment B]” (Carrol 1985:1272).
The figure shows symbiotic relationship between generalists and specialists both of which “previously relied on the same resources, they now rely on different resources – because of the partitioning the market” (Carrol 1985: 1273). The model predicts that the more market concentration, the less the rate of death of specialists. And vice versa the less concentration the bigger life chances are for generalists.
Therefore resource-partitioning model adds market concentration as a factor which also explains the variations in industry structure in various markets i.e. competitive and non competitive. However, the theory contains a mentioned taken for granted statement which if false might weaken conclusions.
[edit] Density Dependence
Theory of density dependence is based on the notions of legitimation and competition. Legitimation is defined by Carrol and Hannan as “conformity with a set of rules… a socially taken for granted character” (2000:223). It seems that definition is too hard (or even vague) to understand and then to operate it. So by using context of the article another “paraphrased” definition of legitimation might appear. It is “easier to understand” legitimation as a process leading to breakthrough in reputation of an organization when reputation is no longer deemed by stakeholders as asset rather than liability. Another variable of density dependence model is competition. Competition is clear to grasp so there is no sense to discuss its definition.
The theory of density dependence “posits that founding rates rise and mortality rates fall as the legitimation of the population increases and that founding rates fall and mortality rates rise as competition within and among populations intensifies” (Barron et al. 1994:391). So the relationship of density to founding rates has an inverted U shape and the relationship of density to mortality rates has a U shape (Barron et al. 1994:391). In other words legitimation and competition influences on organizational growth rates which mean “attracting new resources” (Barron et al. 1994:391). However, some literatures (e.g. Ranger-Moore 1990) negate the model of growth rates as the researches indicate that the growth rates succumb to density-dependent competition.
Therefore density dependence model might be help to understand variations in industry structure over times.
[edit] References
Amburgey, T.L. and Rao, H. (Oct 1996) “Organizational ecology: past, present, and future directions”, Academy of Management Journal, 39 (5): 1265-1286
Barron, D.N., West, E. and Hannan, M.T. (Sep 1994) “A time to grow and a time to die: growth and mortality of credit unions in New York City, 1914-1990”, American Journal of Sociology, 100 (2): 381-421.
Carroll, G. R. and M. T. Hannan (2000), The Demography of Corporations and Industries, Princeton, NJ: Princeton University Press.
Carroll, G.R. (May 1985) “Concentration and specialization: dynamics of niche width in populations of organizations”, American Journal of Sociology, 90 (6): 1262-83.
Hannan, M.T. and Freeman, J. (Mar 1977) “The population ecology of organizations”, American Journal of Sociology, 82 (5): 929-964.
Hannan, M. T. and J. H. Freeman (1989), Organizational Ecology, Cambridge, MA: Harvard University Press.
