aldrich pfeffer 1976 organization and its environments

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Environments of OrganizationsAuthor(s): Howard E. Aldrich and Jeffrey PfefferSource: Annual Review of Sociology, Vol. 2, No. (1976), pp. 79-105Published by: Annual ReviewsStable URL: http://www.jstor.org/stable/2946087Accessed: 19-08-2014 11:42 UTC

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2/28

Copyright 1976

byAnnual Reviewsnc.

All rights eserved

ENVIRONMENTSOF

*:10520

ORGANIZATIONS

Howard

E.

Aldrich

NewYork tate chool f ndustrialnd LaborRelations,ornell niversity,

Ithaca,New

York14850

Jeffrey

feffer

School

f

Business dministrationniversity

f

California,

erkeley,

alifornia

4720

INTRODUCTION

The relationship

etween rganizations

nd environments as drawn

ncreasing

attention

n therecent iteraturef the

ociology

f

organizations.

We consider he

subject

f

nterorganizational

elations o be a special ase

ofthemore

general

tudy

of

organizations

nd their

nvironments.imensions f

interorganizational

ela-

tions avebeen isted

Marrett

971),

nd

partially

eveloped aradigms

or

nalyz-

ing organization-environment

elations

ave been

proposed.

The natural election

model,

eveloping

he trongestrgument

or n environmentalerspective,

osits

that nvironmental

actors elect

hose

rganizational

haracteristics

hat est

fit

he

environment

Hannan

& Freeman

1974,

Aldrich

1971b).

A

complementary

odel,

variously alled

a political

conomymodel Benson 1975,

Wamsley& Zald 1973),

a dependencexchange pproach Jacobs1974,Hasenfeld1972),and a resource

dependence

model

Pfeffer

972b), rgues

or

reater

ttention

o nternal

rganiza-

tional

olitical

ecision-makingrocesses

nd

also

for

he

perspective

hat

rganiza-

tions eek to

manage

or strategicallydapt

to their nvironments.

The two models agree

on the

importance

f organizational

nvironments

or

understandingrganizational

ecisions

nd

structures,

ut

differn their valuation

of

the

importance

f the role of environmental

election.

Current iterature as

elements

f both

ncompletely

evelopedperspectives

nd the

shape

of

organiza-

tional

sociology

will be determined

y

the

implicit

ebatetakingplace.

As it

is

impossible

o ascertain heultimate esolution

f this

rgument,

e have chosen o

examine

oth

perspectives

n

this

hapter,

nd to

include iterature

rom ndustrial

organization,

nd

administrative

cience

and

organizational

ehavior, s well

as

from

rganizational

ociology.

79

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3/28

80

ALDRICH

&

PFEFFER

Historical

recedents

The emphasis

n organizational

nvironmentss

not recent

evelopment,ince

Weber's1968)historicalnd comparativetudiesxaminedheeffectfsocial

structure

n

bureaucracy.elznick's

tudiesf he

TVA

1949)

nd heCommunist

Party 1960) explicitly

ncluded he

environments an important

xternal

on-

straint,

ndthework fBendix1956)

n the elationship

etweenntrepreneurial

andmanagerial

deologies

nd ocial tructures also

n this radition.he

theory

of the

firmn

economicsreats

he relationship

f a single rganization

o its

environmentnd posits

hat rganizationalecisions

oncerning

rice ndoutput

are

he utcomefmarketorces

e.g.

Stigler 966).

ndustrialrganization

cono-

mists ave een oncerned

ith he

bilityf rganizationso

cquiremarket

ower

and modifyheir nvironmentsPhillips 960,Scherer 970).Anthropologists

brought

he nvironment

nto heir heories ith

he oncept

f ocietal volution

(White 949,

ahlins

Service 960), nd a similar

nterestn

societal volution

occurred

n the

1960s

n

sociology

Parsons

966).

One could

pose

everal

uestions

bout

he xtento which

hiswork as

been

cumulative,eginning

ith he ntriguinguestion

fwhy

here as been ittle

cross-fertilization

etweenhefields f

ndustrial

rganization

n

economics

nd

organizationalociology.

t s lso nteresting

o onsider

hy

esearchnthe ffects

of environmentsn social tructure

axes nd wanes,

with ttention

ometimes

focusednexternalffects,nd totherimesn nternalrocesses.hese uestions

arebest eft or ociologistsf cience

o

nswer

cf

Hirsch 975a).

here

s

currently

great

nterest

n

nvironmental

ffectsnd he

ournals

re

filled ith

apers

ontain-

ing the

words environmentr interorganizational

n their itles.

THE NATURAL SELECTION

MODEL

Two

possible

pproaches

o

the tudy f organizational

hange

re

thenatural

selection

model

f

evolutionary

heory

nd the decision-makingerspective

n

organizationshat ubsumeshe esourceependenceodel. henaturalelection

modelwill e

presented

irst

nd

erve s

a

point

f ontrast

or

ther erspectives.

WhileCampbell1969)

has applied

heterm volutiono

theprocess f

natural

selection

perating

n

social tructures,

e

will

use

eitherhe

erminology

atural

selection

r

ecological

o refer

o this

process.

volution

ontains ome

connotation

of

progression;

or

xample,

n

biology,

romess

o more

omplex

orms.

volu-

tion

lso

carries ome onnotation

f

progress,

s

each

succeedingeneration

s

presumably

ore dvanced

n

the volutionaryrocess. y

using

he erm atural

selection

r

ecological,

e

emphasize

hat he

process

f

organizational

hange,

while ontrolledy he nvironment,oesnotnecessarilynvolverogresso more

complex

r

higher

orms f

social

organization

r

to

better

rganizations.

he

process

f

natural election

eans

he

ocialorganizations

removing

oward

better

it

with he

nvironment,

ut

nothing

ore.

Thenatural

election

odel

n

ts

riginalormpplies t

the

opulation

evel f

organizations

atherhan t the evel

f

single

nits. nvironments

ifferentially



4/28

ENVIRONMENTSOF

ORGANIZATIONS 81

select

rganizations

or

urvival n the

basisof hefit

etween

rganizationtructure

(and

activities)nd

environmental

haracteristicsHannan &

Freeman

1974,Buck-

ley

1967). Those

organizations

hathavethe

ppropriateocial

structure,

orwhat-

everreason, re selected verthosethatdo not.

As

developedby

Campbell

1969), the

natural

election

modelhas

three

tages.

The model

s

not ntended

o

account

for hort-run

hanges,which re

temporary

responses o local

conditions,

ut

rather

or

ong-runransformationsn

the

form

of

the

elements

eing

xamined.

n

biology he

forms hat

re

changing

re typical

species

genotypes, hereas

n

social

sciencewe are

nterested

n

changes

n

the

form

of social

organization.

n

organizational

ociology, orms re

currentlydentified

through arious

typologies, uch as

mechanistic-organicr

bureaucratic-profes-

sional,or

through n

empirically

eveloped ypology

cf Hall

1972, hap.

2).

Such

typologiesreoften otcomplex rdeveloped ufficientlyopermit very ompre-

hensive

cological

nalysis.

The first

tage

n

the

natural

election

rocess s

the

occurrence

fvariations

or

whatever

reason, planned or

uplanned. n

organic

evolution,

variations

ccur

through

he

genetic

mutation

rocess,

while

n

the

earning

rocess

ariation

ccurs

in the

exploratory

esponses

made to stimuli.

Variations re the raw material

rom

which

he election

rocess ulls hose

tructuresr behaviors hat re

most uitable.

The second

tage s the

operation fconsistent

election

riteria hat

differentially

select some

variations ver

othersor

selectivelyliminate ertain

variations. n

organic volution hedifferentialurvival fcertainmutant orms hat rebetter

able to

exploit

the

food

supply

n

their

nvironmenteflects

he

operation

f a

resource-based

election

riterion.

ifferential

einforcementf

particular

xplor-

atory

responses

y

animals,

n

a

consistent

manner,

s the

selection

tage

n

the

learning rocess.

The third

tage

n

the

ecologicalprocess

nvolves

heoperation

f a

retention

mechanism or he

elective

etentionfthe

positively

elected

ariations. etention

occurswhen ertain

ariations re

preserved,

uplicated,

r

reproduced.

n

organic

evolution

he retention

mechanism

s the

chromosome-gene

ystem.

ositively

e-

lectedvariationsurvive ndreproduceimilar thers. or the earning rocess he

memory ystem s the

means

whereby

ositively

elected

esponses an

be

recalled

forfuture

se.

The

process

s

described

s

perfectly

eneral

nd

can be

applied

to

any situation

where he

three

tages re

present. he

three-stage odel

completely escribes he

evolutionaryrocess.As

Campbell

1969:73)

noted,

Given

these hree

onditions,

an

evolution

n

the

direction

fbetter it o

the

elective

ystem ecomes nevitable.

Before

onsidering

ome

of the

theoretical

roblems f-the

cologicalmodel,we

should note

three

problems hat have

limited he

application

of

this

model

in

organizationalociology.First, t is mostappropriatelypplied at the fieldor

population

evel,

s it

is

not

the fitness f

any single

organization,

ut

rather

he

distributionf

fitness

cross a

population f

organizations hat

s of

nterest.

his

requires

he

study

f

relativelyeterogeneous

opulations f

organizations ver a

fairly

ong

time

pan,

something

ew

nvestigatorsave the

funding

r

the time o

do,

although

tinchcombe

1965)

attempted

partial

ersion f

such an

analysis

n



5/28

82

ALDRICH

& PFEFFER

his

paper

on

social

structurend

organizations.hereare few

ongitudinal

tudies

of

organizationseyond solated

ase

studies,

lthough

ecently

nterest

as been

growing

n

such work

Aldrich

& Reiss 1976,

Meyer 1972,

Warren,

Rose & Ber-

gunder1974). It might e noted hat heavailabilityfarchivaldata,particularly

on economic

organizations,otentially

educes he cost of

such

research.

Second,

the natural

electionmodel

focuses n

outcomes

nvolving heselective

propagation

f

changes,however

enerated,

n

thestructure f

a large

number f

organizations,ather han

n theroute

aken y ny

ingle

rganization

n

adapting.

Indeed,

he

focus n

survival,

n

contrast o

adaptation, s themechanism

fchange

is one of

the unique

contributionsf this

perspective.

owever,

nvestigatorsun

the risk f

merely

ompiling chronicle

fchanges

whose

causes cannotbe

ascer-

tained. We would

suggest

hat without

complementary

heory

f

managerial

behavior,uch an outcome s highly robable.

Third,

proper

pplication fthe

natural election

modelrequires

system f

classificationnd

categorization f

organizational orms

nalogous

to

species

n

biology.

n

studies f

biological volution,

when one

particular

ype

of

organism

disappears

nd another

rises nto

prominence

n

the same

niche,

the

system

f

categorizations able to

assess,

o some

extent,

hether he new

organisms

really

a different

pecies,

mutation

irectly

elated o the old

species,

r a

temporary

phenotypic

daptation.No such

system f

classification

xists

n

the

tudy

f

orga-

nizations.The difference

etween

tructural

modifications

nd

the

emergence f

fundamentallyeworganizationssfrequentlynclear.Anotherwayto thinkfthis

problemsto note hat

we do not

know he ength f n

organizationalgeneration,

if such a

thing

xists.

Summary

As

a modelof

organizational

hange, he

natural election

erspective

s

indifferent

regarding

he

source of variation r

change

n the

first lace. Selection

f social

structuress

accomplished

y

differential

urvival f structural

orms,

ather han

by

the

adaptation

f a

single

rganizational

nit.

While

n

thismodel

selection s

determinedyfitnesso theenvironment,o furtherpecifications provided s to

the

election riteria.

etention,

he

opposite

f variation

Weick

1969),

s accom-

plished

hrough

rganizational

tability, anifested

n

the use of

unchangingtan-

dard

operating rocedures

r formal

ules.

Since

selection s made

by

the

environment

ccording

to some

dimension f

fitness,

theorist

sing

his

model

ould,

n

explaining nly

ong-runhanges, afely

neglect

ntraorganizational

anagerial rocesses.

n

the

ong

run

only

those

orga-

nizations hat

fit

he

environment ill

survivend,

consequently,

ne need

not

be

as concernedwith

he

processes

y

which uch an

organization-environment

atch

is achieved. tatednthis orm,he cologicalperspectivean beseento be

virtually

isomorphic

with

the

economic

theory

f

perfectompetition

Winter

1971)

and

similar o

elements

f

what

has been alled

structural

ontingencyheory

Pennings

1975).

Microeconomic

heory,

r the

theory

f the

firm,

lso

neglects

nternal

decision-making

ealities.

riedman

1953) argued

that since firms re forced

o

behave

s

if

they

re

maximizing rofit ecause

of

competition,

he

ssumptions

f



6/28

ENVIRONMENTSOF

ORGANIZATIONS

83

profitmaximization ill ead to correct redictions

n

equilibrium,egardless

f the

processby which such equilibrium tatesare reached.

n both natural election

theory nd microeconomics,heenvironmentelects

he

mostfit,

r

optimal rga-

nizations, nd both mplicitlyssume hat he ndividual ocial unit s itself ower-

less to affect he selection rocess.Both models focus trongly n the processof

selection, oncerninghemselvesess with ariation.ndeed,one might haracterize

the theory f the

firm

s

a theory f the

selection

riteria

hat re inevitable

iven

certain ssumptionsboutdecisionmaking nd thecompetitive

ature f theenvi-

ronment. oth tructuralontingencyheory nd ecologicalmodels osit n optimal

fit etween heorganizationnd itsenvironmentnd structuralontingencyheory

differshiefly

n

its emphasis n managerial daptation o

find he

fit,

ather han

on changebeing ccomplished hrough ifferentialurvival.

THE

RESOURCE DEPENDENCE MODEL

Thenaturalelection odel eaves utquestionsbouthowdecisionsremade

n

organizations.

f

all decisionsreconfinedo

some imited

et

of

olutions

in

the

caseofmicroeconomicheory,single ptimalolution),

hen

t

would e

proper

to

treat hem as irrelevant,

f

one

assumes further

hat

equilibrium

s achieved

relatively apidly nd the process f adjustments

not

nteresting

n

its own

right.

However,

here re few ndustries

n

the

United

States

hatfit he modelof

perfect

competitionGalbraith967), ndfurthermore,ublicnd ocial ervicerganiza-

tionsface situations f little r no competition.

n the

absence

of environmental

demands hatmust nevitably e heeded

f

the organization

s to

survive,

ow

and

whydecisions re made

in

organizations ecomes

a

more mportant

ocus

of

re-

search ttention.

The

resourceependence odel roceeds

romhe

ndisputableroposition

hat

organizations

re not

ble

to

nternallyenerate

ither ll theresources

r

functions

required

o

maintain hemselves,nd thereforerganizations

must nter nto rans-

actions nd

relations

ith

lements

n

the

environmenthat an

supply

he

required

resources nd services. inceorganizationsreconstructedr enacted ystemshat

must

atisfy

hedemands f

members,wners,

r constituents

White1974)

and

are

subject

o evaluation

Thompson1967),

administratorsace the task

of

ensuring

continued

upply

of

resources nd performances

nd

ensuring

he satisfaction f

powerful roups

n

their

nvironment.

he

resource ependence erspectivergues

that

n

addition o the

nterdependenciesmong organizations

hat

are

based

on

differentiationnd the

nterorganizational

ivision f

abor, ome nterdependencies

are

sought

r avoided

by

administratorsecause ofthe

power

nd control

ossibili-

ties nherent

n

thesituation fdependence Blau 1964).Administrativetrategies

rangefrom erticalntegrationo deny he competitorhe use of raw materials o

horizontalmergers ndertaken o restrict ompetition.

The resource

ependencemodelportrays heorganization s active, nd capable

of

hanging,

s well

s respondingo, he nvironment.dministrators anage heir

environmentss well as their rganizations, nd the former ctivitymay be as

important,r venmoremportant,han he atterPfeffer976). hepresumednd



7/28

84

ALDRICH

&

PFEFFER

result

of

such strategies

s

the acquisition

of resources

nd

the

survival

f the

organization,

s

well as the

stabilization

f relationships

ith

environmental

le-

ments.

Since theenvironment,ccording o theresource ependence erspective,oes

not mpose

s strict

equirements

or

urvival,

manypossible

ctions

ndstructures

are consistent

ith he urvival

ftheorganization.

herefore,

he riteria

y

which

decisions

remade and

structures

eterminedecome

mportantnd

problematic.

Internal

power

differencesecome

mportant,

ecause

there

s no longer

single

optimal

tructurer

set

of

ctions

hatwill

fit he

organization

ith ts nvironment.

There

s a range

fchoices r

strategies

vailable

Child

1972,Chandler

1962),

nd

the nfluence

f nternal ubunits

may come

to determine,

n interaction

ith

he

demands

f various

xternal

roups,

heoutcome

cf.Jacobs

1974,

Pfeffer

Salan-

cik 1974). The resourcedependencemodelcalls attention o the importance f

environmental

ontingencies

nd constraints,

t the ame

time eaving

oomfor

he

operation

f

trategic

hoice

on thepartof

organizational

members

s they

maneu-

ver

through nown

nd

unknown

ontexts.

If the cological

model

s

analogous

o themicroeconomic

heory

f hefirm,

hen

theresource ependence

model s

analogous

o theories

f

oligopoly

nd

thebehav-

ioral

theory

f the

firm

Cyert

&

March

1963).

The resourcedependence

model

posits,

herefore,hat

while nvironmental

nfluencesre important,

nvironmental

constraints

o not reduce

he

feasible

et

of

social

structures

o a

setconsisting

f

onlyone form.The possibilityhat there re a variety f internaltructuresnd

actions

onsistent

ith he urvival f

the

organization

means

that

while he

orga-

nizationmay

have

thegoal of urvival,

urvival

oes

not

mply

nly single

rvery

limited et

of social structural

orms.

Not all

internal ecisions

re

relevant o

survival,

nd

thus not all are

affected

y

the environment.

The

goal

of

survival

nd

thecorollary

dea of environmental

onstraint

rovide

a calculus

for understandingrganizational

tructures

ver the long

run. n

the

absence

of such strict estraint,

nother

way

of

understanding

nternal rganiza-

tional tructures

nd

actions srequired.

he

political

conomy

model

Zald

1970),

which mphasizes he cquisitionnd useofpower n understandingrganizational

processes,

rovides

uch

an alternative erspective.

he

relationship

etween he

political

conomy

model

nd theresource ependence

model

houldbe

clear.

Only

if

one

assumes

that he

environments

not

completely

inding

oes the

operation

of nternal

rganizational

olitical

rocesses

ecome nteresting.

f the

nvironment

inevitably

onstrains

ocial structures

o a

unique

onfiguration,

hen

nternal

oliti-

cal

processes

elevant o

organizational

ecision

making

ecome

uninteresting,

s

they

must ll lead

to the same end

result

r the

organization

will fail.

The resource

dependence

model

also

posits

an active

role

of

the

organization

affectingtsenvironment,s well as arguing hatenvironmentalonstraintseave

a

range

of

possible

ocial structures

onsistent

with

survival.

n contrast o the

ecologicalperspective,

heresource ependence

model

posits

n

active,

managerial

process

f

selection,

s

opposed

to a

process

f natural election

ontrolled

y

the

environment.

hile

it is of course

possible

to

argue

that

political

nd decision-

making

tructuresre themselves

he

outcome f

process

fnatural

election,

uch



8/28

ENVIRONMENTS

OF ORGANIZATIONS

85

an attempt

o

subsume he resource

ependence

pproach

under

he

natural elec-

tion

model

would

only

end o hide the fundamental

ifference

etween hem.

We

might

ote

hat hisdifference

etween

mphasizing ersonal

ctionversus

nviron-

mental ffectss found hroughouthe social sciences-in history,n the contrast

between

he great

man approach

versus

the approach

that stresses

he effect f

context,nd

n psychology,

n thedifference

etween

perant onditioning,

tressing

the

ontrol

fbehavior

y he nvironment,

nd theories

f

personality

nd

cognitive

choice

that

emphasize

morethe effect f

intended,

onscious

ction.

In

the

followingections

we review

ecent esearch

n

organizations

n terms

f

its relationshipo

the

three

tages

of the

natural election

rocess,

ariation,

elec-

tion,

and retention,

oting

disagreementsmong

the

perspectives.

he

greatest

amount

of theoretical

ivergence

s withrespect

o

the selection tage,

with the

resource ependencemodel ssigningmore mportanceomanagerialndorganiza-

tionaldecisionmaking

han

the

ecological

perspective.

VARIATION

Thenatural election

model s

indifferento

the

ource

fvariation,s both

random

and

planned

ariation erve

qually

well

n

providing

heraw material rom

which

selection

s made.

The

general

rinciple

s thatthe greater

he heterogeneity

nd

number

f

variations,

hericher he pportunities

or

close

fit

o the nvironmental

selection riteria.

Following

uggestions

made

by

Buckley 1967)

and

Hannan & Freeman

1974),

we believe hat

the natural election

model can

be

applied

not ust

to the

survival

or

failure

fentire

rganizations

ut lso

to the

partial

modification

f

tructure

nd

activities hat

falls hort f elimination

f the total

organization.

his modification

of the

biological

model

takes nto account

the

capacity

of

social organizations

o

alter

tructure, process

hat s

qualitatively

ifferent

romhomeostatic

hanges

made by biological

organisms

n

response

o

environmentalhange.

Whereasor-

ganic

evolution

roceeds

y

a

process

f differential

urvival f

the entire

nit,

he

changingf socialorganizationsanalso occurthroughdaptations f tructurer

conduct

n

one

part

of the

organization

while the

rest of the structure

emains

unchanged.

Modifying

he

natural electionmodel

n

thisfashion omplicates

n ecological

analysis,

ince

he

riterion or

uccessfuldaptation

o the

environments

changed

from

he

easier-to-observe

urvival r failure

o the more

problematic

riterion f

structural

hange

or

stability.

ather

than

being

able to observe

population

f

organizations

dapting

ythe selective

limination f the

ess

fit,

we

may

find hat

almost ll

survive,

ut that ach has

undergone

ignificant

nternal ransformations

of

tructure.

evertheless,

odifying

he

cological

model

s a necessarytep

oward

recognizing

he differenceetween rganic

nd

social

evolutionZachariah

1971)

and toward

making

natural election

heory

seful ororganizational

nalysis.

Ecological

changemay

arise from ariation othbetween

nd within rganiza-

tions. here re

ikely

o be

significant

ariations

ithin differentiated

rganization

in

ndividual

bilities o fill

articular

oles, ust as

therewillbe variations

ver

ime



9/28

86 ALDRICH &

PFEFFER

in

carrying

ut

mportant

ctivitiesCampbell

1969).

Hirschman's 1970) assertion

that

ll

organizations riftnto

deterioration

hrough andom rrors n the

perfor-

mance

of everyday

uties s consistent ith he

ecological

pproach.

While henatural electionmodeldoes not pecify he ource fvariation,cono-

mists,

managementcientists,nd

many

ociologists aveargued or he

mportance

of

variation

as a

planned

response

to

environmental

ontingencies. enrose

(1952:819),fornstance, rote,

Our knowledge f

whymendowhat hey o

is very

imperfect,utthere

s

considerable vidence hat consciously

ormulated

uman

values

do affect

men's actions, hatmany

decisions re

reached fter conscious

consideration f

alternatives,

nd thatmen

have a wide

range f

genuine

hoices.

Similarly,ociological

heories forganization

reat eadership nd

organizational

design

s

rational,

onscious, lanned ctions Gouldner

1954,

Selznick

1957).

Variationbetween rganizationss inherentn the interorganizationalivision

of labor

across

industriesnd since the

distribution

f

organizations

y industry

changes

ver

ime,

we

might

nfer

hat election t this evel s

occurring.

here

re

also variationswithin

ndustries r

generic ypes, .g.

within

he

manufacturing

sector nd within irms

manufacturingarticular

roducts.

mery

& Trist's

1965)

example

f he

firm

manufacturinganned

foods nd thefirms

manufacturing

rozen

foods s a

case of such

within-industry

ariation.

Innovating

rganizationsmay

ntroduce ariation ntoa

population y

deliber-

atelyvarying

rom

ustomary

modesof

behavior.

nnovation,

owever,

eed notbe

a consciousstrategynd maybe a result f imperfectttemptso imitate ther

organizations

erceived

o be

successful s

pointed utby

Alchian

1950:218-19):

Whilethere

ertainlyre those

who consciouslynnovate,

here re those

who,

n

their

mperfectttempts

o

imitate

thers,

nconsciously

nnovate

yunwittingly

acquiring

ome

unexpected

r

unsought nique

ttributes hichunder he

prevail-

ing

circumstances

rove

partly

esponsible

or he

success.

A

continuing

ycle

of

imitation-innovation

ay

occur f

other

rganizations,

n

turn, ttempt

o

imitate

the

unwitting

nnovator.

Variationsmay be

introducednto the

organizational

opulation hrough he

creation f neworganizations.conomicorganizationsrepresumablyreatedby

entrepreneurseeking

profit

nd

confronted iththe risksof

undertaking

new

venture.

heories f the

formationf new economic

rganizations ave been

pre-

sented

by Schumpeter

1934)

and

Knight 1921),

while Stinchcombe

1965)

has

treated he

problem

f

organizational

ormation ore

generally.

iven herisks nd

uncertainties

nvolved,

herate fcreation fnew

organizations

s

surprisinglyigh.

While there s no

systematic ata

on theformation f nonbusiness

rganizations,

in

the

period

between

944 and

1954

over 5.4 million

new small firms ere stab-

lished

n

theUnited

tates nd another .5

millionwere ransferredo a newowner

(Aldrich1971b).The large number fvoluntary ssociationsHausknecht1962)

and social

movementshat ome and

go quite

regularlyZald

&

Ash

1966,

Zurcher

&

Curtis

1973) provide

urthervidence hat

great

deal of variation

n

the form

of new

organizations

s

introducednto the

organizational

opulation

ver time.

The resource

ependence

model

posits

hat

rganizations

ttemptomanage heir

environmentsnd that

variationsre

conscious, lanned

esponses

o

environmental



10/28

ENVIRONMENTS

OF ORGANIZATIONS 87

contingencies.rganizations ttempt

o

absorb

nterdependence

nd

uncertainty,

either

ompletely,s throughmergerPfeffer

972b),

r

partially,s through

oop-

tation

Pfeffer

972a,

Allen

1974)

or the

movement fpersonnel mongorganiza-

tionsPfeffer Leblebici 973b).Attemptsre made tostabilize elations ith ther

organizations,sing actics anging

rom

acit ollusion

Scherer 970:157)

o

legal

contracts

Macaulay 1963). Researchon

strategies as been designed o testthe

hypothesishat

observed ariations re planned

esponses o environmentalondi-

tions or at least

that organizations ehave as if

they were guided by

normsof

rationality.feffer

1972a) found hatregulated irms eremore ikely o

include

representativesf outsidegroups n their

oardsthannonregulated irms nd

that

the

pattern

f

merger ctivityollowed hepatternf resource ransactions

Pfeffer

1972b).Alexander

1971) noted

hat

fter

raditional orms f mergers

erechal-

lenged ythe ntitrustuthorities,irmswitched o therarely hallenged onglom-

erate

merger.

Sincethe

cologicalmodel s indifferento

the

ource

of

variations,tudies how-

ing that pecific ariations

ppear

to

be

responses

o environmentalonditions re

not nconsistent ith

he model.Moretroublesomes the fact

hatno

attempt as

been made to

test

the

alternative

ypothesis, amely

hat

random

or

unplanned

variations layan

important art

n

organizational hange.

A

well-known

tudy

n

economicss

the

ttempt y

Mansfield

1962)

and others o testGibrat's

aw,

which

states

hat

given qual starting oints,

he

ize distribution

f a

population

f

firms

can befairly ellapproximated y allowing rowthvertime obe determinedy

a random

ampling

rom

distribution

f

growth

ates.

n

reviewing

ome

experi-

ments,

cherer

1970:126) noted hat contrary o what untutoredntuition

might

advise,

he

firms

o

not

ong remain qual

in

size

and

market hare,

ven

though

their

rowth

rospects

re identical x

ante. Patterns esembling

he

concentrated

structuresfmuch

American

manufacturingndustrymerge

within few

experi-

mental) ecades. However, cherer oncludes

by callingfor aution

n the use of

Gibrat'sLaw, as

it patently xcludesmanyvariables f nterest o

economists.

SELECTION

A

critical istinction

etween heresource ependence

nd

natural

election

models

of

organizational

hange

s the

relative mportance f environmentalelection s

opposed

to

strategic

ecision

making y organizational

members. or

systematic

environmental

election riteria

o

have an

effect,

wo

conditions

mustbe

present

(Campbell1969):

a)

theremustbe numerous

nstances nvolved,

.e. a

high

rateof

variation, nd (b) theremustbe a fairly igh

mortality ate

for

he organizations

or

structures

nvolved.Without ariation, here

s

no

raw material

or he

election

process, ndwithout highmortality ateenvironmentalelection riteriawould

be

irrelevant.

The

purest orm f

environmentalelection sthe elective urvival r

elimination

of

complete

rganizations, epending

n their

fit

with

the environment.or

in-

stance,

f

he

election riteria ere

based

on

administrativeationality,onbureau-

cratic

rganizationsmight

ail

to

survive,

eaving nly

bureaucracies. his

type

f



11/28

88 ALDRICH & PFEFFER

selection

process

s

limited

n

its

applicability

o

organizational

opulations

f

industrial

ocieties ecause a) the

population fbusiness

rganizationss bifurcated

into

segment fvery arge rganizations ith very ow

mortalityate nd another

segmentf mallorganizations ithhighvariation ndturnover;nd b) as the ize

of the

public

sector

of

the societies rows,moreand more

organizations re pro-

tected

rom

he possibility f failure ince

theyrelyon publicfunding.

As anexample fourfirst oint, n

1964 herewere bout 1.5

million ncorporated

businesses n the

UnitedStates.Of

these,

he

argest

25

nonfinancial

orporations

controlled

2%

of the

ssets

f

all US

nonfinancialorporationsScherer

970:39).

Therewere

another10 million r so

proprietorshipsnd partnerships, ost with

less than

four mployees. arge

businesses arely isappear, ndwhen hey o it s

generally

ecauseof

mergers

r

acquisitions. ollins&

Preston

1961) compiled ists

ofthe100 argestmanufacturing,ining,nddistributionirms or ixfairly venly

spaced periods

from

1909

through

958.

An

average

of

2.5

firms

er year disap-

peared

from

he list and the

rate of turnover eclined over

time.

Mergers

nd

acquisitions

ccountformostof

the

disappearances.

At

the

other nd of the

size

distribution

he rate of

turnover

mong

small

businesses s

extremely igh.

t is

estimated hat

s

many

s

halfof

all

new

small businesses

ailwithin

wo

years

of

their

reation

Mayer

& Goldstein

1961).

Our

second imitation

f

the

pplicability

f

the

natural

electionmodel

s

related

to the

expanding

ole of

government

n all

industrialized

ations.

Governmental

bureaucraciesarely ooutofexistence. rganizationshat ome under heprotec-

tion

of

various

federal, tate,

or

local

governments,.g. publichospitals,

ocial

service

gencies, chools, rmanpower

rograms,

an also be

expected

o

have

very

low failure

ates.Nationalgovernmentsave come to the aid of

private nterprise

as

well,

particularlyargefirms,

urther

educing

he

mortality

ate

n that

ector.

Environmental

election

f

ntire

rganizations

xists

mainly

or mall

businesses,

organizations

ot

linkedto or

subsidized

by governmental

nits,

nd

voluntary

associations. ess

complete

orms

f

selection, owever,

xist

for ll

organizations,

as

particular

tructuresr

behaviors

may

be

eliminated,dded,

or

modified nder

the impactof environmentalorces Burns& Stalker1961,Pfeffer Leblebici

1973a).

As

is thecase

in

organic

volution, election mongorganizationss

on

the

basis

of

relative,

ather

han bsolute, dvantage, xcept

n the

case of

completely

nonviable orms.

Selection

rocesses

The workof Hickson

et al

(1971) and otherswho

have noted

the mportance f

ch,.

Ce

nd

power

n

organizations

e.g.

Child

1972) provides

n

important

heoreti-

cal

link

between he

organization-environment

iteraturend theories

f

organiza-

tional behavior. n

Hickson's

strategic ontingencies' heory,

ower

within

he

organization

omes from

subunit's

apability

or

coping

with

ritical

rganiza-

tional

ncertainties,

s

well

s from

he

mportance

f

the

uncertainty

nd the

xtent

to

which

other

ubunits an

substitute. ower

within

he

organization,

n

other

words,

s

related to the uncertaintiesnd

contingencies

he

organization

aces

(Crozier1964,Thompson 967).Powerwithin he

organization,

n

turn,

ffectshe

choicesmadewithin

rganizationsbout

tructures

Child 1972)

and about

resource



12/28

ENVIRONMENTSOF

ORGANIZATIONS

89

allocations

Pfeffer

Salancik

1974).

Thus,

the

process

by

which

environment

comes to affect ocial structure

may

be the

following:

1. Theenvironmentrovidesmany fthe onstraints,ncertainties,ndcontingen-

cies

because of the

necessity

or

ransacting

ith

he environment.

2.

These

contingenciesffect he

distributionf

power nd

influence ithin

rga-

nizations,

rovidingome

subunitswith

morepower

and otherswith

ess.

3.

Power s used

n

determining

rganizational

ocial

structures,

articularlyo the

extent hat

there s

uncertainty

nd

the

decisions oncern ritical

ssues.

Therefore,y

affectinghe

distributionf nfluence ithin

rganizations,

rganiza-

tional

environmentsome

to affect

tructurend

decisions.

Organizations

may ctively

monitor

he nvironmentnd

borrow

uccessfulnno-

vations n structure r conductfrom ther rganizationsAldrich& Reiss 1971).

Alternatively,e need

onlypositthat

organizations hat

dopt

the nnovations

f

relativelyuccessful

rganizations

will

have at least a

short-run

dvantageover

others.

f

information

lows

elatively

reelyhroughout

he

population,

we would

expect

elective iffusion

f

innovations

mong organizations

o be an

important

selectionmechanism

or

changes

that do not involve

the elimination

f entire

organizations.

s Mueller

1972:

200) noted,

he nitial

dvantage

f an

organiza-

tion,

derived

from n

innovation,

s

eventually

ost when nformation

bout

the

innovation s

diffused.

electivediffusion

nd

borrowing

will

occur

most

readily

whenorganizationsre relativelyimilar nd whencommunicationsre inexpen-

sive,

permitting

he free

low f

nformation

Stinchcombe

965).

Within

n

organizationhe

process f

selection

may

occurthrough

he

selective

promotiono

leadership

oles

of

personswhose

past behavior

has been most

dap-

tive nd

successful

n

a

given nvironment

Campbell

1969). Similarly, ariations

in

task

performancehat

provemore

uccessfulwill be

selected f

they ccur fre-

quently nough

and

there

xists

mechanism or

retaining

he

processes

f

the

successfulnew

activities

r

structures.

ariations

n

the

environment

ust be

matched

by

parallel variations n

organizational tructure r

activity

f

adaptive

selection s to occur Buckley1967).

One ofthe

major

problems

f

using

he

cologicalmodel's

onception

f election

processes s the

difficulty

f

avoiding

ircularityr

tautological

rgumentsCamp-

bell

1969).

Since

organizations r

partial

structures hat are

not suited

to

the

environment

resumably

ail,

he

surviving

rganizations

r

structures

re,

almost

bydefinition,

uited. t

is

easy

to

retrospectively

onstruct

ationales or

he

charac-

teristics

hat caused

organizations

o fail

or

survive. ince

evolutionary

heory

focuses n

differential

urvival

ates

which an

only

be known

estrospectively,

he

temptation

o

construct

autological

xplanations or

urvival nd

death s

great.

We

mayfind urselves aying hat

bureaucratic

rganizations

ereproduced

y

selec-

tive criteria

avoring

ureaucratic

rganizations.At that

point

the

concepts

of

environmental

itness,

urvival,

nd

selection

riteria ecome

onceptuallyndistin-

guishable

Alland

&

McCay

1973).

For

evolutionary

heory

o be

successfully

pplied, t appears

hat

t

s

necessary

that

ariables e

identified

hat re

generalizablecross

ontexts nd

that

permit he

formulating

f a

priori s well

as ex

post

hypotheses.

ince

organizations

ypically



13/28

90

ALDRICH

&

PFEFFER

require esources

n

order

o

survive, linkage etween

volutionary

heory

nd

the

variousmodels

of

resource

ependence

an

bemade. t

is

possible hat

he

critical

variable

ffectingurvival

robabilitys the

relative

esource

bundance

rscarcity

for heparticularrganizationntheenvironment.n order odevelop his dea, t

will

be

necessary o derive

measures

f

resource

carcity r

munificencehat

are

generalizable

cross

contexts nd

types of

organizations Staw

&

Szwajkowski

1975), nd then

o

examine

he xtent

o which

hese esource

measures ccountfor

survival

r

organizational

eath.

Strategic

hoice

Selection n the

ecologicalmodel

s a matter

f certain

rganizational

ariations

being ither

ositively

r

negatively

elected,

epending n their

match

with

nvi-

ronmentalonditions. hemodel s indifferents to howthevariations rose nthe

first

lace

and the

emphasis

n

selection

s

on

therole of

theenvironment.

e

have

already

noted hat n

the ase

of

arge

r

public

rganizations

he

notion f

election

being

accomplished

hrough

ifferential

urvival s

probably

ncorrect.

urther

criticismsfthe

basic

concepts

fthe

election

rocess

s

developed

n

evolutionary

models

re implicit n

the workof

theorists

riting

n

the

strategichoice

Child

1972)

or

political

conomy

Zald

1970)

traditions.

Child

(1972)

raisedthree

rgumentso

counter he claim that

environmental

influence

s

an

overwhelming

onstraint n

organizations.

irst,

he noted

that

organizationalecisionmakershavemore utonomy hanmight e inferredrom

the

perspective f

environmental

eterminism.

ecision

makers an both

select

from

range

f

viable lternatives

ompatiblewith

heniche

hey

urrently

ccupy

and choose the

type

f

environmentn

which

he

organization

s

to

operate.

Busi-

nessmen, or

example,

may choose to

enteror

leave markets.

urther, yert&

March

1963),

Williamson

1964), and

Hirschman

1970)

have

proposed hat

here

is

typically

lack in

organizational

perations

nd

that

few,

f

any,organizations

operate

t the

imits f

fficiency.

hile

ontingency

heorists ave

rgued

hat

here

is

no

universal,

est

way

to

organize,

hey

have

searched or he

best

tructure or

a given nvironmentLawrence& Lorsch1967).The pointmadehere s that here

may

be a

variety

f

structureshat

re

viable

n

a

given

nvironment.

he

inconsis-

tent

upport

or

heories f

tructural

ontingencyMohr

1971,

Pennings

975),

nd

the iterature

hich

ndicates hat

here re a

variety

f

structural

echanisms

hat

may

ccomplish

n

organizational

urpose, uch

as

control

e.g.

Meyer1972,Child

1973)

are both

consistent

ith his

first

hallenge

o

evolutionary

heory.

Strategies

uchas

product

ifferentiation

nd

market

egmentation

an

be

viewed

as

attempts

y

business irms

o

achieve wider

ange

f

discretion. he

traditional

marketing

trategy

as

to convince

onsumers

hat

a

product erved heir

needs

betterhanproducts fcompetingirms.Market egmentationnvolves n attempt

to meet

the

perceived

pecialized

requirementsf consumers

n

a

disaggregated

market.

Market

egmentation as

the

strategy sed

byadult

educationprograms

in

California

Clark

1956),

n

which

programs

meeting

he

needsofdifferent

roups

were

ffered.

oluntary

ssociations

must ften

hoosebetween hese

wo

trategies.

Ifthe

ssociation

tresses

he

general

eeds

f

ll,

t

may

ose

potential

members

ith



14/28

ENVIRONMENTS

OF ORGANIZATIONS

91

specializedrequirements.

f

special programs

re established

o meet he needsof

subgroups, he

overall

bjectives

f the

association

may

be

dilutedAldrich1971a,

Demerath&

Thiessen 1966).

The second point s that rganizationsrenot alwayspassiverecipientsf envi-

ronmentalnfluence ut also have the power

to reshape

he

environment

Hirsch

1975b).

Perrow

1970)

has

made

the ame point,

whileGalbraith 1967)

has

argued

that

arge

business

orporations

re able

to

createdemand

for

heir roducts nd

control heir

ompetitive

nvironments.

heoriesofoligopolyweredevelopedby

economists

recisely

o examine he conditions nder

which

groups

of firms an

acquire

the

power

to altermarket

arameters

Phillips 1960).

If the number ffirmsn a particularmarket

s small,competition

an be regu-

lated through

nformalnterfirmrrangements

Phillips 1960). Such informal r-

rangementsend obe more ffective hen heorganizations ave similar bjectives

and similar perating

haracteristics.

emiformal

nterfirm

inkages,

uch as

joint

venturesPfeffer

Nowak 1976) and the

movement f executive ersonnelPfeffer

& Leblebici 1973b) can

be used

when

there are

more,

but still

relatively ew,

organizations

o

be

coordinated.

he

problem

fmanaging

heenvironmentnder

the

uncertain onditions

roduced y

a

large

nd

heterogeneousopulation

f

firms

has

been

solved

n

many

nstances

y

turning

o

governmentegulation

r

other

political

nterventions

n

the

marketplace.

egulation

has

frequently

perated

o

restrictntry

nd

to

stabilizemarket rices nd product haracteristics

cf

Pfeffer

1974).

Slightly

more

ubtle

s

the

role

played

by

the

Commodity

tandards ivision of

the US

Department

f Commerce

n

reducing

he

number f different

roducts

manufacturedor

given

market

nd in

standardizing

heir

haracteristics.hese

standards

emove

major

obstacle

o interfirmollusion

y

ensuring

hat here re

standard

roducts,

ence

asing

he

askof

monitoring

arketharing greements,

and

also

tending

o

stabilize

roduction

haracteristics

cross

organizations.

ublic

organizations

nd

private onprofitrganizations

may

form

learinghouse

ssocia-

tions,

eviewommittees,nd

other entralizedtructures

o

reduce

he

uncertainty

thatmight therwisexistn a multi-organizationalieldWarren1967). Also,both

private nd publicorganizations

eek

assistance

f

various

kinds from

he

gov-

ernment, anging

rom irect inancial ssistance

s in the

case

of cities

nd uni-

versities

o the

protection

f markets rom

oreign ompetition sing

tariffsnd

quotas.

Child's

(1972)

third

rgument gainst

environmentaleterminism

s that

the

theories

tressing

he

mportance

f the environment

ave

frequently

lurred he

distinction

etween

haracteristics

f he

nvironment

nd theperception

nd evalu-

ation

of these

haracteristicsy persons

within he

organization.

his

distinction

wouldnot be crucial f people always accurately erceived nvironmentalimen-

sions.

Such s

not

ikely

o be the

case,however,

nd

Pennings 1973)

has indicated

that here

re minimal orrelations etween bjective

nd

subjective

measures ven

of dimensions

f

organizational

tructure. ne

interesting

ut thus

far

unexplored

research

uestion

s the

causes

and

consequences

f the

extent o

which

rganiza-

tionalmembers ccurately erceive

he

environment.



15/28

92

ALDRICH & PFEFFER

Conceptionsf theEnvironment

Following p Child's nsight, ldrich Mindlin1976) dentifiedwodifferent

conceptionsftheenvironmentn theorganizationaliterature.ne approach,

exemplifiedy

Dill

1958),Weick1969), ndDuncan 1972), reatsnorganiza-

tion's nvironments

the

low f nformationerceivedymemberstthe rganiza-

tion's oundaries.heother pproach,xemplifiedyPfeffer1972a, ) andAiken

& Hage 1968), reats n organization'snvironments theresourcesvailable,

more r ess gnoringheprocess ywhich nformationbout he nvironments

apprehendedydecision

akers.

nalystsrom oth pproaches

end o stresshe

active ole

played y

n

organizationn selectingtructure,

ather

han he ole f

the environmentn

selectingppropriaterganizationsnd organizationale-

sponses.

When

he nvironments considereds a stock fresources,hebasic oncept

used

by nvestigators

s

dependence,

efinedn terms fthe

bargainingosition

f

the ocal rganization

ith

especto nteractingrganizationsMindlin

Aldrich

1975,Jacobs 974).Althoughheterm ependence as not always eenused,

referencesremade oresourcexchangeLevine White 961), ower

nd ontrol

over ources f

upportSelznick 949,

van

1972),

nd

mportance

f

nput

nd

output

ransactions

or

eterminingrganizational

tructure

Katz

& Kahn

1966).

Dependence

n

externalgents or esourcess hypothesized

o

ead

o uch nteror-

ganizationalctions smergers,ointventures,ndcooptation.

When

he nvironments considereds a source f nformation,

he

asic oncept

used

by nvestigatorsasbeen ncertainty.heoristsavegenerally

ssumed hat

complexity

nd

nstabilityf he nvironmenteneratesncertaintyDuncan 972),

thought might e argued hat ncertaintys caused ythe rganization'search

and

nalysis

ethods.

ncertainty

as

beenhypothesized

o ead o essformalized

and ess

centralized

tructures

Burns

Stalker

961), hough

t

might

e

argued

that

omplex

nd

contingenttructuresimply erceive

ore f he

ncertainty

n

the nvironment.

BothWeick 1969) and Childhave rgued hat nvironmentsre enacted r

created

hrough process

f

attention.

t

does

seemreasonableo

argue

hat

organizational

ctions ill e determined

yperceivedeality,

hich

may

r

may

notbe the ame nvironmenthat he esearchererceives.t

is

also reasonableo

argue

hat n

differentrganizations

ith

ifferenttructures

nd nformation

ys-

tems,

ecisionmakers

ill

perceive

he environment

ifferently.rganizational

monitoringnd canningystemsrehighlightedy he onceptf nvironmental

enactmentnd

deserveurtherxploration.f ourse,

f he

rganization

s

severely

constrained

y

the

nvironment,

s in a

very ompetitivearket,

hen

erception

isnot mportant.hepersonnelnthe rganizationill peratendperceiveffec-

tively

r

else

t will

oon

go

outof

xistence.erception

ecomes

mportant

o

the

extent

hat

he

rganization

s

nsulated

rom r

mmune

o environmentalffects.

To the

xtenthat he rganizations not ightlyonstrained,ariations

n

percep-

tions f

organizationaleality

avemore

mportance

n

understandingrganiza-

tional tructuresnd

processes.



16/28

ENVIRONMENTS

OF ORGANIZATIONS

93

Limitsto

Strategic

hoice

While he rguments

aised gainst

he

general

pplicability

f the

volutionary

model o the tudyf ocial rganizationrepersuasive,heselternativeoints f

view

lsohave

heirimitations.

hile nvironments

re elected yorganizational

decisionmakers,

here re constraintsn

theoperation

fthis election

rocess.

Potentialnvironments

ay e excluded

y awbecause

f

fundingestrictions

r

legal

barriers

o entry.or business

rganizations,

conomists

ave

dentified

number

f

barriers

hat

prevent

otentialntrants

rom aining

positionn a

marketlready

erved

y xistingrganizations.

aves

1972)

discusseshreeuch

barriers.

Economy-of-scale

arriers

xist

when

n organization's

nitproduction

osts

remain igherhan hose f competitorsntil he organizationccounts or

substantial

hare f hemarket.ntil

ts osts

re ompetitive,

he irm ust bsorb

higherosts

nd

hope

hat largerhare f

he

market

s

obtainedeforet xhausts

its

apital.

lternatively,

firm

ould

uild large lant f

fficient

ize

tthe utset

and

hope

o

achieve

nough

markethare

o

dispose

f ts utput. orexample,

n

entrepreneurishing

o

enter

he

igarette

arket ust

uild

plant

hat

roduces

about 5-20%

f he

igarettes

old

n

thenational

arket

f conomiesf cale

re

tobe

realized.

While cale

conomies

re

present

n

many

ndustries

Caves

1972),

two

points

hould

e

noted.

irst,

caleeconomiespply rimarily

o plant

ize

ratherhan irmize. econd, ain1956) oundhathe actorf conomiesf cale

could

not ccount

or he

arge

ize

of

manymajor

ndustrialorporations.

cale

economies

re

typically

ot

great

nd

are achieved t

a

scale

of

operations

ar

smaller

han

hatwhich

revails

n

many

ndustries.

While ntroduced

n

economic

nalysis

o explain ntry

ntomarkets

yprofit-

seeking irms,

he

concept

f economies

f

scale

applies

o

other

rganizational

formss

well. tate nd

federal

egislation

ay nly rant

place

n the allot

r

campaign

ubsidies

o

political

arties

hat chieve

given

evel

f

elf-financing

r

votes,nd his

ffectivelyimitshe rowth

f

new olitical

arties.he

United

und

requiresew pplicantsor undsodemonstratehe xistencef sufficientlyarge

market

or

heir

ervices, hile

niversitiesnlyubsidize

hose

tudent

ssociations

that

re

able

to

demonstrate

ufficient

tudent

nterest.

Absolute

ost arriers

oentry

xistwhen new irm'sosts

re

higher

han

hose

of

xisting

irms,egardless

f he

irm's

utput,

r

when

he

ost

f

ntry

o

chieve

economies

f

cale

or

to

achieve

market

cceptance

s so

great

s to

exclude

most

entrants.xisting

irms

maypossess

knowledge

ot available

o newentrants,

perhaps

ecause

f

patents

r he rohibitive

xpense

nvolved

n

doing he

esearch

or

building

plant igenough

o

compete.

classic

xample

s

the

Coca

Cola

Bottlingompany ith formulaor heproducthat s known nly oa few

persons

n

the

organization.

xisting

irms

ay

have acquired ontrol

ver

he

supply

f

n mportant

esource,

hus

enying

tsuse to a

new

irm.

ntil he

nd

of

the

second

World

War the

Aluminum

ompany

f

Americamaintained

ts

position

s

the

single upplier

f

aluminum

hrough

ts monopolization

fthe

bauxite

upply.

he

amount f capital

equiredo start

newfirmmaybe

so



17/28

94

ALDRICH

&

PFEFFER

enormous s to

be

prohibitive.or

example,

n

1954

t was

estimated hat

he

apital

required

o build

an

efficient

utomobile

lantwas

$250-500

million.

hus

it s

not

surprisinghat

therehas

been

imited

ntry

nto

the

automobile

market.

Product differentiationarriers o entryexist when establishedfirmshave

achieved

high

visibility

nd

their rands

have

gained

wide

recognition.

or a

new

firmo

enter

he

market,

egardless

f

the

production

conomics

nvolved,

hefirm

must

pendan

enormous

mount n

advertising

o

develop

brand

recognition

nd

market

cceptance.

he

existing

ompetitor

eed pend

only

nough

o

maintain n

imagethathas

been

developed

vera

longperiod

of

time.This

added

expenditure

required or

overcoming

dvertising

conomies

f

scale

provides he

new

entrant

with

ost

disadvantages hat

must

be

absorbed r

reflected

n

higher

elling

rices.

Voluntary

ssociations

face

similar

problems,

s

particular

bjectives r

causes

come to be identified ithparticularssociationsAldrich1971a). Consider, or

example, he

problem

new

group

working

n

the

ecology rea would

have

winning

members

way

from

he

Sierra

Club.

Many public

ector

rganizations

urther

aise

the

barriers o

entry

y

being

recognized

egally

r

socially

s

monopolies

or he

service

r

product

hey ffer.

The

existence f

barriers

o

entry

makes

clear the

imits o

organizational

hoice

of

environment.

urther,

arriers

o

entry rovide

partial

xplanation or

why

rates

of

change n

some

populations

re

much

slower

than

n

others.

Barriers

o

entryimit he

range

f

variation n a

population

nd are a

negative elective

orce

operatinggainstneworganizations. hehigherhebarriers oentry,he ower he

pressure or

hange

n

the

structure r

activities

f

existing

rganizations.

The

idea of

choice of an

environment

ay

be an

overstatement

f

the

actual

degree f

planning

nd

rationalityxercised

y

organizations

n

moving

nto new

niches

Starbuck

975).

Behavioral

heories

f

the

firm

ypicallyssume

that

orga-

nizations

xamine

their

nvironments

nlywhen

they are under

some

pressure

(Cyert

&

March

1963)

or that

earch

fornew

opportunities

ccurs

only

when

the

organization aces

problems

with

ts

current

ctivities.

tudies of

organizational

managers

ind

hat

the

managers

ften

perate

on

the basis

of

folk theories

r

conventionalwisdom Mintzberg1973), taking heirenvironments givenand

working

within

he

constraints.

rganizations

ccasionallymove nto

new envi-

ronmental

icheon

the

basis

of

misperceptions

f

their itness

or

he

niche,

uch

as RCA's

entry

nto

the

computer

usiness.

The

second

criticism

f

environmental

eterminism,hat

organizations ave

the

power

o

modify

heir

nvironments,

s

true

hiefly

or he

argest

rganizations

r

those

hat re

politically

ell

connected.

However, nly

lightly

more

than

3%

of

all business

nterprises,

s

enumerated

ythe US Social

Security

Administration,

have

over50

employees.t

is

unlikely hatfirms

f

under his

ize have

much

power

to affect heir nvironments,lthough hisvariesby local circumstances. t the

same

time,

we

should

recognize hat

there s

some

evidence hat

concentration

f

resources n

fewer

arge

organizations

s

increasing,nd

that

clearly

hese

arger

organizations

nd

comparable

rganizationsn

the

public

sector

dominate

many

aspects

of

current

ife.



18/28

ENVIRONMENTSOF

ORGANIZATIONS

95

While t is

true

hat

ctions re

based

on managerial

erceptions f

reality,

nd

thatChild

1972)

is

correct n

stressing he

role of

perceptions,

t

is

also the

case

that

uch

perceptionsre

not

ikely

o

be

completely

diosyncratico a

particular

organization. variety f ocial processes ombine o nduce common erception

of the

environment

ithin

subpopulation f

organizations.

rganizations

end

o

hire

management

ersonnel rom

within

he same

industryPfeffer

Leblebici

1973b)

or

subpopulation

Baty,

Evan &

Rothermel

971).

mitation

nd

borrowing

are mportant

ources f

new deas and

business,

rade,

nd

professional

ublications

promote

he

developmentf a

common rame

f

reference.

anagers

nd

staff

re

sent o

the ame

nstitutesnd

training

nstitutions,nd

various

ypes f

coalitions

depend

n shared

perceptions or

he

coordination f

nterorganizational

ehavior.

The

effect

f

these

processes s

to

homogenize

erceptions cross

organizations

and tomake achorganizationesssensitive o theunique haracteristicsf ts ocal

environment

Starbuck

1975).

If

a local

environment

s

benign

nd has

a

wide

tolerance

or

deviations rom he

ideal

structure r

performance,

hen

socially

induced

misperceptions

re not fatal.

When

perceptionsre

universally

hared,

no

single rganizations

at a

relative

isadvantage

n

the

competition

or

resources.

When an

environments

changing

apidly

r is less

munificent,

eviant

rganiza-

tions hat

do

not

share he

common

misperceptions ay

be

positively

elected nd

take

over the niche.

Our

review

f

the

selection

tage

of

the natural

election

rocess

has

disclosed

threemajor ssuesthat onfrontesearch norganizationalhange.First, nviron-

mental

election s

not

onlybetween

rganizations

s wholes

but also

between

particulartructures

r behaviors

within

rganizations.While

election

may

occur

through

he

failure f

an entire

rganization,he more

typical

case is

for

the

organization

o

adapt by

means f

tructuralr behavioral

modifications.

rganiza-

tional

hange,

herefore,ust e

examined t

both evels:

election t the

population

level

between

ompeting irmsnd

selection t the

organizationalevelbetween

he

variations

nternal o

the

organization.

Second,

the

organizational

opulation s structuredn

such

a

way

as to

make

selectionmuchmoreproblablen one subpopulationhan n the other.One sub-

population,

onsisting

f

veryarge

rganizations,

ssociations,

nd

public

gencies,

contains

rganizations

hat re

relatively

nlikely

o

fail,

nd,

moreover,

requently

havethepower

o alter

heir

nvironments

ofit heir wn

dimensionsnd

capabili-

ties.

The

other

ubpopulation

onsists

f

smaller

rganizations hat

have

a

signifi-

cant

probability

f

failure

nd a

high

rate of

turnover. he

latter

roup

s

much

larger

n number

han

the

former,

hough

he

former

s

of

greater

otal

societal

significance. hile

argefirmsnd

public

gencies

may

not

fail, hisdoes not

mean

these

rganizations

re

mmune o

environmentalffectsn

structurer

activity.

s

we have ndicated,utonomoustrategichoice s problematic venforvery arge

organizations.

Third,

Child's

point

about

the

importance f

perceptionss

probably

rue, n

general.As Starbuck

1975) has

noted,

however,he

critical

uestions oncern

he

extent

o which

organizational

erceptions

ary

from

bjective ndicators

f envi-



19/28

96

ALDRICH &

PFEFFER

ronment

ndthefactors

hat ause

variations

n

perceptions

nd

in

divergence

rom

other ndicators.

nlesssuch

differences

recritical,

he

point s not ikely o

affect

analyses

of organizationa

aldrich pfeffer 1976 organization and its environments

Documents