Ecologists and Institutionalist: Friends or Foes

MGT 6381- Advanced Organizational Theory

Authors: Heather A. Haveman and Robert J. DavidHeather A. Haveman

◦Professor at Haas Business School◦Research interests – organizational theory

(ecology & institutionalism), economic sociology, social movements, social history, entrepreneurship, organizational demography, gender, careers, social mobility

Robert J. David◦Associate Professor at McGill University◦Research interests - evolution of practices,

organizations, and industries from an institutional perspective

Organizational EcologySeeks to understand the distribution of

organizations across different environmentsCore assumption – understanding

organizational diversity requires ‘population thinking’

Populations – aggregates of organizations that share a common dependence on material and cultural environments

Empirically, populations are sets of organizations that produce similar goods or services, use similar resources, and have similar identities

Ecology – Main Assumptions

Density dependenceResource portioningInertiaOrganizational form as identity

Density DependenceOrganization founding and failure depend on

population densityWhen density is low, increasing density

increases legitimacyAt higher levels, more organizations compete for

resourcesAs density increases, competition begins to

overwhelm legitimacy as the primary mechanism driving vital rates

Density –dependence models can be applied to subpopulations and to compare organizational similarities and differences

Are there times when this model does not apply?

Resource PartitioningFocuses on competition and mutualism between

organizations that serve a wide range of clients with a diverse array of products (generalists) and organizations that focus on a limited clientele, offering a narrower set of products (specialists)

When there are economies of scale and a resource distribution with a single rich centre and poor peripheral region, the resource ‘space’ becomes partitioned with generalist occupying the centre and specialist occupying the periphery

Increased competition between generalists leads to higher failure rates for generalist and lower failure rates for specialists

Inertia Organization ecology assumes that the core features of an

organization change slowly, if at all 8 constraints on adaption

1. Investment in plant, equipment, and specialized personnel2. Limits on the internal information received by decision-makers3. Vested interests4. Organizational history5. Legal and economic barriers to entry and exit6. Constraints on external information gathered by decision-makers7. Legitimacy considerations8. Problem of collective rationality and the general equilibrium

These constraints favor inert organizations When organizations change, resources are diverted from

operating to reorganizing, reducing effectiveness and increasing the likelihood of failing

Though change can be detrimental, organizations can learn to change

General consensus is that failure rates generally decline with size and increase with age. Is this still true in the current economy?

Organizational Form As Identity

Analyzes organizational forms as identities or social codes, which are recognizable patterns that take on rule-like standing and get by social agents

Rules of conduct provide guidelines for members of a population by delimiting what they should and should not be and do

Signals generate a cognitive understanding about the populations because they define what observers understand the members of an organizational population are and what they do

Works in tandem with other strands of organizational ecology

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 don’t?Emerging issue?

Institutionalism3 of the most important subjects

in organizational institutionalism are◦Legitimation and institutionalization◦Isomorphism and diffusion◦Strategic action

Legitimation and Institutionalization Organizations are legitimate with they are

comprehensible and taken for granted as the natural way to achieve some collective goal, when they are justified and explained on the basis of prevailing values, role models, and cultural agents, when they are sanctioned or mandated by authorized actors, and when those involved cannot conceive other alternatives

Legitimacy can rest of any of 3 foundations◦ Regulative◦ Normative◦ Cognitive

Legitimacy improves access to resources and acceptance from customers, thereby contributes to organization’s ability to persist

Deinstitutionalization and delegitimation Is deinstitutionalization inevitable?

Isomorphism and DiffusionStudy of why organizations are similarThe more prevalent an organizational

structure, practice, or tactic, the more legitimate it is

3 processes driving isomorphism1. Coercive pressures – based on

regulatory legitimacy2. Normative pressures – based on

normative legitimacy3. Mimetic pressures – based on cognitive

legitimacy

Strategic ActionBased on premise that organizations

are often proactive and control their environments, so institutionalist place conformity on a continuum of responses to the environment1. Compromise2. Avoidance3. Defiance4. Manipulation

Examples?

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 don’t?Emerging issue?

Points of SimilarityDeveloped as corrections to rationalist and

adaptationalist theories◦ Both theories contend that organizations could not

be adapted to external conditions in a technically rational way

Concerned about the variety or lack of variety of organizations

Study similar phenomena◦ Legitimacy◦ Organizational form◦ Emergence and spread of new organizational forms

and features◦ Organizational change◦ Organizational survival

Points of DifferenceEcologist Institutionalist

Scope Parsimony & generality

Richness & contextual specificity

Ontological Stance Empirical realists Social constructivists

Theory development

Collection of overlapping theories that build upon each other

More emergent and diffuse research agenda

Definition of legitimacy

The degree to which an organizational form is taken for granted

Legitimacy encompasses cognitive, normative, and regulative dimensions