Change in Organizations
Theorists at the organizational set level (resource dependency, contingency,
transaction cost) assume that organizational structures can adapt (Scott
p. 215) through the actions of decision makers. In contrast, population
ecologists argue that most structural change at the population level is
done through selection. Though organizations do adapt their structures,
it is often too slow to successfully react to environmental changes (Hannan
& Freeman, 1984).
Hannan & Freeman (1977) suggest a number of constraints that restrict
organizational adapation. Some internal limitations are capital and personnel
expenditures, constraints in information processing, costs of upsetting
the political equilibrium, and history and tradition. External constraits
are legal barriers, fiscal limitations, and costs of securing legitimacy
and political support from external forces. Stinchcombe (1965) already noted
that the founding structure is retained for long periods in organizations
(imprinting).
Furthermore, the inertial properties of an organization be also be a consequence
of selection (Hannan & Freeman, 1984). Organizations are valued for
their reliability, which is only possible with relatively stable structures.
They are also valued for their accountability and rationality, which also
presumes stable, rational structures. In a stable environment those firms
with higher reliability and accountability are more likely to be successful,
but are also more likely to fail when the environment changes.
In their 1989 book Hannan and Freeman refer to a "hierarchy of inertial
forces", and recognize that some parts of organizational structure
are harder to change than others. For example, the mission of the core technology
is more difficult to change than more peripheral units (Scott p. 216).
Since the simplest measurable quantity for adaptability is survival, most
population ecologists have focused on mortality rates (see Carrol 1984 for
a review). Some factors leading to higher mortality rates are:
* liability of newness (newer firms more likely to fail)
* liabilty of smallness (smaller fail more often than bigger)
* density dependency (more likely to fail at founding if lots of competing
organizations have the same type)
Changes in institutional environments can also impact mortality and fouding
rates (changes in laws, political changes, etc.) (Scott p. 217).
Organizations fail in many ways. They may dissolve completely, be acquired,
or merge. Generalist organizations have different behaviors and survival
rates than more specialist organizations (Hannan and Freeman, 1989).
Population ecologists tend to focus on the core features of organizations
and look over longer periods. Resource dependency theorists focus on more
peripheral features and shorter time periods (Scott p. 218). Both views
have usefulness.