Density Dependence

Hannan and Freeman use the concept of density dependence in population ecology to show that a growth of organizations follows a curvilinear approach. In early stages founding rates are low and failure rates high (due to lack of institutional experience of the form and the "liability of newness") The new form lacks reliability and legitimacy. But as the number of organizations of that form increase so does their legitimacy, which recursively increases the founding rate. The rate of growth increases up until competition begins to increase consolidation and failure rates which slows the growth in numbers of organizations and eventually leads to a gradual decline.

Thus organizational density has a positive effect on organizational rates in the early stages and a negative effect in later stages.