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.