Organizations, Demography of
ORGANIZATIONS, DEMOGRAPHY OF
Research on organizations (for example, firms, voluntary associations, political movements) has become increasingly more focussed on demographics and ecology. The research strategy of organizational demography has several noteworthy features that resonate with practice in the study of human demography. This research examines the full histories of organizational populations, because early events have been shown to have lasting consequences for population dynamics. It also gathers life history data on all organizations in the population(s), including the large and famous as well as the small and insignificant–this is crucial for avoiding problems of selectivity bias. Organizational demography records detailed information about the ways in which organizations enter and leave and investigates organizational populations. Finally, it uses event-history methods to estimate the effects of characteristics of organizations, populations, and environments on vital rates in populations of organizations.
Differences between Human and Organizational Demography
The fact that organizations are constructed social entities, not biological organisms, has major implications for their demography. In 2000 sociologists Glenn R. Carroll and Michael T. Hannan enumerated several important differences between organizational and human demography. First, organizations come into existence and disappear due to a wider range of events including founding, merger, spin-out, and secession. Their lives as independent corporate actors can end by dissolution, acquisition, or merger. Second, an organization can exist long after its initial members have departed; it is not unreasonable to characterize organizations as, potentially, immortal. Third, organizations often do not have obvious parents. Therefore, organizational demography treats the population of organizations as the unit at risk of experiencing entries. Fourth, organizations can have multilayered structures, each level of which might operate relatively autonomously. These structures range from establishments (physical sites) to business groups such as the Korean chaebol. Many other possible configurations lie between these extremes. Most research, in this area, focuses on the autonomous organization. Fifth, organizational populations generally possess great heterogeneity in size and other characteristics.
A major discovery of organizational demography is a regular pattern of density dependence in rates of founding and disbanding. As the number of organizations in a population (density) rises, founding rates first rise and then fall as density increases and mortality rates fall initially and then begin to rise. The standard explanation for this pattern is based on the opposing effects of legitimation (taken-for-grantedness) and diffuse competition, each of which depends upon density, but in characteristically different ways. Several parametric models of these relationships are well established from research on many diverse populations. In their 2000 book Carroll and Hannan review this evidence.
Several important variations on the basic pattern have been identified. First, density has a "delayed" effect, as was noted by human demographer P. H. Leslie in his analysis of cohort differences in mortality in human populations. The population density at time of entry has a persistent positive effect on an organization's mortality hazard. Second, density-dependent competition is generally more localized than density-dependent legitimation, presumably because cultural information diffuses more readily.
Another major focus of organizational demography has been endogenous processes of segmentation in organizational populations. The best developed re-search program builds on resource-partitioning theory, developed by Glenn R. Carroll in 1985, which concerns the relationship between increasing market concentration and increasing proliferation of specialist organizations in mature industries with heterogeneous consumers. Specialist organizations are those that focus on narrow, homogeneous targets, whereas generalist organizations aim at broad, heterogeneous targets. If there is an advantage of scale (in production, marketing, or distribution), then competition is most intense in a resource-dense center, which generally becomes dominated by large generalist organizations. The failures of smaller generalists free some resources near the center, but large generalists can rarely secure all of the newly freed resources due to constraints imposed by organizational identities. Therefore, as concentration (the share of the market held by the largest firms) rises, the viability of specialist organizations increases as well: Founding rates rise and mortality rates fall.
Age and Size Dependence
In 1965 sociologist Arthur L. Stinchcombe observed that organizations experience a liability of newness, that age dependence in the mortality hazard is negative. A great deal of early research confirms this pattern. Some later research found a liability of adolescence: The hazard rises during the early portion of the lifespan–that is, while initial stocks of endowments are being exhausted–before declining. Much of this latter research did not control for age-varying organizational size, which is important because age and size are correlated and mortality hazards fall sharply with increases in size. More recent research, using designs that measure age-varying organizational size, has produced mixed evidence in favor of positive age dependence. Two interpretations of this pattern have been proposed. If inertial forces are strong, then the possibility of adapting to changing environments is limited and older cohorts of organizations have lower fitness–there is a liability of obsolescence. Alternatively, the accumulation of rules and routines impedes adjustment to environmental change–the liability is one of senescence. Theoretical research by logician László Pólos and Michael T. Hannan has sought to unify these seemingly irreconcilable theory fragments.
Inertia and Selection
Important inspiration for developing a demography and ecology of organizations comes from Stinchcombe's 1965 conjecture that new organizations get imprinted by their environments. Because entrants get tested against taken-for-granted assumptions that vary over time, organizations that pass such tests reflect the social structure of the time of entry. Imprinting requires both a mapping of environmental conditions onto organizations and inertia in the imprinted characteristics.
Organizational demography and ecology emphasizes inertial forces. According to structural-inertia theory, inertia prevails as an inadvertent byproduct of a selection process that favors the properties of reliability (low variance in the quality of performance) and accountability (the ability to construct rational accounts for actions). Achieving these properties depends on structures being reproduced faithfully over time. Yet, high reproducibility means that structures resist transformation. Therefore, this selection process inadvertently favors corporate actors with strong inertial tendencies.
Fundamental change in technologies and environments presumably diminishes reliability and accountability. Old loses value, and new processes must be learned. Vestiges of the old system conflict with the emerging new one. Thus, even if fundamental change has long-term benefits (the new form might be better aligned with environments and internal processes), change might increase mortality hazards over the short term. If this is indeed the case, reorganization-prone organizations have a lower probability of representation in future populations.
Substantial research has tested the implications of this argument. Most well designed studies have determined that changing core structures increases the hazard of mortality in the short term, often substantially. Moreover, the magnitude of this effect increases with organizational age.
Carroll, Glenn R. 1985. "Concentration and Specialization: Dynamics of Niche Width in Organizational Populations." American Journal of Sociology 90:1,262–1,283.
Carroll, Glenn R., and Michael T. Hannan. 2000. The Demography of Corporations and Industries. Princeton, NJ: Princeton University Press.
Carroll, Glenn R., and Anand Swaminathan. 2000. "Why the Microbrewery Movement? Organizational Dynamics of Resource Partitioning in the U.S. Brewing Industry." American Journal of Sociology 106: 715–762.
Hannan Michael T., and John Freeman. 1989. Organizational Ecology. Cambridge, MA: Harvard University Press.
Leslie, P. H. 1959. "The Properties of a Certain Lag Type of Population Growth and the Influence of an External Random Factor on the Number of Such Populations." Physiological Zoölogy. 3:151–159.
Pólos, László, and Michael T. Hannan. 2002. "Reasoning with Partial Knowledge." Sociological Methodology 2002. ed. Ross M. Stolzenberg. Cambridge, Eng.: Blackwell.
Stinchcombe, Arthur L. 1965. "Social Structure and Organizations." Handbook of Organizations, ed. James G. March. Chicago: Rand McNally.
Michael T. Hannan