Ecologists and Institutionalists: Friends Or Foes?

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24 Ecologists and Institutionalists: Friends or Foes?

Heather A. Haveman and Robert J. David

In this chapter, we consider the web of rela- Our title poses a question about the nature tions between institutional and ecological of the relationship between ecology and analysis of organizations. These research tra- institutionalism. Depending on whom you ditions are very similar in some ways, ask, you will get divergent answers to this notably that foundational articles for both question. Some will say that ecologists were published in the same year (Meyer and and institutionalists are happy bedfellows Rowan, 1977; Hannan and Freeman, 1977). because they ask similar questions about the Yet, in other ways, they are remarkably dif- nature and functioning of organizations and ferent, as evidenced by vociferous debates they provide similar answers (e.g., Fligstein between ecologists and institutionalists (e.g., and Dauter, 2007). Both sets of scholars Carroll and Hannan, 1989a vs . Zucker, 1989 attend to many of the same concepts, notably vs . Carroll and Hannan, 1989b; Hannan, legitimacy and organizational form, and seek Carroll, Dundon, and Torres, 1995 vs . Baum to explain change and stability in organiza- and Powell, 1995 vs . Hannan and Carroll, tional systems. Moreover, both sets of schol- 1995). Given their concurrent origins and the ars tend to conduct longitudinal analysis of combination of similarity and difference in original data on collections of organizations – their lived histories, it is not surprising that populations in the case of ecologists and these two research traditions have been fields in the case of institutionalists. Such sometimes contrasted and other times com- basic similarities are not surprising, as both bined. In this chapter, we will review how ecology and institutionalism emerged as and when ecological theory has been used in corrections to the rationalist approach preva- contrast to or in combination with institu- lent in the 1960s and early 1970s, which tional explanations, and suggest how they focused on the design and management of might be fruitfully combined in future efficient organizations, and both directed research. attention towards the external environment 9781412931236-Ch24 5/19/08 4:17 PM Page 574

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and away from internal organizational func- who, when surrounded by ecologists, feels tioning. like a stout-hearted institutionalist, and when But when faced with the same question, surrounded by institutionalists, feels like a other scholars will wonder whether ecologi- died-in-the-wool ecologist. Robert is an cal analysis is inconsistent with institutional- organizational theorist who has delved into ism (e.g., Zucker, 1989; Baum and Powell, both traditions, yet never feels quite like a 1995). Perhaps the most obvious divide ‘pure’ ecologist or a ‘pure’ institutionalist. stems from the fact that ecologists investigate We are thus members of both communities, highly abstract models of population evolu- in varying proportions, depending on time of tion and organizational outcomes, while day, question at hand, and surroundings. But institutionalists seek nuanced explanations at heart, we are members of a broader com- that are sensitive to the specifics of time and munity – organizational sociologists. As place. This yields, by necessity, a difference such, our goal is to understand formal organ- in relationships between theory and data: izations, the building blocks of all modern research in organizational ecology is driven societies and the most powerful actors in by a desire to test and extend formal models those societies (Coleman, 1974; Perrow, with general applicability, while research in 1991). We are happy to achieve this objective the institutional tradition is driven by a desire with any implements that we can use skill- to explain particular empirical phenomena. fully – including, but not limited to, institu- This divergence in research activity stems tional and ecological tools. from a profound difference in theoretical perspective: organizational ecology focuses on demography (numbers of organizations and their vital rates), while institutional WHAT IS ORGANIZATIONAL analysis focuses on culture (norms, values, ECOLOGY ANYWAY? and expectations) and its manifestations (rules, regulations, conceptions, frames, and Organizational ecologists wonder ‘why schemas). are there so many kinds of organizations?’ To discover our own take on the vexing and seek to understand the distribution of question of whether ecologists and institu- organizations across different environments tionalists are friends or foes, you must read (Hannan and Freeman, 1977: 936). To this on. To convince you that our answer is end, ecologists have adapted and applied the- correct, we proceed in stages. We first define ories and formal models of population biol- the nature and scope of ecological analysis. ogy and human demography to explain the After briefly reviewing the institutional evolution of organizational systems – that is, perspective, we reflect in detail on how, and to explain rates of organizational founding, how well, ecology and institutionalism get failure, growth, performance, and change. along intellectually. Our assessment of Ecologists begin with the core assumption convergence and divergence encompasses that understanding organizational diversity research questions, assumptions, predictions, requires ‘population thinking’ (Hannan and and methods; we pay particular attention to Freeman, 1989: 15). Populations are aggre- those hard-to-define, harder-to-defend, yet gates of organizations that share a common critical issues that are related to taste and dependence on material and cultural environ- style. After answering the question posed in ments. Empirically, populations have been our title, we conclude by suggesting how identified as sets of organizations that pro- scholars in both traditions can benefit from a duce similar goods or services, use similar closer relationship. resources, and have similar identities. Some disclosure is in order before we Organizational diversity increases when new begin. Heather is an organizational theorist populations emerge and expand in size; 9781412931236-Ch24 5/19/08 4:17 PM Page 575

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it declines when existing populations Ecologists have extended and refined the decrease in size and become extinct. basic density-dependence model. One In the paragraphs below, we briefly review approach involves assessing the effect of the main assumptions underlying ecological density across subpopulations defined along analysis and the main lines of research. 1 Our such key dimensions of organizational form commentary involves four areas: density as goals, size, technology, and location. For dependence, resource partitioning, structural example, a study of competitive interactions inertia, and organizational identity. We (those that harm one or both parties) and discuss each in turn. mutualistic interactions (those that benefit one or both parties) between commercial (for-profit) and mutual (non-profit) tele- Density dependence phone companies in Iowa disaggregated population density according to technology and The basic model of organizations’ vital rates location relative to the focal organization is density dependence, which proposes that (Barnett and Carroll, 1987). This analysis organizational founding and failure depend revealed that the non-local density of both on population density, meaning the number commercial and mutual telephone companies of organizations in a population. When den- raised failure rates, as did the local density of sity is low, increasing density enhances the commercial companies. These results indi- legitimacy, or taken-for-grantedness, of the cate purely competitive interactions. Only population; thus, at low levels of density, the local density of mutual companies con- increases in density cause founding rates to tributed to mutualistic interactions. Density rise and failure rates to fall. At higher levels has been disaggregated by subpopulation of density, however, more organizations vie in studies of organizations as varied as for resources, so competition becomes more breweries (Carroll and Swaminathan, 1992), intense. At the same time, increasing health-care organizations (Wholey, Christianson, numbers of organizations provide only incre- and Sanchez, 1992), and credit unions mental legitimacy benefits. Thus, as density (Barron, West, and Hannan, 1994), demon- increases, competition begins to overwhelm strating the broad applicability of this legitimation as the primary mechanism approach. driving vital rates. At high levels of density, Another way to disaggregate density is to therefore, further increases in density cause allow for the fact that organizations in a pop- founding rates to fall and failure rates to rise. ulation often differ in degree rather than Over the full range of density – from very kind. To reflect this, some ecologists have low to very high – this logic predicts followed McPherson (1983) and assessed non-monotonic effects on vital rates, specifi- similarities (and differences) between popu- cally an inverted-U-shaped relationship lation members by how much their domains between density and founding rates, and a overlap (or not) along some dimension. One U-shaped relationship between density and such study showed that Manhattan hotels failure rates. The earliest empirical investiga- experienced more intense competition from tions of the density-dependence model were hotels that overlapped in terms of size, geo- Hannan and Freeman’s (1987, 1988) studies graphic location, and price (Baum and of labour unions in the United States. They Mezias, 1992). Going even further, a study of found that unions’ founding and failure rates day-care centres in Toronto showed that followed the predicted non-monotonic pat- competition and mutualism varied with terns. Many studies of other organizational overlap in the ages of children enrolled: a populations have yielded similar effects high degree of overlap between a focal day- (e.g., Carroll and Hannan, 1989a; Hannan care centre and other centres raised failure and Carroll, 1992). rates, while a high degree of non-overlap 9781412931236-Ch24 5/19/08 4:17 PM Page 576

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lowered failure rates (Baum and Singh, (Carroll and Swaminathan, 1992, 2000), 1994). wineries (Swaminathan, 1995), and automobile manufacturers (Dobrev, Kim and Hannan, 2001). Resource partitioning

A related stream of research focuses on com- Inertia petition and mutualism between organizations that serve a wide range of clients with a Organizational ecology proceeds from the diverse array of products (‘generalists’) and assumption that the core features of organi- organizations that focus on a more limited zations change slowly, if at all, because of clientele, offering them a narrower set of strong inertial pressures (Hannan and products (‘specialists’). The basic argument Freeman, 1984). Eight constraints on adapta- is that when there are economies of scale and tion are proposed, four internal and four a resource distribution with a single rich external (Hannan and Freeman, 1984). The centre and poor peripheral regions, the internal constraints are investment in plant, resource ‘space’ (the combination of inputs equipment, and specialized personnel; limits and demand for output) becomes partitioned, on the internal information received by deci- with generalists occupying the centre and sion-makers; vested interests; and organiza- specialists the periphery (Carroll, 1985; tional history, which justifies past action and Carroll, Dobrev and Swaminathan, 2003). prevents consideration of alternatives. The This happens because generalists compete external pressures for stability are legal and with one another to control the resource-rich economic barriers to entry and exit; con- centre by offering generic products with straints on the external information gathered broad appeal. Specialists, meanwhile, avoid by decision-makers; legitimacy considera- competing with generalists in the market tions; and the problem of collective rational- centre, instead exploiting peripheral regions ity and the general equilibrium. All of these by serving small groups of clients with idio- pressures favour organizations that perform syncratic tastes. Because economies of scale reliably and can account rationally for their favour large organizations, the generalist actions, which in turn requires that organiza- subpopulation concentrates; a smaller number tional structures be highly reproducible – that of larger generalists competes for the market is, unchanging (Hannan and Freeman, 1984). centre. As this happens, generalists focus If inert organizations are favoured over more tightly on the market centre and aban- changeable ones, inert organizations will be don more of the periphery to specialists. The less likely to fail. upshot of this partitioning of the resource The structural inertia thesis does not imply space between a core occupied by generalists that organizations never change; rather, it and a periphery occupied by specialists is implies that when organizations do change, that increasingly intense competition resources are diverted from operating to reor- between generalists leads to not only higher ganizing, reducing effectiveness and increas- failure rates for generalists, but also lower ing the likelihood of failing. Ecologists failure rates and higher founding rates for distinguish between two consequences of specialists. Like the density-dependence change: process effects, which stem from the model and its offshoots, the resource- inevitable frictions generated by undertaking partitioning model has been tested on a wide change and which are inherently deleterious, array of organizations, including newspapers and content effects, which derive from the (Carroll, 1985; Boone, Carroll and van altered fit between changed organizations Witteloostuijn, 2002), auditors (Boone, and their environments, and which may be Broecheler and Carroll, 2000), breweries good if fit to the environment is improved, or 9781412931236-Ch24 5/19/08 4:17 PM Page 577

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bad if fit is worsened (Barnett and Carroll, of organizations, including newspaper 1995). Notwithstanding the grim prognosis publishers (Carroll and Delacroix, 1982; for organizational change, some of the more Freeman, Carroll and Hannan, 1983; optimistic ecologists have investigated the Amburgey et al., 1993), labour unions possibility that in some circumstances, (Freeman et al., 1983), and semiconductor organizations can adapt and change can be manufacturers (Freeman et al., 1983). But beneficial, such as when organizations these studies confounded the effects of age diversify after large-scale shifts in external with those of size (Barron et al., 1994; conditions (Haveman, 1992), or when organ- Hannan, 1998). Findings that failure rates izations’ constituencies support the content decline with age may be spurious because of change and are willing to supply resources there is a positive correlation between size to effect change (Minkoff, 1999). Others and age, and a negative effect of size on fail- have shown that ties to state and community ure. This was clear in an analysis of New institutions, which provide resources and York credit unions: age on its own had a neg- legitimacy, can buffer organizations from the ative effect on failure, but after including size deleterious effects of change (Baum and in the analysis, the effect of age became pos- Oliver, 1991). Despite these important limi- itive, while the effect of size was negative tations on the inertia hypothesis, empirical (Barron et al., 1994). Similarly, size damp- analysis generally shows that change harms ened failure rates for all but the largest life organizations (Barnett and Carroll, 1995; insurance companies in New York, while Carroll and Hannan, 2000: 357–380). age increased failure rates (Ranger-Moore, Change may be harmful, but organizations 1997). The current consensus is that failure do often change. Change exhibits momen- rates generally decline with size and increase tum: the more organizations have changed in with age (Hannan, 1998). However, the effect the past, the more they are likely to change in of age, after controlling for size, may be non- the future because they have learned how to linear – increasing in the first few years after change (Amburgey and Miner, 1992; founding, as fledgling organizations use up Amburgey, Kelly and Barnett, 1993; Greve, their initial stores of resources, then decreas- 1998). Change is often driven by prior per- ing, as organizations learn how to operate formance, assessed relative to goals, and by efficiently and develop solid reputations changes made by rivals, which in the aggre- (Levinthal, 1991). gate alter an organizational population’s demography (Greve, 1998). If the forces that drive change (notably performance) also Organizational form as identity drive failure, analyses of change and failure must account for endogeneity. Doing so The newest strand of ecological theory reveals that even though change causes per- involves analyzing organizational forms as formance to decline and the chance of failure identities or social codes, which are ‘recog- to rise, there is a big difference between nizable patterns that take on rule-like stand- well- and poorly-performing organizations. ing and get enforced by social agents’ (Pólos, Poorly-performing organizations may benefit Hannan and Carroll, 2002: 89; see also from change, but well-performing ones are Hannan, Pólos and Carroll, 2007). Such usually harmed (Greve, 1999). socially-coded identities comprise both rules Because older and larger organizations are of conduct and signals to internal and exter- expected to be more inert and thus less likely nal observers. Rules of conduct provide to fail, empirical research has often focused guidelines for members of a population by on the effects of age and size on organiza- delimiting what they should and should not tional failure. Failure rates have been found be and do, while signals generate a cognitive to decline with age in studies of many kinds understanding about the population because 9781412931236-Ch24 5/19/08 4:17 PM Page 578

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they define what observers understand the With regard to inertia, research on young members of an organizational population are high-technology firms in California showed and what they do. that the content effects of change are most Thinking about organizational form as hazardous when they involve shifts in iden- identity has benefited the other strands of tity (Hannan, Baron, Hsu and Koçak, 2006). ecological analysis. Consider resource parti- Growth in market capitalization slowed and tioning first. An analysis of the identities and failure rates rose following changes in competitive tactics of U.S. breweries showed human-resource blueprints – a core aspect of how and why established firms (mass-pro- these firms’ identities. In contrast, outside ducer breweries) that are under siege by CEO succession depressed growth in market insurgents (microbreweries and brewpubs) capitalization but did not affect failure rates. have a limited ability to adopt the beneficial This study redirects attention from the inter- features of their new rivals (Carroll and nal consequences of change – disruption of Swaminathan, 2000). Quite simply, it is diffi- routines and structures – to the external con- cult for organizations with established identi- sequences, in particular, to what happens ties to present themselves as entirely when organizations violate the expectations different kinds of organizations, even when of external observers (here, investors). Thus, their identities are based on intangibles such it paves the way for empirically assessing the as perceived authenticity. In a similar vein, a content effect of change, to complement pre- study of American feature films showed that vious studies of the process effects of change there is a fundamental tradeoff between (e.g., Amburgey et al., 1993; Greve, 1999). appealing to a broad customer base (being a generalist) and targeting a more focused base (being a specialist): films pitched in multiple Summary genres attracted larger audiences but were less appealing than films pitched in a The great strength of the ecological tradition single genre, because audiences found is its high level of paradigmatic consensus multi-genre films difficult to make sense of (Pfeffer, 1993). Ecologists agree on what (Hsu, 2006). outcomes to study (founding, failure, growth, For the density-dependence model, analy- performance, and change), what explanatory ses of identities among disk-array producers factors to consider (the number of organiza- showed that, contrary to what happens when tions of various (sub)forms, as well as their classic density-dependent competition and sizes, ages, locations, technologies, net- legitimation operate, increases in the density works, and identities), and what analytical of disk-array producers did not legitimate the strategies to employ (primarily quantitative disk-array-producer form (McKendrick and analysis of original data sets covering entire Carroll, 2001; McKendrick, Jaffee, Carroll populations of organizations over extended and Khessina, 2003). Most disk-array periods of time). Among theories of organi- producers had heterogeneous origins and zations, ecology displays the highest degree continued to derive their primary identities of logical rigour. Indeed, ecology has bene- from other fields. These heterogeneous fited from several logical tests: of resource origins and persistently derivative identities partitioning (Péli and Nooteboom, 1999), made it impossible for the disk-array- inertia (Péli, Bruggeman, Masuch and producer form to cement its own distinctive Ó Nualláin, 1994; Hannan, Pólos and Carroll, identity. Following this logic, only increases 2003), and density dependence (Kamps and in the density of firms with focused identi- Péli, 1995). These tests have revealed incon- ties, not increases in total density, should sistencies and incoherencies in natural- result in the establishment of a distinct language statements of ecological theory and organizational form. so paved the way for theoretical refinements. 9781412931236-Ch24 5/19/08 4:17 PM Page 579

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In sum, because organizational ecologists scope of organizational institutionalism (for have always built on and refined each other’s a more detailed review, see Greenwood work, they have accumulated much knowl- [Introduction, this volume] or Scott edge about organizational dynamics. [1995/2001]). Like ecological analysis, insti- But the strength of the ecological research tutional analysis of organizations can be programme reveals a weakness: precisely broken down by subject area. Three of the because it is such a ‘normal-science’ most important are legitimation and institu- activity, some find it too narrow to interest tionalization, isomorphism and diffusion, anyone except ecologists themselves (e.g., and strategic action. We discuss each in turn. Hedström, 1992). As van Witteloostuijn (2000: v) put it, organizational ecology has a ‘relatively small influence outside the inner Legitimation and circle of its own parish’. Narrowness may institutionalization overtake this paradigm because much work clarifies and refines the basic theory without Legitimacy is the central concept in institu- extending it in truly novel directions; as a con- tional analysis. Organizations are legitimate sequence, ecologists’ work rarely intersects when they are comprehensible and taken for with – or draws the interest of – scholars in granted as the natural way to achieve some other research traditions. The marginalization collective goal (Berger and Luckmann, of organizational ecology is revealed in analy- 1967), when they are justified and explained ses of submissions to the Organization and on the basis of prevailing values, role Management Theory Division of the models, and cultural accounts (Meyer and Academy of Management Annual Meetings of Rowan, 1977; Douglas, 1986), when they are 2004 and 2005 (Thompson, 2004; Davis, sanctioned or mandated by authorized actors 2005). According to author-assigned key- (DiMaggio and Powell, 1983), and when words, which could indicate either theory or those involved cannot even conceive of alter- phenomenon, a relatively small number of natives (Zucker, 1983). Legitimacy can rest papers labelled as ‘ecological’ were submit- on any of three foundations: regulative, ted, far fewer than the number of papers which includes the laws and administrative labelled as ‘institutional’. Perhaps more guidelines that constitute the basic rules gov- important, organizational ecology occupied a erning relationships within and between relatively peripheral position in the network of organizations; normative, meaning ‘expert’ references to other perspectives and phenom- sources of information and value judgments ena, as it was used in combination with few about the nature of organizations; and cogni- other perspectives and it was used to tive, meaning shared perceptions of organ- explain relatively few phenomena. This ized social activity (Scott, 1995 [2001]). situation is unfortunate, given ecology’s Highly legitimate forms of organization are many theoretical advances and empirical highly institutionalized – perceived as objec- successes. tive and exterior facets of social life (Berger and Luckmann, 1967). The greater the legitimacy attributed to an organizational form, the less any member of that form will require HOW DO WE UNDERSTAND active justification and the more it will be INSTITUTIONAL ANALYSIS? taken for granted and accepted by observers. Legitimacy improves access to resources and Before comparing institutional analysis of acceptance from customers, and thus con- organizations to ecology, we want to make tributes to organizations’ ability to persist sure we’re all ‘on the same page’, so we offer (Meyer and Rowan, 1977). Empirical our own brief assessment of the nature and research has supported these ideas for many 9781412931236-Ch24 5/19/08 4:17 PM Page 580

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kinds of organizations, including hospitals (Haveman and Rao, 1997; Haveman, Rao (Ruef and Scott, 1998), biotechnology start- and Paruchuri, 2007). ups (Stuart, Hoang and Hybels, 1999), day- care centres (Baum and Oliver, 1991), and banks (Deephouse, 1996). Isomorphism The flip side of institutionalization is deinstitutionalization: erosion of activities or Institutionalists wonder why organizations practices (Oliver, 1992). And the flip side of are so similar (DiMaggio and Powell, 1983). legitimation is delegitimation: reduced Accordingly, one of the most important ideas acceptance of activities or practices. Some in institutional analysis is that of isomor- scholars see the continuance of structures, phism (literally, ‘same shape’). As communi- rules, and routines as inherently problematic, ties of organizations evolve, a variety of and see deinstitutionalization as an inevitable forces (interorganizational power relations, process (e.g., Covaleski and Dirsmith, 1988; the state and professions, and competition) Zucker, 1988) Deinstitutionalization can be promote isomorphism within sets of organi- precipitated by political, functional, or social zations that either play similar roles or are forces (Oliver, 1992). Some forces for tied directly to each other. There is a logical deinstitutionalization are internal to the focal connection between isomorphism and legiti- organization, including increasing workforce macy. The more prevalent an organizational diversity, declining performance, and execu- structure, practice, or tactic, the more legiti- tive succession. For instance, poor per- mate it is. Therefore, one indicator of legiti- formance triggered the abandonment of macy is the spread of organizational features, permanent-employment guarantees and which increases isomorphism within fields increased downsizing by Japan firms; more- (Tolbert and Zucker, 1983). Moreover, the over, the rate of abandonment increased with three bases of legitimacy map neatly onto the the number of firms downsizing (Ahmadjian three processes driving isomorphism: cogni- and Robinson, 2001). Other forces for dein- tive legitimacy onto mimetic processes, reg- stitutionalization are external, such as tech- ulative legitimacy onto coercive processes, nological innovation, shifts in the polity or and normative legitimacy onto normative general culture, economic booms or busts, processes (Scott, 2001). and changes in regulation. For example, the Interest in isomorphism has produced decline of large conglomerates in the 1980s many, many studies of the diffusion of was precipitated by shifts in attitudes and formal structures and practices across organi- beliefs about the nature of the firm (Davis, zational fields, encompassing all three Diekmann, and Tinsley, 1994). The idea of engines of diffusion. Coercive pressures the firm as a bounded social entity, analogous accelerate diffusion; for instance, structures to a sovereign body which could not be mandated by the state diffuse more rapidly dismembered, lost legitimacy in the face of than structures encouraged but not mandated evidence that conglomerates were inefficient; (Tolbert and Zucker, 1983). Although state as a result, many were taken over and broken regulations appear to be simple coercive up. Similarly, several forms of savings- forces, reality is often more complex, as and-loan associations, each embodying many state regulations allow discretion in a different set of opinions, beliefs, and judg- their interpretation and application (Dobbin ments, were extinguished by a combination and Sutton, 1998). For example, in response of technical pressures (changes in human to legal mandates against employment demography and employment patterns) discrimination, firms experimented with and institutional pressures (changes in several ways to demonstrate compliance – attitudes towards bureaucracies precipi- creating both new rules and new units tated by the Progressive movement) (Edelman, 1992) – until court rulings showed 9781412931236-Ch24 5/19/08 4:17 PM Page 581

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one way – formal, merit-based rules govern- management (TQM) programmes as TQM ing hiring and promotion – to be suffi- adoption increased (Westphal, Gulati and cient, after which the sanctioned approach Shortell, 1997). diffused widely (Dobbin, Sutton, Meyer and Scott, 1993). Normative pressures often trump coercive Strategic action pressures, because state regulations often allow discretion in their interpretation and Organizations do not simply react to environ- application (Edelman, 1992; Dobbin et al., mental demands; instead, they are often 1993). Take, for instance, the diffusion of proactive and control their environments. human-resources practices among U.S. Recognizing this, institutionalists place con- firms. Human-resources managers and formity on a continuum of responses that labour lawyers used the ambiguity inherent includes compromise, avoidance, defiance, in employment law to promote particular and manipulation (Oliver, 1991). Indeed, solutions – those that would solidify their organizations can avail themselves of many power – and discourage others (Dobbin and different tactics for gaining legitimacy (con- Sutton, 1996; Sutton and Dobbin, 1998). form to, select, or manipulate the environ- Thinking more broadly, the civil-rights ment), maintaining legitimacy (police mandates of the 1960s created a normative internal activity, eschew obvious appeals for environment that led employers to adopt legitimacy, and stockpile goodwill), and several human-resources procedures, even in repairing legitimacy (offer normalizing the absence of formal legal sanctions accounts, restructure, and (our favourite!) (Edelman, 1990). don’t panic) (Suchman, 1995). These ideas Mimetic pressures are ubiquitous but pave the way for investigating when con- subtle. In the early stages of diffusion, formity will or will not occur, and assessing adopters of new structures and practices tend the effectiveness of various strategic to be those facing technical problems of con- responses. trol and co-ordination they hope will be Empirical work on strategic action often solved by these innovations; later, however, investigates how rhetoric is used to legiti- as the innovations become widespread, con- mate change. For example, tracing the evolu- nections between technical rationality and tion of corporate takeovers from 1950 adoption are attenuated and the causal engine through 1985 revealed that rhetoric created shifts from technical rationality to blind imi- powerful new patterns of meaning, which in tation, as innovations become taken for turn affected the status attributed to buyers granted as the ‘right’ way to do things and target firms alike (Hirsch, 1986). As the (Tolbert and Zucker, 1983; Baron, Dobbin practice of hostile takeovers diffused, the and Jennings, 1986). There is widespread language used to describe them became more evidence of mimetic diffusion: corporations positive and more complex (borrowing from were more likely to adopt the multidivisional more genres; evaluating bidders and targets). form when others in their industry had Moreover, takeovers came to be framed as done so (Fligstein, 1985), savings and loans violent when the bidder was outside the cor- were more likely to expand into new service porate establishment, but dispassionately and areas when large and profitable firms benignly when the bidder was an insider. In were active there (Haveman, 1993), acquir- the same vein, a study of attempts to repair ing firms were more likely to select invest- legitimacy after a public-relations crisis in ment banks used by large and profitable the cattle-ranching industry demonstrated the others (Haunschild and Miner, 1997), and efficacy of verbal accounts (Elsbach, 1994). hospitals were more likely to adopt standard- Similarly, a study of accounting firms ized (as opposed to customized) total quality showed that the profession was ‘framed’ as 9781412931236-Ch24 5/19/08 4:17 PM Page 582

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being under threat and that change was thus marginalized and have little power – like natural, almost inevitable; thus, rhetoric por- women in the late nineteenth and early twen- trayed the broadening of accounting firms’ tieth centuries – can develop new kinds of professional scope as a solution to evolving organizations; these ventures are most likely client needs and heightened competition to succeed when they embody familiar struc- (Greenwood, Suddaby and Hinings, 2002). tures and practices (Clemens, 1997). Strategic actors in accounting deployed many rhetorical strategies to legitimate mul- tidisciplinary partnerships: appealing to Summary myths of progressive rationality, suppressing contradictions, and emphasizing consistency The strength of the institutionalist perspective with professional values (Suddaby and is its sweeping reach. Consider the core con- Greenwood, 2005). Finally, institutional cepts, institution and institutionalization . entrepreneurs in the HIV/AIDS-treatment Scholars working in this tradition have field framed new practices of consultation claimed that institutionalization is both an out- and information exchange among commu- come, which suggests attention to stability, nity organizations and pharmaceutical com- and a process, which suggests attention to panies in ways that integrated the interests of change. They have identified the carriers of many different stakeholders and that were institutions at multiple levels of analysis: the consistent with existing routines (Maguire, routines, rules, scripts, and schemas that guide Hardy and Lawrence, 2004). the perceptions and actions of individuals and Strategic action is especially obvious small groups; local regional or demographic- when people are trying to create new kinds of group identities and regimes; meso-level organizations. Such institutional entrepre- organizations, occupations, and fields; and neurship requires the skillful use of resources society-wide norms and codified patterns of to overcome skepticism and persuade others meaning and interpretation. They have identi- to believe entrepreneurs’ representations of fied a wide array of mechanisms through reality and thus to support their new ventures which institutionalization occurs: habituation, (DiMaggio, 1988; Fligstein, 1997). For blind or limitedly-rational imitation, norma- example, art historians and their patrons tive conformity, accreditation, social obliga- co-operated in the nineteenth century to tion, and coercion. In building theory, they develop art museums as a distinct cultural have drawn not only on sociology, but also on form by creating a framework that distin- cognitive psychology, philosophy, and lin- guished vulgar art from high art and by guistics. Finally, they have employed a wide establishing non-profit enterprises to show- array of methodologies, ranging from ethno- case and conserve their cultural capital graphies and qualitative historical studies to (DiMaggio, 1991). Product-testing organiza- laboratory experiments to statistical analyses tions and consumer leagues promoted con- of survey and archival data. As a result of its sumer watchdog associations by tapping into breadth and flexibility, institutionalist analysis the growing customer-service and truth-in- has recently dominated submissions to the advertising movements; these institutional Organization and Management Theory entrepreneurs also linked their activities to Division of the Academy of Management home-economics professors, who already Annual Meetings (Thompson, 2004; Davis, enjoyed the legitimacy accorded to academia 2005). Institutional analysis was also central (Rao, 1998). Such actions conferred norma- in the network of references to other perspective appropriateness to the new consumer- tives or to specific phenomena, indicating that watchdog form and shielded it from institutionalism was used to explain a wide opposition, thus allowing it to stabilize and range of phenomena and was used in combi- persist. Even individuals and groups that are nation with many other perspectives. 9781412931236-Ch24 5/19/08 4:17 PM Page 583

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But the strength provided by this broad differences, then – finally! – answering the reach also generates a critical weakness. If question posed in our title. institution and institutionalization mean everything and explain everything – change and stability; routines, values, and norms; Points of similarity intra-organizational, organizational, and interorganizational structures and behav- Ecological and institutional approaches have iours; cognitive, regulative, and normative as their most basic commonality their ori- processes – then they mean nothing and gins: both developed as corrections to ratio- explain nothing. The institutional ‘tent’ nalist and adaptationist theories that were in houses a loose collection of propositions, of use in the 1960s and early 1970s, which varying degrees of formality, some seem- assumed that those in charge of organizations ingly incompatible and others only tenuously could survey the environment and determine connected. For example, it is unclear when what the organization should do, and that coercive, mimetic, or normative forces organizations could easily change their predominate, and to what extent these are strategies and structures, and thus improve conceptually or empirically distinct phenom- their performance. Both organizational ena (Mizruchi and Fein, 1999). Given these ecology and institutionalism broke with the fundamental uncertainties, debates in assumption that organizations could be the institutionalist tradition tend to be unpro- adapted to external conditions in a techni- ductive feuds about intellectual origins cally rational way. In the case of ecology, and definitions, rather than substantive inertial forces prevent timely adaptation; arguments about logic or evidence in the institutional perspective, conforming (e.g., Scott, 1995 [2001] vs . Hirsch, 1997). to institutional rules can prevent efficient Institutionalists have not built systematically operation. on one another’s work to the same Another deep commonality – albeit one extent that ecologists have, and the institu- that is often mistaken for a basic difference – tional perspective has not accumulated is a concern for the variety (or lack thereof) empirical successes at the same rate as of organizations. As we noted above, ecolo- ecology has. This lack of accumulation of gists ask ‘why are there so many kinds of knowledge happened because institutional- organizations?’ (Hannan and Freeman, 1977: ists eschewed ‘theories of the mid range’ – 936), while institutionalists wonder why logically interconnected sets of propositions, organizations are so similar (DiMaggio and derived from assumptions about essential Powell, 1983: 148). The apparent contrast in facts (axioms) and causal mechanisms these questions is illusory, however, because (unobservables), that yield empirically they point to the ends of a single continuum , testable hypotheses and deal with delim- which runs from a setting in which each ited aspects of social phenomena (Merton, organization is unique to one in which all 1968: 39–72). organizations are identical. To explain one end of the continuum, one must explain the other. The real questions are how much organizational variety there is and what factors COMPARING ECOLOGICAL AND contribute to more or less variety. INSTITUTIONAL ANALYSIS These core similarities have led researchers within the two traditions to focus on similar We begin by laying out the things that make constructs and to study similar phenomena: ecology and institutionalism similar. We then legitimacy, organizational form, the emer- discuss the things that make them different. gence and spread of new organizational We conclude by weighing similarities and forms and features, organizational change 9781412931236-Ch24 5/19/08 4:17 PM Page 584

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(or persistence), and organizational survival institutionalism. The most basic discord or failure. Consider legitimacy: ecologists stems from their theoretical agendas. and institutionalists alike believe that legiti- Ecologists value parsimony and generality, macy is necessary for the emergence of new while institutionalists prefer richness and organizational forms, and the proliferation contextual specificity. Therefore, ecologists and persistence of existing organizational strive to identify broad regularities across forms. For ecologists, legitimacy is cognitive populations. Institutionalists, in contrast, in nature and accrues to an organizational attempt to offer highly contextualized and form as it increases in numbers and thus nuanced depictions of organizations or fields. becomes accepted as the natural way to effect This conflict is difficult to reconcile because collective action (Hannan and Freeman, it reflects a difference of taste in theorizing, 1987, 1988). Institutionalists also recognize but it could be settled by careful empirical the cognitive aspect of legitimacy, but attend analysis. The issue boils down to whether or to its regulative and normative dimensions as not relationships between explanatory and well (Scott, 2001). Both traditions also outcome variables vary over time and across emphasize organizational survival as a central contexts – clearly empirical questions. For outcome of interest; this stands in contrast to instance, does density dependence operate other areas of organizational scholarship, over a population’s entire history or just such as strategic management, that focus on within particular periods defined by larger profitability or market share. For ecologists, forces, such as technology, social mores, and organizational survival is determined by tan- the state (e.g., Dobbin and Dowd, 2000)? gible resource flows, whereas for institution- Does the similarity (or difference) between a alists it is rooted in the subjective assessments focal population and related populations of constituents. This overlapping interest in a affect density-dependent processes (e.g., core set of constructs and phenomenon, Ruef, 2000; Dobrev, 2001)? And does the despite differences in the ways they have nature of the organizations under study or been conceived and measured, forms the their context determine how inert they are basis for considerable conceptual, method- and whether change harms or helps them ological, and empirical common ground. (e.g., Dobrev, Kim and Carroll, 2003)? Indeed, methodological similarity is obvi- Ecologists’ concern for parsimony and ous, as both sets of scholars employ original generality has led them to follow a tight data on collections of organizations – popula- normal-science trajectory, while institution- tions in the case of ecologists and fields in the alists’ concern for richness and contextual case of institutionalists. This empirical strategy specificity has yielded a more emergent and stands in stark contrast to much other sociolog- diffuse research agenda. To put it more for- ical research, where reliance on publicly-avail- mally, ecology is a collection of overlapping able data, especially survey data, is the norm. theories of the mid-range, each of which Both research traditions also emphasize longi- builds on a small set of assumptions and tudinal analysis. This contrasts with the causal mechanisms to derive empirically approach taken in other research traditions, testable predictions about a delimited set of such as transaction-cost economics and organizational outcomes. Institutionalism, resource-dependence theory, both of which in contrast, is not really a single mid- tend to rely on cross-sectional data. range theory, or even a collection of such theories – despite the prevalence of the label ‘institutional theory’. Instead, institutional- Points of difference ism is a perspective – a congeries of ideas and empirical tests of those ideas that Despite these basic commonalities, there are demonstrate the power of rules and regula- important differences between ecology and tions; frames and schemas; and norms, 9781412931236-Ch24 5/19/08 4:17 PM Page 585

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values, and expectations in explaining orga- use contextually sensitive measures of the nizational genesis and functioning. three bases of legitimacy, none of which can Institutionalists and ecologists also differ be reduced to simple counts: links between remarkably in their ontological stance – their the focal organizations or fields and powerful understanding of the essential nature of the supporting organizations or fields, such as empirical world. Basically, ecologists are the state or professions; coverage of the focal empirical realists who believe that the mate- organizations or fields in the news media, rial world is primary and consciousness is either positive or negative; and laws and reg- secondary; thus, the material world, includ- ulations supporting or undermining various ing organizations and their environments, forms of organization. exists outside of and independent of our The last core difference between ecology observations. In stark contrast, institutional- and institutionalism is that while both tradi- ists are social constructionists (subjective tions feature quantitative analyses of longitu- idealists) who believe that all phenomena are dinal data on collections of organizations, mental constructions created through social institutionalism encompasses a greater vari- interaction; thus, the material world is sub- ety of methods, including case studies of jective and interior, rather than objective and single organizations (e.g., Ritti and Silver, exterior. To put the difference in plainer 1986), qualitative historical analyses of fields terms, ecologists believe that organizational (e.g., DiMaggio, 1991; Rao, 1998), and labo- environments are ‘real’ phenomena, while ratory experiments of organizational mem- institutionalists hold that they are created by bers (e.g., Zucker, 1977; Elsbach, 1994). the shared perceptions and interactions of Ironically, the tradition most interested in individuals, groups, and organizations. 2 organizational diversity – ecology – displays Differences in goals and philosophy lead little diversity in its theoretical and method- naturally to differences in constructs, predic- ological approaches, while the tradition inter- tions, and methods. As noted above, even ested in isomorphism – institutionalism – though the construct of legitimacy figures displays a great deal level of diversity. prominently in both traditions, ecologists have focused exclusively on its cognitive dimension, while institutionalists have vari- The bottom line: answer the ously studied its regulative, normative, and question already! cognitive components. There are two related issues here: what does legitimacy mean, and After surveying the nature of organizational how should it be measured? According to ecology and institutional analysis of organi- organizational ecologists, legitimacy is the zations, and considering their points of simi- degree to which an organizational form is larity and difference, we conclude that taken for granted. To capture legitimacy, ecologists and institutionalists have in the researchers simply count the number of past been both friends and foes, but that they organizations in the focal population. have good reason to be far friendlier in the Institutionalists recoil from this simple future. Both sets of scholars reject the approach (Zucker, 1989; Baum and Powell, assumption, pervasive in the late 1960s and 1995). They protest that legitimacy encom- early 1970s and still popular today, that passes cognitive, normative, and regulative organizations are pliant tools that can easily dimensions, which may or may not correlate be made to fit technical exigencies. Both sets with one another (Scott, 2001). To institu- of scholars are centrally concerned with tionalists, a count of organizations of a given explaining organizational variety, even form says little about the subjective evalua- though they use different terms – ecologists tions constituents make about that form. talk about heterogeneity, institutionalists Institutionalists therefore argue that we must about homogeneity. Moreover, both sets of 9781412931236-Ch24 5/19/08 4:17 PM Page 586

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scholars seek to explain organizational adap- We are also hopeful because we see an tation, or lack thereof, to shifting circum- increasing number of well-executed studies stances, even though they use different that combine ecological and institutional terms – ecologists discuss inertia, institution- arguments to gain richer insights. For exam- alists persistence. In addition, both sets of ple, in a study of child-care centres, Baum scholars emphasize the role of legitimacy, and Oliver (1991) tested the structural-inertia although they disagree about its basis – hypothesis of organizational ecology by purely cognitive for ecologists; cognitive, taking into consideration sociopolitical legit- regulative, and normative for institutionalists. imacy as understood by institutionalists. Moreover, both traditions generally focus on They found that linkages to powerful state collections of organizations, rather than indi- actors mitigated the high failure rates of vidual organizations or subunits, although young and small organizations. Haveman they use different labels – ecologists talk of (1993) combined ideas about density populations and communities while institu- dependence in organizations’ vital rates with tionalists discuss fields and sectors. Finally, the mimetic isomorphism hypothesis to pre- both sets of scholars take a dynamic, rather dict diversification into new markets in the than comparative-static, approach to savings-and-loan industry; she found that organizational phenomena and use original increases in the number of successful organ- longitudinal, rather than derivative cross- izations in a market drew in new entrants sectional data. until competitive effects swamped legitimat- We may be wide-eyed optimists, but we ing ones, at which point new entries began to see differences between ecology and institu- decline. Dacin (1997) found that both sheer tionalism eroding. Consider the basic unit of density and sociopolitical factors like rising analysis for ecologists and institutionalists nationalism could be used in concert to alike, organizational form. Ecologists origi- explain founding rates of Finnish news- nally conceived of distinct forms of organiza- papers. Similarly, Wade, Swaminathan and tions as having a unitary standing with Saxon (1998) showed how both density respect to the environment, and identified and particularistic institutional conditions – them empirically through observable social non-uniform state-government regulation – discontinuities and conventional cognitive affected the geographic distribution of maps (Hannan and Freeman, 1977). In other breweries’ foundings and failures. Most words, for ecologists, the difference between recently, David and Strang (2006) combined forms could be deduced from observation of insights from ecology’s resource-partitioning their inputs and outputs. In contrast, institu- model with notions of mimetic behaviour tionalists typically classified organizations from institutional analysis; they showed how according to their distinctive logics – the among management-consulting firms, gener- socially-constructed sets of beliefs and alists and specialists exploited different types values upon which they are based. To iden- of demand and reacted differently to shifts in tify a form, researchers would need to under- collective understandings regarding popular stand the cultural elements upon which the management practices. form was built (e.g., DiMaggio, 1991; Rao, 1998). This distinction between resource flows and cultural underpinnings is disap- pearing, as ecologists have recently come to PRESCRIPTIONS FOR FUTURE conceive of organizational forms as identities RESEARCH or social codes (Pólos, Hannan and Carroll, 2002; Hannan, Pólos and Carroll, 2007), Our final task is to offer suggestions for which is much closer to the conception of readers about how to engender a more pro- form used by institutionalists. ductive exchange of ideas between the two 9781412931236-Ch24 5/19/08 4:17 PM Page 587

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research traditions. In particular, we suggest normative, and cognitive (Scott, 2001) or how scholars in each tradition can learn from pragmatic, moral, and cognitive (Suchman, the other to improve their research. 1995) – and the fact that ecologists have been expansive in their use of this term – talking not just about taken-for-grantedness but also How to live peaceably and prosper about conformity to recognized principles or accepted rules and standards (Aldrich and Can institutionalists and ecologists stop snip- Fiol, 1994), and normative (value) judgments ing and develop productive intellectual by observers (Pólos et al., 2002; Hannan et al., exchanges? Although there is a substantial 2007). This bewildering list must be win- middle ground between ecology and institu- nowed down. What kinds of legitimacy result tionalism, important philosophical, theoreti- from which sources, and what effect does each cal, and empirical differences (and the have? Do different kinds of legitimacy work in occasional dust-up over them) have pre- tandem or opposition? Which kinds are most vented much fruitful interaction. Indeed, potent, when, and for which outcomes? Not clashes between ecologists and institutional- until these questions about legitimacy are ists have been intense precisely because answered, along with similar questions about there are such great overlaps between the other constructs central to both ecology and phenomena they study and close similarities institutionalism, can the research traditions in the constructs they use to explain these fruitfully co-exist. phenomena. If ecologists and institutionalists were studying very different things using very different ideas, the divergence in their How can institutionalists learn theoretical tastes – that is, basic preferences and benefit from the experiences for parsimony versus richness – would not of ecologists? vex them so much. Given this, how can accord be achieved? Our first prescription is for institutionalists to The answer is simple: ecologists and institu- develop a set of related theories of the mid- tionalists must reach a level of consensus con- range (that is, to focus on delimited and sub- cerning the many constructs they share, and stantively important topics), in order to agreement concerning the logical and empiri- accumulate knowledge (that is, to reject cal relationships between them. Fuzzy con- some ideas and affirm others). We are not struct definitions open doors for fruitless alone in thinking this way. Institutionalists debates: ‘he-said- vs .-she-said’ situations have already produced solidly cumulative develop in which both parties talk past and knowledge about U.S. employers’ responses caricature each other, rather than talking to to employee-rights legislation in the U.S. and hearing each other. While some theoreti- (Edelman, 1990, 1992; Dobbin et al., 1993; cal tension between the perspectives is Dobbin and Sutton, 1996; Sutton and healthy, we are hopeful that we can escape a Dobbin, 1998; Guthrie and Roth, 1999; Kelly situation in which ecologists seem like they and Dobbin, 1999). This knowledge informs are from Mars and institutionalists from subsequent research on the effectiveness of Venus. An excellent place to start would be organizational structures and practices in legitimacy. As explained above, ecologists decreasing sex and race segregation (Reskin and institutionalists define this construct dif- and McBrier, 2000; Kalev, Kelly, and ferently. The situation is exacerbated by the Dobbin, 2006). Notwithstanding this valu- fact that institutionalists do not agree among able example, much more could be done. themselves how to categorize the various One excellent candidate for more focused aspects of legitimacy – sociopolitical and con- and paradigmatic theorizing is institutional stitutive (Haveman et al., 2007), regulative, entrepreneurship – currently a ‘hot’ topic, as 9781412931236-Ch24 5/19/08 4:17 PM Page 588

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evidenced by our finding of 115 citations to about how to live peaceably and prosper, DiMaggio’s (1991) pioneering paper on the above.) Second, we must formulate more topic, and 12 articles published in 2005 and coherent and more clearly falsifiable hypothe- 2006 using this term in the title, abstract, or ses about relationships between constructs, keywords. 3 Work on institutional entrepreneur- and disdain loose propositions. In other words, ship presents a much needed theoretical and we should act (just a little bit!) more like ecol- empirical ‘boost’ to the generally woeful state ogists: in exchange for greater generality and of entrepreneurship research more generally, cumulative knowledge, sacrifice theoretical which has long been dominated by rationalist ambiguity and some small degree of contex- ideas, functionalist logic, and cross-sectional tual specificity. Doing so will have the benefit research designs. This means that institution- of allowing some institutionalist predictions to alists have a great opportunity to make an be disconfirmed by empirical analysis, while intellectual contribution. How does institu- others are confirmed, perhaps in contingent tional change create entrepreneurial opportu- formulations. Following this prescription will nity (e.g., Sine and David, 2003)? How do also allow us to take stock of the vast institu- entrepreneurs seize this opportunity to found tionalist output and outline scope conditions – new organizations (e.g., Sine, Haveman and explicit statements of the circumstances under Tolbert, 2005)? How do entrepreneurs modify which predictions do and do not hold, and the or create institutions to advance their interests types of phenomena that are more and less (e.g., Lawrence, 1999; Garud, Jain and amenable to institutional analysis. Kumaraswamy, 2002)? Institutionalism is uniquely placed to address such questions in a focused, cumulative manner that can expand How can ecologists learn from the our knowledge about an important social and experience of institutionalists? economic phenomenon. A second candidate for focused theorizing We offer two related prescriptions that will is the diffusion of new organizational features. refresh ecological research and return it to This should be an easy pill to swallow, as we the centre of organizational theory. First and have two first-rate models on which to build. most fundamentally, we should develop DiMaggio and Powell’s (1983) article about richer conceptions of organizational con- institutional isomorphism explains both what texts, ones that are more sensitive to time and kinds of forces drive the diffusion of organiza- place. In other words, we should take a page tional features to create isomorphism within out of the institutionalist handbook, and sac- institutional fields (mimetic, coercive, norma- rifice some parsimony and generality to tive) and the mechanisms by which diffusion acquire conceptual richness. Theoretically, operates (cohesion and structural equiva- this means returning to our roots in human lence). Strang and Tuma’s (1993) article pro- ecology, as pioneered by Park and Burgess vides a detailed, integrated model of diffusion (1921), and refined by Hawley (1950). processes, one that bridges the gap between Empirically, it means expanding our set of natural-language theory and hypothesis test- explanatory variables. Most ecological ing. It should not be difficult to turn the growth analysis has used the characteristics of the industry that is institutionalist studies of diffu- focal organization and the focal population to sion into a true knowledge-building project. explain organizations’ vital rates. Little Even if you accept our suggestions, it will ‘pure’ ecological work has considered be difficult to make institutionalist research characteristics of the world outside the focal more paradigmatic and cumulative. First, we population, including the state, social and need to reach agreement on the meaning of political movements, socially-constructed central constructs and stop using the vapid technological systems, and belief systems. umbrella term ‘institution.’ (See also our ideas Those more macroscopic explanations have 9781412931236-Ch24 5/19/08 4:17 PM Page 589

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been the domain of institutional analysis. inherit legitimacy from other pre-existing Indeed, in some ways ecological analysis, as entities can be answered by observation in the it has been practiced to date, can be seen as field and by qualitative analysis (e.g., textual nested within institutional analysis. By this, analysis) of organizational archives; these we mean that processes that have been the methods can shed new light on the content of object of ecological analysis, such as density organizing. Finally, experimental methods dependence, resource partitioning, structural like vignette studies can allow us to control, inertia, and identity valuation, seem to oper- in a rigorous way, alternative explanations for ate within contexts that are assumed to be several observed relationships, such as den- invariant in time and space (Dobbin and sity dependence in founding and failure rates. Dowd, 2000). Expanding the reach of eco- The second use to make of a greater variety of logical analysis to include forces exogenous empirical methods – direct observation in the to the population will connect ecology to field, laboratory experiments, historical/nar- many other research traditions: sociology of rative analysis, textual analysis – is to expand culture, political sociology, sociology of law, our set of core research questions by gather- and sociology of work. There is precedent ing new kinds of data on forces exogenous to here, as ecologists have long noted the organizational populations (see our first pre- importance of political environments on pop- scription for ecologists). ulation evolution (e.g., Carroll, Delacroix and Goodstein, 1988). Second, ecology would benefit from greater methodological pluralism. Statistical FINAL WORDS analyses of longitudinal archival data on entire populations of organizations, aug- In closing, we wish to step back and take the mented by computer simulations and logical perspective of nearby outsiders: strategy analyses, have demonstrated the veracity of researchers, economists, cognitive and social core ecological ideas. We are now in a posi- psychologists, and applied mathematicians. tion to expand our horizons in two ways. To them, institutionalism and ecology look First, we could cement our knowledge of remarkably similar. All of these fields are core causal mechanisms by gathering new highly rationalist. When scholars steeped in kinds of data. For example, questions about these traditions examine organizations, their organizational identities can be answered by focus is generally on understanding and gathering data on the opinions of observers, improving organizational performance. If both internal and external, through surveys institutionalism and ecology arose as an anti- and interviews. This is something that dote to rationalism within organizational innovative ecological research is beginning theory, then they might very well be seen as to do (e.g., Carroll and Swaminathan, 2000). allies within the broader context of organiza- Questions about inertia can be given new tional studies. Both institutionalists and ecolo- life through direct observations of change gists care deeply about theory, methodological efforts in theoretically important cases – rigour, and building an understanding of organizations that are either exemplary of organizations that goes beyond a narrow focus their form, outliers, or hybrids. Field meth- on optimizing performance. It is often those ods like participant observation can also help groups that are most similar to each other – us develop more nuanced understandings of French and English Canadians, Flemish and how the members of new organizations Walloon Belgians, Protestant and Catholic develop structures, routines, and norms, thus Irish – that fight most intensely, even when clarifying the process of organizing. more important battles lie elsewhere. The Questions about how new organizations, intellectual world of organizational studies especially those using novel forms, borrow or would benefit from a true peace – not a form 9781412931236-Ch24 5/19/08 4:17 PM Page 590

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of mutually assured destruction – between on merger activity. Strategic Management ecologists and institutionalists. Journal , 13: 335–48. Barnett, William P., and Glenn R. Carroll. 1987. Competition and mutualism among early telephone companies. Administrative Science ACKNOWLEDGEMENTS Quarterly , 32: 400–21. Barnett, William P., and Glenn R. Carroll. We thank Christine Oliver for her insightful 1995. Modelling internal organizational comments and Royston Greenwood for shar- change. Annual Review of Sociology , 21: ing his draft chapter tracing the evolution of 217–36. the institutional analysis of organizations. Baron, James N., Frank R. Dobbin, and P. Devereaux Jennings. 1986. War and peace: The evolution of modern personnel administration in U.S. industry. American NOTES Journal of Sociology , 92: 350–83. Barron, David N., Elizabeth West, and Michael 1 For more detailed reviews, see Carroll and T. Hannan. 1994. A time to grow and a time Hannan (2000) and Baum and Shipilov (2006). Note to die: Growth and mortality of credit unions that our analysis does not cover the study of internal in New York City, 1914–1990. American organizational demography and demographic Journal of Sociology , 100: 381–421. change. Both reviews delve into this more micro- Baum, Joel A.C., and Stephen J. Mezias. 1992. scopic line of work. 2 Organizational theory is not alone in being Localized competition and organizational divided into material realists and social construction- failure. Administrative Science Quarterly , 37: ists/idealists. Physics, for example, has long been 580–604. fraught by similar disagreements. Recall Einstein’s Baum, Joel A.C., and Christine Oliver. 1991. famous quip, when he rejected the idea from quan- Institutional linkages and organizational tum mechanics that reality was indeterminate and mortality. Administrative Science Quarterly , subjective: ‘God does not play dice with the uni- 36: 187–218. verse’. To put it crudely, the ontology of classical Baum, Joel A.C., and Walter W. Powell. 1995. physics is material realism, while that of quantum Cultivating an institutional ecology of organ- mechanics is subjective idealism. 3 These statistics come from searches conducted izations: Comment on Hannan, Carroll, on the Web of Science, February 2007. Dundon, and Torres. American Sociological Review , 60: 529–38. Baum, Joel A.C., and Andrew V. Shipilov. 2006. Ecological approaches to organizations. REFERENCES Forthcoming in S. Clegg, C. Hardy, and W. Nord, eds., Handbook of Organization Ahmadjian, Christina L., and Patricia Robinson. Studies, 2nd edn. London: Sage. 2001. Safety in numbers: Downsizing and Baum, Joel A.C., and Jitendra V. Singh. 1994. the deinstitutionalization of permanent Organizational niches and the dynamics of employment in Japan. Administrative organizational mortality. American Journal of Science Quarterly , 46: 622–54. Sociology , 100: 346–80. Aldrich, Howard E, and Marlene Fiol. 1994. Berger, Peter L., and Thomas Luckmann. 1967. Fools rush in? The institutional context of The Social Construction of Reality . Garden City, industry creation. Academy of Management NJ: Doubleday. Review , 19: 645–70. Boone, Christophe A.J.J., Vera Broecheler, and Amburgey, Terry L., Dawn Kelly, and William P. Glenn R. Carroll. 2000. Custom service: Barnett. 1993. Resetting the clock: The Application and tests of resource partitioning dynamics of organizational change and failure. among Dutch auditing firms from 1880 to Administrative Science Quarterly , 38: 51–73. 1982. Organization Studies , 21: 355–81. Amburgey, Terry L., and Anne S. Miner. 1992. Boone, Christophe A.J.J., Glenn R. Carroll, and Strategic momentum: The effects of repeti- Arjen van Witteloostuijn. 2002. Resource tive, positional, and contextual momentum distributions and market partitioning: Dutch 9781412931236-Ch24 5/19/08 4:17 PM Page 591

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