Academic journal article
By Swaminathan, Anand
Administrative Science Quarterly , Vol. 40, No. 4
Organizational populations as varied as newspapers, railroads, and banks apparently evolve in a strikingly similar pattern (Carroll, 1984: 88-89; Klepper and Graddy, 1990). The early history of these populations shows a small number of organizations. A period of rapid increase in numbers follows. Finally, the number of organizations either stabilizes or declines as the population matures. Several populations such as book publishing, music recording, newspaper publishing, brewing, and banking, however, show a dramatic resurgence in numbers after having experienced a protracted period of decline or stability (Powell, 1985; Carroll, 1987; Carroll and Swaminathan, 1991; Freeman and Lomi, 1994). Often, these newly founded organizations constitute specialist organizational forms, which depend on a narrow range of environmental resources for survival (Freeman and Hannan, 1983; Carroll, 1985). Further, their formal structure, patterns of activity, and normative order are different from those of dominant generalist organizations. This pattern of industry evolution and new firm entry is also characteristic of the American wine industry, the context of this study.
With few exceptions (Carroll and Swaminathan, 1992; Freeman and Lomi, 1994), the study of organizational foundings is rife with unitary causal explanations. For instance, founding rates of specialist organizations can be explained solely in terms of niche formation (Delacroix and Solt, 1988) or resource partitioning (Carroll, 1985). Conceptually, it is important to determine which if any of several proposed theories contribute to an explanation of the founding rate of specialist organizations. Empirically, it is important to gauge the extent to which these theories explain the founding rate of specialist organizations. An understanding of how powerful the effect of a unit change in a given causal factor is on the dispersion of founding rates adds significantly to our knowledge of the organizational founding process (Singh and Lumsden, 1990). This study represents an initial attempt to estimate the relative influence of several causal factors that drive the founding of specialist organizations. These include density-dependent legitimation and competition (Hannan, 1986), niche formation due to changes in consumer preferences (Delacroix and Solt, 1988), resource partitioning (Carroll, 1985), and a supportive institutional environment (Tucker, Singh, and Meinhard, 1990).
In general, we would benefit from disentangling the various theoretical models that explain variations in organizational founding rates (Singh, 1993: 468-469). Delacroix and Rao (1994) recently criticized research on density-dependent evolution of organizational populations and proposed alternative interpretations of findings that support density-dependence theory. This study evaluates some of their arguments about organizational foundings by modeling density dependence in founding rates in addition to other factors, such as the effects of infrastructural support and vicarious learning. More importantly, support for one or more of the above-mentioned theoretical explanations suggests that different aspects of an organizational population's environment may play a prominent role in the founding process. For instance, institutional support and niche formation are factors that are largely exogenous to an organizational population, whereas density dependence and resource partitioning are endogenous to the organizational population.
The study of specialist organizations is important for at least two reasons. First, specialist organizations may be responsible for "de-maturity," or a reversal in industry maturity (Abernathy, Clark, and Kantrow, 1983). Such reversal is often the result of changes in the relationship between technological and market preferences. Industry maturity is characterized by high levels of standardization in technology and products. Any reversal in industry maturity can be seen as an iterative process. …