Density-Dependent Dynamics in Regulated Industries: Founding Rates of Banks and Life Insurance Companies

By Ranger-Moore, James; Banaszak-Holl, Jane et al. | Administrative Science Quarterly, March 1991 | Go to article overview

Density-Dependent Dynamics in Regulated Industries: Founding Rates of Banks and Life Insurance Companies


Ranger-Moore, James, Banaszak-Holl, Jane, Hannan, Michael T., Administrative Science Quarterly


Density-Dependent Dynamics in Regulated Industries: Founding Rates of Banks and Life Insurance Companies The theory of density-dependent legitimation and competition has been tested on numerous organizational populations, including labor unions, newspapers, semiconductor manufactureres, voluntary social service organizations, wineries, and breweries. Despite this impressive diversity, we do not yet know whether processes of density dependence are sufficiently general to apply to all kinds of organizational populations. Several challenges to the scope of this theory deserve consideration. These include arguments that it applies only to nonbusiness organizations and to systems of unregulated interaction. This paper addresses these matters by analyzing founding rates of Manhattan banks during 1791-1980 and American life insurance companies during 1759-1937.

The first challenge comes from a study of mortality rates in the post-Prohibition wine industry in California. Delacroix, Swaminathan, and Solt (1989) claimed that the theory of density dependence used in prior research does not apply to populations of business organizations because legitimation is not problematic for them. If so, this is a majory limitation on the scope of the theory. Yet, the implications of the theory have been shown to hold for some populations that one normally thinks of as including business firms, e.g., newspaper publishers and brewing films, as we discuss below. The failure of the theory to explain mortality rates in the population of California wineries appears to reflect use of a poor research design, one that ignores the establishment of the wine industry in California and other states prior to 1940 (Carroll and Wade, 1991). Nonetheless, the claim that the theory does not apply to business firms has gaines some favor and ought to be considered more extensively.

A second challenge claims that ecological theory applies only in the context of classical markets and thus specifically to some kinds of business firms. This view holds that the theory applies only when many small and individually powerless organizations engage in competition free of regulation by the state or other external actors (Perrow, 1986). A sophisticated version of this view is reflected in Meyer and Scott's (1983) distinction between technical and institutional societal sectors and their claim that ecological arguments apply to the former and institutional arguments to the latter. If organizational ecology's scope covers only deregulated and undominated competition, ecological models would fail when applied to populations that have encountered substantial government regulation over their histories.

A third issue of general importance concerns a distinction between two forms of legitimation and its relevance to dynamics of organizational populations. The theory of density dependence has borrowed from institutional theory a cognitive view of processes of legitimation. According to this view, a powerful form of legitimation involves an organizational form's gaining unquestioned acceptance as the way to conduct a certain kind of activity, being taken for granted. Legitimation in institutional theory also refers to formal legal standing, as coded in laws, charters, regulations, and so forth. Empirical work on institutionalization of organizations has concentrated on such formal legitimation, thereby giving the impression that legal standing is the dominant or even the sole dimension. If the legal dimension does dominate, then models built on representations of processes of cognitive legitimation will prove useless.

For these varied reasons, testing the applicability of the theory of density dependence to populations of banks and insurance companies is especially intriguing as a test of the scope of the theory. As we sketch below, the population of banks studied has been subject to extensive regulation by the state and the federal government, and the population of life insurance companies has experienced state regulation.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Density-Dependent Dynamics in Regulated Industries: Founding Rates of Banks and Life Insurance Companies
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.