Academic journal article Administrative Science Quarterly

The Development and Institutionalization of Subunit Power in Organizations

Academic journal article Administrative Science Quarterly

The Development and Institutionalization of Subunit Power in Organizations

Article excerpt

The Development and Institutionalization of Subunit Power in Organizations

The research reported here examined the effects of founding events on the evolution of subunit importance in the semiconductor industry from 1958 to 1985. The environmental period during which the organization is founded and the background of the entrepreneur starting the organization were shown to create conditions under which particular functional areas come to be regarded as more important. Patterns of influence established at founding are also demonstrated to maintain some consistency over time, contingent on the organization's performance, the organization's age, and the tenure of the entrepreneur. Inertial and institutional arguments are developed to explain the role of past practice in shaping future organizational action. Distributions of power and subunit importance represent not only the influence of current conditions but also vestiges of earlier events, including the organization's founding.(*) One of the least understood aspects of subunit power and influence in organizations is how it originates. Why do subunits within organizations have varying amounts of relative power when they begin, and to what extent are these patterns of subunit power perpetuated over time? Most past theoretical and empirical work that has examined subunit power has adopted a contingency view. For example, past research on subunit importance and power by Crozier (1964), Woodward (1965), Lawrence and Lorsch (1967), Hinings et al. (1974), Pfeffer and Salancik (1978), and Hambrick (1981) has empirically demonstrated the effects of environment, technology, and strategy on the distribution of influence and power among organizational departments and functions. For the most part, this work has explained subunit power as arising from the conditions currently faced by the organization. However, recent work on organizational inertia and institutionalization has demonstrated that, under many circumstances, organizations are rather severely constrained in the extent to which they can adapt (Hannan and Freeman, 1984; Scott, 1987). Salancik and Pfeffer (1977) have similarly noted that the relative power of organizational subunits remains stable most of the time because of commitment processes and the institutionalization and perpetuation of previously adopted patterns of influence. This suggests that precedence and past practice play an important role in limiting change in the distribution of power among subunits. However, almost all quantitative research on subunit power has ignored any effect of past events on current organizational practices. The implicit assumption has been that organizations adapt patterns of subunit power to match changing environmental and technical demands. In firms organized around functional areas, the functions themselves provide the relevant setting for determining differences in subunit power (Dearborn and Simon, 1958). This study investigated the development and institutionalization of subunit power by examining differences in the relative importance of functional areas in a sample of semiconductor organizations that were functionally organized. Three specific functional areas found in most manufacturing organizations were examined: (1) research and development, (2) manufacturing and production, and (3) marketing and sales. The first part of the study investigated how the relative importance of these three functions originates by examining characteristics of each firm's founding. The second part of the study examined the extent to which initial patterns of functional importance are subsequently perpetuated and the extent to which they influence current characteristics of the firm.

BACKGROUND

Environmental Imprinting at Founding

Stinchcombe (1965) was one of the first organization theorists to provide evidence that existing organizations are imprinted by the environmental period of their founding. He argued that the period of founding influences not only the need for particular goods and services but also characteristics of the organizations created to provide them. …

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