Academic journal article Administrative Science Quarterly

The Organizational Ecology of a Technological System

Academic journal article Administrative Science Quarterly

The Organizational Ecology of a Technological System

Article excerpt

The Organizational Ecology of a Technological System

This paper investigates organizational mortality in the early American telephone industry, in which thousands of companies proliferated and failed under conditions of technological change. Drawing on the theory of community ecology, it is predicted that when technologies are systemic, technological change does not necessarily favor advanced organizations. Instead, mutualism is predicted among both advanced and primitive firms, as long as they are technologically standardized and differentiated. Competition is expected when organizations are technologically incompatible or noncomplementary. The hypotheses are supported by dynamic models of organizational mortality, estimated using archival data describing the life histories of all telephone companies that operated in Pennsylvania up to 1934 and in southeast Iowa from 1900 to 1930.(*)

Often there is no clear boundary around an organization's technology. Separate chemical refiners physically connect to each other's facilities, computer manufacturers assemble hardware systems using components produced by various organizations, and transportation companies ship standardized containers to and from one another. Because of this, many technologies can be thought of as systems that cut across formal organizational boundaries. How does technological change in such a system affect organizational interdependence? When does it generate competition? Does it ever increase "mutualism," or positive interdependence, among organizations? If we knew the answers to these questions, then we could predict when an organization in such an industry improves or threatens its viability by changing its technologies. We could also predict when an organization's viability is improved or threatened due to technological change by others. However, the literature on technological change has paid little attention to the unique properties of systemic technologies. Consequently, despite the potential value of such predictions, these questions have remained unanswered.

They are addressed in this study as part of a broader investigation of the early American telephone industry. In the first three decades of this century, thousands of telephone companies co-existed under conditions of technological change. These companies often connected their systems, resulting in mutualism as they decreased each other's failure rates. But in other cases they competed, increasing the chances that one or another would fail (Barnett and Carroll, 1987). This paper investigates how two important developments in power and transmission technology affected these relations.

Hawley's (1950) ecological framework suggests that systemic technologies can be usefully studied in terms of their more elemental systems. These elemental systems are distinguished according to whether they are uniform or differentiated. Uniform systems require standardization throughout, as with the operating system of a computer. Differentiated systems, in contrast, comprise parts that work together because they are different in a complementary way, as with the hardware components of a microcomputer. Because it is based on ecological principles, this approach differs fundamentally from the prevailing Schumpeterian approach to the study of technological change and competition.

Technological Superiority and Competition

It is commonly thought that technological change generates competition and that this competition works to the benefit of technologically advancing organizations. The idea is often attributed to Schumpeter (1950: 84):

... in capitalist reality as distinguished from its textbook picture, it is not [price] competition which counts but the competition from ... the new technology ... -- competition which commands a decisive cost or quality advantage and which strikes not at the margins of the profits and the outputs of the existing firms but at their foundations and their very lives. …

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