Academic journal article Administrative Science Quarterly

Interorganizational Linkages and Population Dynamics: Buffering and Transformational Shields

Academic journal article Administrative Science Quarterly

Interorganizational Linkages and Population Dynamics: Buffering and Transformational Shields

Article excerpt

This paper examines evidence concerning the existence of organizational buffers, which insulate an organization from environmental disturbances, and transformational shields, which insulate an organization from the risk of failure due to transformation. It proposes that interorganizational linkages in particular can (1) buffer organizations from failure, (2) affect the likelihood of organizational transformation, and (3) modify the effect of organizational transformation on failure. These propositions are examined using event-history analysis of data on approximately 1,000 Finnish newspapers over a 200-year period. in this population, linkages reduced failure, increased organizational transformations, and altered the chances for failure after transformation. More generally, the findings support the existence of organizational buffers and transformational shields, suggesting further work on their role in population dynamics.

How do the characteristics of a population of organizations change over time? Much traditional organization and economic theory has assumed that the population changes because decision makers adjust the characteristics of individual organizations (Barnard, 1938; Child, 1972). In contrast, ecological research has argued that selective failures and foundings of whole organizations are the primary engines for change (Hannan and Freeman, 1977; Carroll, 1988). Combined perspectives have argued that both transformation and selection processes play major roles (Aldrich, 1979; Tushman and Romanelli, 1985; Singh, House, and Tucker, 1986). Studies that provide empirical evidence about the operation of both transformation and failure processes in a population of organizations remain rare, however. In this paper we propose that the presence of interorganizational linkages will significantly affect patterns of organization transformation and failure. We examine this basic proposition through the analysis of data on an organizational population of approximately a thousand Finnish newspapers over a 200-year period.

Our purposes in this investigation are twofold. First, we seek to contribute to understanding of the effects of interorganizational linkages on population dynamics. We explore in some detail the differences between transformation and failure patterns in organizations with and without interorganizational linkages. Second, we introduce and examine evidence for the occurrence of two phenomena that can affect the dynamics of population change: resource buffers and transformational shields. Resource buffers insulate an organization from environmental disturbances. Organizations protected by resource buffers should tend to have lower failure rates than other organizations and should show different patterns of transformation as well. We propose that interorganizational linkages may serve as a resource buffer.

Some organizational characteristics may alter the point at which organizational change leads to failure. Transformational shields insulate an organization from the risk of failure due to transformation. Organizations protected by transformational shields should be able to accomplish change with a lower risk of failure than can other organizations. We propose that the presence of interorganizational linkages will alter the effects of transformation on failure.

THEORY AND HYPOTHESES

Interorganizational Linkages and Organizational Failure

The idea that some organizations are buffered from external pressures has a long history in organizational theory. Thompson (1967: 19), for example, proposed that "under norms of rationality organizations seek to seal off their core technologies from environmental influences." According to Thompson, buffering insulates the core technology from disturbances in the task environment. Other theorists have broadened the concept of organizational buffering to include external factors that may protect an organization from failure. …

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