Academic journal article Revue Canadienne des Sciences de l'Administration

The Community Ecology of Large Canadian Companies, 1984-1991

Academic journal article Revue Canadienne des Sciences de l'Administration

The Community Ecology of Large Canadian Companies, 1984-1991

Article excerpt

Based on an extensive study of 25 Canadian industries, Michael Porter (1991, p. 4) recently concluded that the Canadian economy is at a crossroads and cautioned that Canadian industry is in many respects ill-equipped to respond to a rapidly changing competitive environment. According to Porter, the Canadian economy is currently undergoing rapid structural change and evidence is accumulating that Canadian industries are encountering difficulties as they confront a changed competitive environment, i.e., globalization of production, finance, and markets, accelerating technological change, lower tariffs worldwide, and free trade with the United States and Mexico. While Porter's conclusion may be sound, the research on which it is based does not address the role of the community structure of the Canadian economy, that is, the relationships among various sectors of Canadian industry that bind them into an integrated economic system. Yet, as Porter (1990) himself has pointed out, the structure of the relations among the sectors of a nation's economy plays a central role in determining its competitive advantage.

These relationships among industries are central to ecological theories of organization. Organizational ecology explores processes that control organizational expansion and contraction, focusing on the interplay of environmental constraint and interdependence both within and between industries or populations of organizations. Populations and communities of organizations constitute the basic elements of an ecological analysis of organizations (Hannan & Freeman, 1977, 1989). A set of organizations engaged in similar activities and with similar patterns of resource utilization constitutes a population (Hannan & Freeman, 1977, 1989). Populations themselves develop relationships with other populations engaged in other activities that bind them into organizational communities (Astley, 1985; Fombrun, 1986; Hannan & Freeman, 1989). Organizational communities are functionally integrated systems of interacting populations; they are emergent entities that, over time, gain a degree of autonomy from the environment as members of the community come to exchange resources more with each other than directly with the environment (Astley, 1985). In an organizational community, the outcomes for firms in any one population are fundamentally intertwined with those of firms in other populations that exist in the same community system.

Organizational communities are formed as competition leads to the creation of new populations that fulfill complementary roles in which they are dependent on, but noncompetitive with, established populations (Astley, 1985; Carroll 1985; Hawley, 1950). In this way, competition leads to the emergence of a complex system of functionally differentiated populations linked by mutualistic interdependencies. The elaboration of an organizational community continues until the complexity of its internal relationships can no longer increase without reducing the community's effectiveness as a functional unit (Hawley, 1950). The growth of internal complexity fosters community stability, and slows the formation of new populations (Astley, 1985; Hawley, 1950). However, increasing internal complexity also sets the stage for community collapse. If complex systems experience disturbances beyond a certain threshold level, they may disintegrate as the result of a domino effect (Astley, 1985; Pimm, 1991).

Prior research in organizational ecology has modeled the community dynamics of societal sectors (e.g., national education systems: Carroll, 1981; Nielsen & Hannan, 1977) and national industries (e.g., U.S. electronics components manufacturing: Brittain, 1993; Brittain & Wholey, 1988; U.S. brewing: Boeker, 1991). However, a national economy consisting of differentiated and interacting productive sectors also exhibits the properties of an organizational community (Korn & Baum, 1994). This suggests that the structure of relations linking the sectors of an economy may play a central role in determining its competitiveness and adaptiveness. …

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