Institutions, Exchange Relations, and the Emergence of New Fields: Regulatory Policies and Independent Power Production in America, 1978-1992
Russo, Michael V., Administrative Science Quarterly
This paper analyzes how a new field, independent (or non-utility) power production, was created by a federal mandate that electric utilities purchase power from private generating sources and how the field was populated. Results show that key rules that state regulatory bodies adopted or rejected regulating exchange between independent power producers and utilities were influential predictors of organizational foundings. Results also show that collective action by independent power producers boosted foundings. Finally, if the preexisting relationship between utilities and regulators was one of accommodation, foundings were suppressed. The paper examines these results in view of economic and sociological perspectives on public policies, spotlighting the vital role of institutions in early population dynamics. [*]
Like geophysical events, institutional forces continually shift the organizational landscape. Public policies, one class of such forces, influence existing organizations and fields routinely and sometimes profoundly. Policy initiatives can usher organizations into previously foreclosed domains, as seen by the post-deregulation diversification of savings and loans (Haveman, 1993), or restrict existing organizations from entering sectors closely associated with their own, as Microsoft may find when its antitrust case ultimately concludes. But public policies also create opportunities at the fringes of existing fields, attracting organizations armed with a variety of technologies and strategies. For example, deregulation gave rise to organizations as diverse as discount brokerages, all-first-class airlines, and waste-to-energy facilities. We know much less about the effects of public policies on the birth of organizations in new fields, however, than we do about their effects on existing organizations and fields .
Organization theorists studying how institutions shape competitive interactions have now produced research substantive enough to be categorized into three broad themes that bear on the issues of policies' effects on foundings. The first theme pinpoints the most salient facilitating role for governmental actors, channeling resources directly to organizations through policy making. Tucker, Singh, and Meinhard (1990) demonstrated that periods of direct government subsidies and explicit fiscal restraints inflated and deflated founding rates of voluntary social service organizations, respectively. corroborating evidence was provided by Staber (1989) and Swaminathan (1995), who found that favorable tax policies stimulated foundings of cooperative organizations and wineries, respectively. Dobbin and Dowd (1997) showed that public capitalization increased the founding rate of early railroads in Massachusetts. If this were the extent of theoretical interest in public policy and organizational foundings, such results w ould not only reflect intuition but, more importantly, portray public policy as an influence analogous to a number of other resource-related changes that can influence foundings. But two other themes apparent in the literature describe how public policies operate in ways that are more subtle and potentially more comprehensive than simply shifting the incentives facing entrepreneurs.
The second theme connecting institutions and organizational foundings spotlights the role of ties between organizations and key institutions. Extending the work of Singh, Tucker, and House (1986), Baum and Oliver (1992) examined how the extent of linkages between a population of day care centers and its institutional environment influenced foundings. They found support for the concept that increases in such embeddedness (Granovetter, 1985) augmented foundings early in the population's history. Such ties enhance prospects for resource acquisition by establishing the legitimacy of new fields of endeavors (Galaskiewicz, 1985).
The third broad theme in this literature focuses on how institutional actors influence the relationships between like organizations in new and established fields. …