Population Ecology Theory Flashcards
What is PET about?
Population Ecology Theory questions adaptation theories (e.g. BTF), where organizations adjust their organizational structure to opportunities and threats, because it assumes organizations to be inert and introduces the idea of environmental selection (selection instead of adaption).
- Population Ecology theory tries to explain how organizations emerge and why they cease to exist
- Draws on biology, evolutionary biology to explain how organizations are born, how they grow and die
- The theory tries to understand the survival of organizational forms
- Guiding metaphor: organization as so-called inert systems
- > There are inertial pressures for stability that will make it difficult for organizations to adapt
- > Organizations’ flexibility is restricted and limited
• Organizational change is less driven by adaption of individual firms than it is driven by selection at the population level
o evolutionary change in organizational forms within a particular population
→ ADAPTION IS NOT SO EASY AS DESCRIBED IN THE BEHAVIORAL THEORY
Basic idea by Hannan and Freeman
- adaption isn’t so easy as described in BT; pressures for stability that will make it difficult for organizations to adapt; organizations’ flexibility is restricted and limited
- Organizational change is less driven by adaption of individual firms than it is driven by selection at the population level
- Hannan & Freeman say that the population ecology theory is a perspective on organization-environment relations. It’s an anti-thesis to BT
- -> adaptation perspective of BT: managers scan the relevant environment for opportunities and threats, they formulate strategic responses and adjust organizational structures accordingly
- -> adaptation is associated with problems as in inertial pressures, these pressures force stability and stability makes it difficult to adapt.
- Structural inertia is one of the key concepts advanced by population ecologists.
What is structural inertia?
- Inertia means a slowness to change the structures of the organization, a difficulty to modify the structures of the organization
- the stronger these pressures for stability (inertia), the lower organizational adaptation to flexibility will be
Key environmental forces for change: Ethical, social, demographic, global, political, economic and competitive pressures. Inertial pressures constrain adaptive flexibility: The organization is exposed to internal and external pressures for stability
What is the purpose of PET? (intellectual foundation)
aims to constitute an alternative to then-dominant perspective of adaptation that fosters the idea of organizations, an adaptive coalition, that are easy to change and modify in response to changes in the environment
What are the key characters? (intellectual foundation)
- Focuses not on the individual organization but on the aggregate population of organizations.
It’s NOT decision-making within a firm, it’s NOT the overall economic system but it’s the population of firms, a group of similar organizations - It’s a theory that tries to develop evolutionary models. These models be decomposing to various steps and they try to explain variation, selection and retention in populations of organizations.
- Identify the key inertial pressures, the pressures that actually restrict organizations adaptive flexibility that make it difficult for organizations to change
- It’s a theoretical tradition that tries to generate theories that are of broad applicability, that is of theories that can be used to explain processes of change, processes of growth of species of organizations, the development and the death
What are the key assumptions? (intellectual foundation)
▪ Bounded rationality instead of full rationality
▪ Inertia of organizations adapting to environmental changes only imperfectly and allowing for selection processes → effect of inertia on probability of survival?
▪ In a world of high uncertainty adaptive efforts of organizations are random with respect to their future value (innovations are not produced because they are useful, they are just produced) → variations do not necessarily mean to yield a survival advantage as organizational inertia can also prevent organizations from potentially harmful changes (Selection advantage of stable, reproducible structures)
▪ Evolutionary explanation of birth, development, and death of organizational forms
→ replacement of outmoded forms by new forms (explains variety of organizational forms)
▪ Organizational change as occurring at population-level due to selection processes rather than at firm-level due to adaptation processes
▪ Limited scope for managerial agency in influencing organizational change and adaptation (environmental determinism)
Definition of population
A population consists of similar organizations and is defined as “all the organizations within a particular boundary that have a common form” or “classes of organizations which are relatively homogeneous in terms of environmental vulnerability”.
Organizational form is conceptualized as genetic blueprint:
the formal structures, patterns of activity, and normative orders for transforming inputs into outputs
Internal Constraints
▪ Sunk costs: investments that have already been made but are wasted in the event of a change, e.g. investments in plants, equipment, and specialised personnel → investment decisions serve as a basis for selection as they can’t be made undone and change (new investments) is costly
▪ Internal information constraints: lack of routines, capabilities, staff members etc. needed to adapt to environmental changes
→ Organizational decision-makers lack information about subunit activities and environmental impact on subunits
▪ Internal political constraints: internal resistance to adapt to environmental changes
→ Redistribution of internal resources upsets subunit leaders to resist against change; reorganization generates long-term benefits but creates short-term costs for leaders
External Constraints
▪ Legal and fiscal barriers: need to be obtained in the process of adaptation and make adaptation costly and reduce the speed of adaptation
→ Regulation prevents organizations from conducting/abandoning certain activities (market entry and exit barriers)
▪ External information constraints: the organization might not be fully informed
→Acquisition of external information about relevant developments is costly & difficult
▪ Organizational legitimacy: To the extent that adaptation violates legitimacy claims, it incurs considerable costs
Describe the evolutionary process
The evolutionary process consists of three sequential stages: variation, selection, and retention.
1) Central Proposition: Variation
The tension between inertial pressures and forces of change is the source of variation.
▪ Birth of organizational forms as a result of entrepreneurial activity, Inter-population imitation (organizations in one population compare themselves and their activities to organizations in other populations and imitate this behaviour), spin-off from existing firms or governmental intervention
▪ Variations can be part of the same population
▪ Variations random with regards to future value: ex-ante an organization doesn’t know if any of these variations brings a survival advantage relative to the current organizational form
→ The interaction between the forces of change and inertial pressures can lead to a failure of adaptation on the individual level of the organization, but to the more aggregate level of organizational population
→ failed variation on the organizational level does not mean that there is no variation at all, but there can emerge variety on the population level as organizations separate (spin-off) or new organizations are founded as a reaction to the competing forces of change and inertia pressure creating variety at a broader level
2) Central Proposition: Selection
The environment selects the fittest organizations and organizational forms, having the best
quality of fit and ability to attract scarce resources, to survive and organizational forms with
inadequate fit with the environment are eliminated (survival of the fittest).
▪ Some organizational forms compete more successfully for scarce resources than
others → Reliability and accountability (ability to justify decisions at any time) is
essential for resource access
▪ But reliability requires that an organization continually reproduces its structure
(through institutionalization and routines) and thereby requires structural inertia,
which is a consequence of selection rather than a precondition
Organizations have different properties which make them favourable against other kinds of
collectives:
1. Reliability: produce products of a given quality repeatedly
2. Accountability: they are able to document how resources have been used and to
reconstruct the sequences of organizational decisions, rules, and actions that
produced particular outcomes
Levels of reliability and accountability of organizational action increase with age. Thus, also
reproducibility of structure and structural inertia increase monotonically with age and
organizational death rates decrease with age.
3) Central Proposition: Retention
Routinization and institutionalization processes are two retention mechanisms which make
sure that the survival-enhancing features are stored. Inertia is a by-product of these
retention mechanisms protecting organizations from modifying their processes.
→ Routinization: Standardization of roles, hierarchies and processes in form of routines conserves organizational knowledge about how to survive
→ Institutionalization: Institutionalization of organizational knowledge in organizational
structures and mental models as well as in the socialization apparatus of societies, cultural
beliefs and values
Paradox of inertia
• Strong pressures for change from environment + countervailing inertia pressures that
reduce individual level adaption
• Through the process of selection, the fittest organizational forms retain their survival
enhancing features through routinization and institutionalization. These mechanisms
helped to enhance reliability and accountability (key factor for survival)
o as a byproduct of routinization and institutionalization, organizations become
more inert/stable → inertia as a good thing, it conserves the results of
variation and selection
o but inertia can also be harmful → it reduces the adaptive flexibility of
organizations
→ INERTIA CAN BE PROBLEMATIC OR BENEFICIAL
