INTRODUCTION
Organizational ecology aims to explain how social, economic and political conditions affect the relative abundance and diversity of organizations and to account for their changing composition over time. Research in organizational ecology is grounded in three observations. First, aggregates of organizations exhibit diversity. Second organizations’ have difficulty devising and executing changes fast enough to meet the demands of uncertain, changing environments. And, third, organizations arise and disappear continually. Given these observations, ecological analyses formulate organizational change and variability at the population level, highlighting differential creation of new and demise of old organizations and populations with heterogeneous attributes. This formulation contrasts adaptation approaches, which explain organizational diversity in terms of ongoing organizations’ leaders cumulative strategic choices.
Changes in organizational populations reflect the operation of four basic processes: variation, selection, retention, and competition (Aldrich 1979; Campbell 1965; McKelvey 1982). Variations result from human behavior. Any kind of change, intentional or blind, is a variation. Individuals produce variations continuously in their efforts to adjust their behavior to others in the organization and to adjust the organization’s relationship to the environment. The centrality of issues of coordination and control in organization theory is a testament to the commonness of variation inside organizations. Organizational variations provide the raw material for selection processes. Some variations prove more beneficial to organizations than others in acquiring resources in a competitive environment and are thus selected positively by managers inside organizations. Similarly, investors, customers, and government regulators in the resource environment select among the variations in place among organizations competing for resources.
When successful variations are known, or when environmental trends are identifiable, individuals can attempt to copy and implement these successful variations in their own organization, or they can attempt to forecast, anticipate, plan, and implement policies in the context of the predictable trends. But when successful variations are unknown, because, for example, the behavior of consumers and competitors is unpredictable, the probability of choosing the correct variation and implementing it successfully is low. Even when effective variations are identifiable, ambiguity in the causes of success may frustrate attempts at implementation and imitation. Under such conditions, variations can be viewed as experimental trials, some of which are consciously planned and some of which are accidental, some of which succeed and some of which fail. Whether or not they are known, over time, successful variations are retained as surviving organizations come to be characterized by them.
If the survival odds are low for organizations with a particular variant, it does not mean that these organizations are destined to fail. Rather, it means the capacity of individuals to change their organizations successfully is of great importance. Ecological approaches do not remove individuals from responsibility for or influence over their organization’s success and survival – individuals do matter. Why have there been so many claims to the contrary? One important part of the confusion is that determinism is mistakenly contrasted with voluntarism rather than with probabilism. Leaving aside whether their actions are intelligent or foolish, planned or improvised, individuals can clearly influence their organizations’ futures. Under conditions of uncertainty and ambiguity, however, there are severe constraints on the ability of boundedly rational individuals to consistently conceive and implement changes that improve organizational success and survival chances in the face of competition. Thus, “in a world of high uncertainty, adaptive efforts ... turn out to be essentially random with respect to future value” (Hannan & Freeman 1984:150). At its inception, organizational ecology focused more on differential rates of organizational failure than to differential rates of entry, largely for reasons of methodological tractability. Although this shortcoming has been largely addressed, organizational ecology is still viewed – inaccurately – as a theory of organizational failure. Organizational founding and failure figure prominently in organizational ecology because they affect the relative abundance and diversity of organizations. Ecological approaches to organizational founding and failure constitute a radical departure from approaches to entrepreneurship and business failure, which focused primarily on individual initiative, skills, and abilities. By concentrating on the traits of entrepreneurs and managers, these approaches deflect attention away from the volatile nature of organizational populations. Ecological approaches, by comparison, emphasize contextual causes that produce variations in organizational founding and failure rates over time by influencing opportunity structures that confront potential organizational founders and resource constraints that face existing organizations.
The focus of organizational ecology research continues to change rapidly, however, as researchers turn their attention to processes of organization-level change and tests of structural inertia theory, revealing the role of organization-level change for understanding what organizations do as individuals, populations, and communities.