Organizational ecology

Organizational Ecology (also Organizational Demography and the Population Ecology of Organizations) is a theoretical and practical approach in the social sciences that is especially used in organizational studies. Organizational Ecology uses a biological analogy and statistical analysis to try and understand the conditions under which organizations emerge, grow, and die.

Introduction to Organizational Ecology
First fully developed by Michael Hannan and John Freeman in 1989 in their book Organizational Ecology, organizational ecology examines an environment in which organizations compete and a process like natural selection occurs. This theory looks at the death of firms (firm mortality) and the founding of new firms (firm founding), as well as organizational growth.

The theory holds that organizations that are reliable and accountable are those that survive (favored by selection). A negative by-product, however, of the need for reliability and accountability is a high degree of inertia and a resistance to change. A key prediction of Organizational Ecology is that the process of change itself is so disruptive that it will result in an elevated rate of mortality.

Organizational Ecology also predicts that the rates of founding and the rates of mortality are dependent on the number of organizations in the market. The two central mechanisms here are legitimation (the recognition of that group of organizations) and competition. Legitimation generally increases (at a decreasing rate) with the number of organizations, but so does competition (at an increasing rate). The result is that competitive processes will prevail at high numbers of organizations, while legitimation at low numbers. The founding rate will therefore first increase with the number of organizations (due to an increase in legitimation) but will decrease at high numbers of organizations (due to competition). The reverse holds for mortality rates. The exact way in which these rates are dependent on the number of organizations in the market also depends on the 'carrying capacity' of a particular market niche.

Other lines of research investigate how the rate of mortality depends on organizational age, size, competitive conditions at founding, and the position in the market niche.

Organizational Ecology has over the years become one of the central fields in organizational studies, and is known for its empirical, quantitative character. Ecological studies usually have a large-scale, longitudinal focus (datasets often span several decades, sometimes even centuries). The book The Demography of Corporations and Industries by Glenn Carroll and Michael Hannan (2000) currently provides the most comprehensive overview of the various theories and methods in Organizational Ecology.

Prominent organizational ecology theorists currently active include Michael Hannan, John Freeman, Glenn Carroll, William Barnett and Terry Amburgey.