Organizational Analysis: Week 8 Questions (Institutional Ecology)

Baum and Powell v. Hannan and Carroll

What makes a theory?

• We are presented this week with a heated exchange between two groups of organizational
theorists. How do we critique Baum and Powell's critique of Hannan and colleague's model?
Do we agree with their critiques on the conceptualizations of legitimacy and density, as well
as the rigor of their analyses? Is their proposed morel more useful for understanding
organizations? Or, as Hannan and colleague's rebuttal states, is their argument "tortured
logic" and their model "a Platonic ideal?" (Sae)

• Are Hannan and Carroll right to suggest that institutional ecology is fundamentally
parsimonious? Or that it's observations are obvious? Does academic research really require
something that starts with a narrower proposition? (Aaron)

• hannan and carroll respond to and lambast baum and powell's response to them, but b/p's
response seems to present a correct and more complex way of thinking about institutional
processes even if it is not particularly useful for theory building or empirical research.
hannan and carroll are right to say that theories must be testable and operationalizations
comparable, but isn't this missing the point if the theory is inaccurate because very
incomplete? (Vaughn)

• Hannan & Carroll, in their response to Baum & Powell, resort to the use of ad hominem
attacks that is shocking. Is such use of attacks publishable in today’s journals? Overall, they
do mention one thing in their defense that seems of value (while the rest of the response
seems to talk past the criticisms, interspersed with invective): the value of abstraction in
theory building and parsimony in model building. How much granularity should we sacrifice
in order to achieve both? (Vince)

• What criteria did the American Sociology Review employ to accept the two “dueling
theory perspectives” of Baum & Powell vs. Hannan & Carroll for its issue, without
requesting a style and tone rewrite, for example? Each article seems to lambaste the other
and to use ad hominem attacks to make its point. What message was ASR trying to send its
readers by publishing these very personal critical attacks, and what does this indicate about
ASR’s scholarly community? (Jennifer)

Usefulness of combining perspectives

• While both Baum & Powell and Hannan & Carroll highlight the inadequacy of neo-
institutional theory with regard to articulating a change dynamic (everything being
exogenous) and the value of ecology theory in supplying an endogenous factor for
change (namely density dependent factors), has institutional ecology actually managed to
merge the two fields successfully to address change in institutional environments? For
instance, it appears that both the microbrewery and thrift case studies rely on eminently

1
 Organizational Analysis: Week 8 Questions (Institutional Ecology)

exogenous factors (emergence of cultural identities/heterogeneous tastes and progressive

ideology, respectively) to explain changes in organizational forms and densities. (Vince)

• What is institutional ecology? Is it a theory? A perspective? A confrontation? Are

Baum/Powell and Hannan/Carroll arguing about different things? (Elizabeth)

• How does the example of the French automotive industry demonstrate that French
organizational density is less precise than measuring the density of French designs? Can
this data truly be used to support institutional ecology? (Aaron)

Legitimacy processes

• Is definition of legitimacy as composed of a cognitive part and a sociopolitical part (used

by Baum and Powell, as well as in the response by Hannan) a useful dichotomy to
incorporate in our seminar's working definition of legitimacy? How does the new concept
of "identity" as introduced by Carroll and Swaminathan and its relation to density-
dependent legitimation clarify or complicate the definition? (Sae)

• What are the limitations of constructing formal models and axioms if they are not going
to help us capture the complex relationships between institutional logics (sociopolitical
conditions) and organization population dynamics? If legitimacy is a proxy more than a
process then studies should focus on measuring it directly to understand its more nuanced
effects. If legitimacy is a process, then measuring it indirectly as Hannan and Carroll
expound with organizational density is useful but insufficient, as legitimation may have
its own autonomous effects. These autonomous dynamics could be understood with more
comparative, qualitative research that complements the formal modeling of
organizational ecology. (Mazen)

• Is it fair to say that density is just a short-cut to explain legitimacy since it allows
researchers to “simply count” the number of organizations in a population and assume
that growth in numbers captures legitimation? (Aaron)

• The exchanges between Baum and Powell, and Hannan and Carroll in the matter whether
legitimacy is endogenous or exogenous are very interesting and can arouse many
important theoretical debates about legitimation process. Baum and Powell are right in
that we need to consider sociopolitical legitimacy and cognitive legitimacy coming from
increasing density, because there are many cases that delegitimation come first before the
decline of density. However, Hannan and Carroll respond to this point by arguing that
sociopolitical (de)legitimation also can be a function of density. How is that? Are there
any empirical works showing this relationship? Even if they are right, is it generable?
When does increasing density lead to increasing legitimation while in other case, does it
lead to delegitimacy? (Dong Ju)

• What immediate bridges can we draw between institutional theory and population
ecology? What are the main differences? Is it fundamentally, as posed by Hannan and

2
 Organizational Analysis: Week 8 Questions (Institutional Ecology)

Carrol, a question of one theory considering institutional environments (and the changes
that occur therein) as exogenous or endogenous? What are the repercussions of this
assumption regarding the way these theories approach the issue of legitimacy of new
firms? (Luciana)

Haveman and Rao

• Haveman and Rao write that “technical advantages were a necessary but not sufficient
condition for the growth of the Dayton/guarantee-stock plan; it also had to become
institutionally appropriate.” Specifically, technical changes were needed to meet
efficiently the new demands resulting from demographic changes and simultaneously the
sociopolitical development of progressivism gave rise to new institutional logics (or
“thrift plans”) within thrift organizations. Neo-institutionalism theories and economic
sociology perspectives would tend to argue that technical efficiency and institutional
constraints are usually contradictory forces. I’m not sure if Haveman and Hao weren’t
really showing that elements of modernization had caused both the dramatic change in
thrift plans and progressivism. That is, progressivism and its institutional logic were
simply concomitants, not enabling or constraining factors. Also, wouldn’t a major change
in organizational form create significant effects on the institutional environment, at least
some of which would constitute the elements of progressivism? (Mazen)

• Here is the question on Haveman and Rao piece: The explanations of why selection
predominated seem to be merely descriptions of historical context. How do we know that
the facts cited as reasons for the predominance are actually causes rather than just
unrelated events that happened in the same historical context? (Phoenix)

• I liked the concept of institutional entrepreneurship in Haveman and Rao. In the context
of their investigation of thrifts, they seem to suggest that institutional entrepreneurship as
a form of action and choice exists at the level of the organization and in the process of
organizational selection rather than organizational adaptation because of the difficulty of
institutional change within an already existing organizational form. Could we imagine a
set of institutional and technical conditions under which institutional entrepreneurship
could exist at the level of individual actors within organizations and those actors could
create change inside their existing organizations? (Elizabeth)

• Haveman and Rao (1997) decouple the institutional rules of individual organizational
forms from global institutional rules “such as truth, equality, and justice,” describing
these as “specific” and “general” institutions respectively. They theorize that that “the
essence of institutional entrepreneurship is to align skillfully an organizational form and
the specific institution it embodies with the master rules of society.” (1614)
Organizational design, then, involves the choice of “which master logic is applied to the
design of organizations and their institutional content.” For a particular organization
designer/builder, are the specific institutions of other institutions with which they interact
considered as part of the broader “master logic”? In other words, to what extent are

3
 Organizational Analysis: Week 8 Questions (Institutional Ecology)

“master logics” local and changeable as a consequence of agency (including the founding
of organizations)? (Matt)

Carroll and Swaminathan

Resource partitioning theory and beer drinking

• this question addresses carroll and swaminathan, but resource-partitioning more

generally. c/s indicate that generalist orgs gravitate to areas of dense resource
concentration and also seeks to maximise the degree to which they are non-competitive
with other orgs (by differentiation). how then is the differentiated generalist organization
(i think of it as the typical multidivisional entity) functionally distinct from an
aggregation of specialist organizations other than by the nature of its existence under a
single corporate umbrella? (Vaughn)

• I found Carroll et al.'s paper on the microbrewery movement in the US interesting and
their resource partitioning theory compelling. However, I wonder why widely this theory
can be applied to other industries. For example, it appears that small, specialist craft beer
breweries successfully occupy "free space resources" through appealing to consumers'
identity as people who do not drink mass produced beer. It seems that the resource
partitioning theory is supported in the case of the microbrewery movement in the US
because of the culture of beer-drinking, consumer identity, and its alignment with
organizational identity. I wonder if the resource partitioning theory will be supported in
other industries in which form identity does not impose market constraints? (Sabrina)

• I found the idea of resource partitioning fascinating and very much counter to basic
economic theory. How odd to think that “once upon a time the big companies crowded
out the little ones- the end” is not actually the end of the story. ( It is in some industries,
of course.) It is amazing to realize that little known craft breweries all around the US
survive right alongside Miller and Coors. But I think I am still confused. The reading
made it sound like there is this space (this area of demand) that the generalists can’t fill
(or fully supply). And so the specialists can come in and meet the demand. It seems
there is no crowding out- and the specialists aren’t taking away the generalist’s
customers. Now, I love this idea- really adds complexity to simple, basic economic
theory- but I have a hard time believing that those specialist-loving beer drinkers
wouldn’t just drink mainstream beer if specialist beer didn’t exist. Perhaps they wouldn’t
drink beer as often- maybe they would switch to another form of alcohol- but it isn’t as if
there is no effect on the generalist beer companies. For the non-generalist beer
consumers, their decision on what to drink will be different in a “generalist beer” vs “all
other beverages” world than in a “generalist beer” vs “specialist beer” vs “all other
beverages” world. Basically, the non-generalist beer drinkers have to drink something-
so if they are consuming specialist beer, they are NOT consuming something else. So
while the specialist beer might be able to “enlarge the pie” a bit, it seems faulty reasoning
I feel that in some way, the specialists are taking someone’s customers but didn’t feel
that the model resolved this problem. (Mary Carol)

4
 Organizational Analysis: Week 8 Questions (Institutional Ecology)

• In reading that “two of three largest brewing firms conceal their identities on specialty
products” and that many use contract brewers, I was reminded of Paharia, Kassam,
Greene, and Bazerman (2009) "Dirty Work, Clean Hands: The Moral Psychology of
Indirect Agency" – the basic idea being that a third party who engages in misdeeds on
behalf of another party does indeed shield the other party from blame. (Merck has done
this with one of its drugs- allowing them to raise the cost of the drug while still also
manufacturing the drug- and selling it under a different label.) Although with
microbrewing, I am wondering if what we see is large “brewery A” creates a beer sold
under the label “microbrewery a.” And there are other beers- “B” produced by big
brewery “B” and beer “x” produced by “microbrewery x.” But I’m not sure if it is totally
clear what the public will do when they find out that “A” created “a.” The article- I
think- seemed to imply that there is a public backlash and people stop buying “a.” (I’m
not sure if they stop buying “A.”) But what about actual taste preferences that might
have formed? What about when a company misbehaves, the public acts all upset- stock
prices go down, and then 8 months later its like nothing ever happened. Does this happen
when the large breweries are found to be producing a beer that is being marketed as a
microbrewery beer? I guess I’m confused because it seems there is an economic side of
the story- or there is a larger story- than just resource partitioning. And I’m wondering if
this isn’t just distinctive to breweries, but would be in any resource partitioning story.
When the public finds out, it is harder to predict what will happen the public stops buying
“beer a” (theraby punishing beer a) and indirectly punishing brewery A. The random
thought I wondered, though, was whether certain industries could get away with such
behavior based on the temperament of the industry- ie: medicine is supposed to be all
about the hypocratic oath, so any sort of misbehavior is an anathema. But the beer
industry-well, its all about wheeling and dealing… and this is capitalism. So it is more
okay for beer companies to sort of misbehave? (Carroll and Swaminathan, p. 727) (Mary
Carol)

• I agree with the critique of Baum and Powell about the density-dependence theory’s
inadequacy in distinguishing organizational forms founding between earlier period and
later period. And I find that Hannan and Carroll’s reply to this matter is far from
satisfactory given that they only show the nonlinear pattern of density on the founding
rates by using interaction term between density and industry age. They do not answer to
the critical point of Baum and Powell: the organizational forms founded at later period
are more likely to be qualitatively different from those founded at earlier period and thus
the founding rates of respective periods have different substantial meanings. My point is
that by obscuring the substantial differences in the organizational forms, density
dependence theorists oversimplify the complex dynamics of density effects on life
chances and patterns of organizations. With this regard, I think resource-partitioning
theory is more interesting in that it is capable to explain the emergence of different
organizational forms depending on the maturity of industry. However, I was disappointed
in that Carroll and Swaminathan does not test the density of large mass production firms
or of total brewery firms on the founding rates of small specialists firms, which may tell
about how density of whole population influences on the creation of different
organizational forms. (Dong Ju)

5
 Organizational Analysis: Week 8 Questions (Institutional Ecology)

Organizational identity

• How does the identity of an organizational form (as introduced by Carroll and
Swaminathan) become legitimized in an environment where resources are thin and firms
are small and new? Can we speak of a shared identity among microbrewers? How would
this identiy compare to each organization's identity, which is defined as that which is
distinctive, central and unique about an organization (Albert and Whetten, 1985)?
(Luciana)

• I would like to discuss their use of the construct “organizational form identity” as an
important construct for the resource partitioning theory. They seem to me to be unclear
about the construct its operationalization. It is unclear whether the construct focuses on
the perception of the org form, the “external identity” (image, brand and reputation for
their customers and not their own organizational identity) or the actual organizational
form (the ownership of mass production brewery for mass producers or the lack of
ownership for contract brewer). They also do not relate to the internal identity of these
organization or to the perception among competitors. When they operationalize it they
use merely organizational form as the variable, assuming that the actual form is equal to
its identity. An in depth discussion of this assumption might reveal the importance of the
categorization dynamics in a given industry. Following Ezra Zuckerman’s work on the
imperative of categorization could serve as a more accurate perspective. It may enable a
more comprehensive understating of the legitimacy formation and negotiation in markets
(for instance how many categories are being constructed in a market is an important
dimension). (Hila)

Marquis/Research and Writing Process

• Could you share with the class the research design process that you used to develop your
article on imprinting? Specifically, what was the timespan from when you first
conceived of the research idea or question to when you completed discussion of the
results and organized the journal submission? (Jennifer)

• I particularly enjoyed reading your paper on network imprinting, and am looking forward
to discussion of this in class today. I had a few questions for you related to your methods.
You mention that your dependent variable for the community-level analyses (number of
direct connections between local companies compared with the total number of direct
network connections) is not a standard network measure. I was wondering if you
also explored any standard network measures such as local density (e.g., the number of
actual direct connections between local companies compared to the total possible direct
connections between local companies)? I guess I'm wondering how much of the local
focus in communities established prior to the advent of air travel technologies might
be attributable to these networks being larger vs. denser?

6
 Organizational Analysis: Week 8 Questions (Institutional Ecology)

•
Finally, how does one even consider studying microbreweries – how do you amass
enough knowledge in the first place to develop hypotheses or consider that such
hypotheses could be studied in that area? (I might ask the same thing to you about
intercorporate communities but that is maybe slightly more understandable…) While I
really enjoyed C & S, I’m really baffled by this. (Mary Carol)

• Marquis (2003) shows that the “local-ness” of corporate communities can be partly
explained by the availability of technologies such as air travel during the periods when
those communities were founded, which becomes manifest in a persistent “template” or
“logic” of action not just for individual corporations, but up a level to inter-corporate
networks. Would the same analysis apply “down” a level, through mechanisms such as
career imprinting (Higgins 2005)? In other words, to what extent to organizations
themselves function as communities that have their own imprinting effects on
individuals? (Matt)