What is organization theory?

o Some can’t keep up (Theory of

evolution)
1) Organization (rationally ordered arrangements to
1) Ecological Analysis (ORG  pop  Community of
achieve particular ends)
ORGs)
a. Size, Goals, Roles, Authority (RAGS)
2) Structural Inertia
2) Weber’s Bureaucracy
3) Demographic Processes (Liability of NSA2)
3) Theories (NC2S)
a. Newness
a. Classical (how to manage ppl)
b. Smallness
b. Neo Classical (more important than money)
c. Adolescence
c. Contingency (environment)
d. Aging
d. Systems (interrelated – whole)
4) Ecological Processes (NWF Grape)
4) Paradigm vs. Problem Driven
a. Niche Width Dynamics
5) Mechanism Based Theorizing
i. Specialist
What are organizations and why do they exist? ii. Generalist
b. Fitness Set Theory
 Firms provide division of labour that make i. Grain
production efficient c. Resource Partitioning Theory (small
 Firms help manage and monitor production and specialist ORGs use free resources from
the environ large Gen ORGs competition; fewer GENs 
 Firms exist to manage costs of market more specialist resources)
transactions d. Organizational Polymorphism  Alternate
 Firms exist to exert control and power Strategy
1) Marx: Firms provide division of labour that make 5) Population Dynamics
production efficient a. Density
2) Cooperation (work together; specialized) b. Dynamics
3) Economy of Scale 6) Community Interdependence
4) Union 7) Environmental Processes (IT2)
5) Transaction Cost Theory – Economic Price a. Institutional Processes (Govt rules)
Fluctuation; Invisible Hand (Demand/Supply) – Firms b. Tech Change (Cycle)
exist to reduce cost c. Tech Discontinuities (Disruptors)
a. Bounded Rationality 8) Organizational Forms (Genres)
b. Opportunism 9) Organizational Identity
6) Transaction Cost – Learning Prices, Negotiating, 10) Identity
Contracts a. Consolidation
7) Measuring Problems 11) Audience
8) Coase: Firms exist because doing econ exchanges in 12) Labels (HALF)
the market is costly (who is more likely to own a a. Homogeneity
printing machine: textbook publisher or newspaper b. Availability
publisher?) c. Legitimacy
d. Facilitate Communication
Why are there so many different types of organizations?
13) Characteristics of ID (BARS2)
- Evolve bc environ is uncertain and changing a. Breadth (Boutique/ chain stores)
- Creates new opportunities/ destroys old ones b. Authenticity (Whole Foods)
- Factors that influence ORG viability c. Resonance (Fox News)
o Demographic, Ecological, d. Sharpness (disk array producers)
Environmental e. Simple/Complex (private/public)
 Uncertain environ – it’s hard for any one ORG to
be stable (they die, multiply, and new ones
come by) Do organizations always act similarly?
 Properties of aggregate ORG
1) Iron Cage Bureaucracy (important decision made by
 It’s hard for ORGs to devise and execute changes
ppl with authority who need not necessarily
fast enough to meet uncertainty
represent the pop the decisions affect; more
 ORG community is rarely stable
competition/ rules; ppl want protection)
 1) Structuration (Fields emerge fr firms, regulatory a. (slowest) GoalsAuthorityTechnology
agency, resource and product consumer; second Marketing strategies (fastest)
step, what happens after fields emerge and before 4) Red Queen
homogeneity begins) a. ORGs adapt in an incremental manner
2) Isomorphism (forces one unit in a pop to resemble b. Competitors co-evolve
other units that face the same environmental 5) Learning
conditions) a. Constructive IF recent, if not…
a. Coercive b. Competency Trap
b. Mimetic i. Maladaptive if from distant past
c. Normative
How do ORGs interact?
3) Contagion
4) Key Elites 1) InterORG relationships (Remember Disney Star Wars
5) Status (High, Middle, Low) bananas)
a. Note Parabolic Behavior 2) How Businesses Interact
a. Traditional: Adversarial
What are the consequences of acting differently?
i. Low dependence
1) Generalist ii. Suspicion! At arm’s length
a. Spanning b. New Orientation: Partnerships
b. Broad – more audience, less appeal i. High dependence
2) Specialist ii. Trust! High commitment
a. More Fitness (less audience) 3) Why should ORGs trust each other? – Better
b. Niche relation!
3) Legitimacy a. Trade off – maintain relation but let go of
a. Conforming economic benefit – COST
b. Audience Expectation 4) Trust and Uncertainty
4) Spanning a. Trust meant to counteract uncertainty: two
5) Focus types
6) New Institutionalism/ Neoinstitutionalism (Draws i. Behavioral Uncertainty – trust is
power from and distinctiveness from institutional good whether behavior is
rather than technical environ predictable or not
a. Inertia/ Persistence 1. Alleviates fears
7) Institutional Variables 2. Develop mutual respect
a. Homogeneity ii. Environment uncertainty – trust is
b. Low vs High Status bad
c. Early vs. Late Arrivals 1. By becoming less alert,
8) Illegitimate Changes (disruptive and viewed as more vulnerable
threatening) 5) How does interaction affect competition?
9) Consequences a. Firms operate in Multi-market
a. Worse case: Decline  Death b. Mutual Forbearance
b. Minor changes  More ISO i. Fear of retaliation
How do ORGs evolve? ii. Indirect ties
1) What causes ORG changes? iii. Have more info in each other
a. Adaptation (Transformation) 6) What happens to competition?
i. Can ORG change on time? a. ORGs with MM contact create domains of
b. Selection (Replacement) influence – other MMC firms stay away
2) How do ORGs become inert? from domain
a. ORG Competencies i. Growth/entry into domain markets
i. Reliability increase initially, but decrease with
ii. Accountability time
iii. R+L = Reproducibility 7) Spillover to Single Market Firms
1. Higher standardization of a. Competition can affect Single Market Firms
routines i. In areas of dominance it can affect
(Institutionalization) SMF negatively
3) Speed of Aspect Change
 ii. In areas with mutual forbearance = i. High with PP/ low without
SMF ++ competition
ii. Low with govt. dependent ORGs
How do ORGs interact with powerful others?
How are ORGs evaluated?
1) Political processes
a. ORG politics 1) Which is a good firm?
i. Use power to obtain outcomes a. Status
where there is uncertainty or b. Reputation
disagreement  influence 2) Status – through affiliations/ hierarchal positions in
decisions social structure
2) Areas where politics play roles a. High is better – more resources, more
a. Structural change – shift in power base visible to audience
b. Mgmt. Succession – network of trust b. Better Audience opinion
c. Resource allocation – changing priorities i. Firms affiliated with high status
3) How do external and powerless others impact ORGs? firms must be good
a. Boycott c. Quality – spend more = more return
i. Take away resources from firm 3) Reputation – through past performance/quality
ii. Not all successful a. High stat can mean high rep (but depends
iii. ORG concedes = success on area being assessed: E.g. Yale for Law vs.
1. More likely with a lot of Medicine)
media attn 4) Study – California Wine Industry
2. Adds more pressure a. Appellations and Prestige
4) Some firms are more susceptible to boycotts i. Wines from certain areas are
a. Internal instability – creates vulnerability prestigious (e.g. Napa Valley)
i. Performance decline ii. High status wineries + high
ii. Reputation decline affiliation = produce better quality
b. Negative feedback wines  high price
5) Political Mediation – boycott success dependent on 5) When does status and rep matter?
political circumstances  visible negative feedback a. Uncertainty and high accountability to
affects this external audience: two stage approach
6) King – Study i. Status – choose bracket
a. Activist more likely to boycott firms who ii. Reputation – choose specific
have already been through it partner
b. Large firms with + image also likely b. Accountability = anxiety = demand high
7) How do ORGs traverse a dynamic political quality  pick high status partner to CYA +
landscape? increase status
a. Political pluralism c. Reputation?
i. Fed vs State parties i. Depends on tech skills + integrity
ii. 2 parties compete to gain support ii. Specific industry expertise
iii. Offer resources, money iii. Firms will choose from low rep
iv. Perfect space for ORG expansion firms within the same bracket first,
8) Unhealthy competition (cheaper)
a. Safe states – neglected 6) Business Integrity
i. Expansion here harder a. Firms will choose partners with higher
b. Swing states – focus integrity (if partner fails they are affected
c. Govt dependent firms can’t be helped by PP too)
9) Advantage of Exp 7) Study on Big 4 firms
a. Locally Embedded – ORG a. Chosen when:
i. More info i. Firms are more accountable
ii. Managed better ii. Prominent
iii. High influence iii. Not a lot of specialization
10) Kozhikode and Li iv. High reputation for integrity
a. Studied bank expansion in India
How do ORGs respond to failure?

1) High status and performance

a. Loss aversion – high stat ORGs try to
minimize status loss if rep is declining
i. Can trigger illegal activities
b. Homophily – Hi stat ORGs associate with
other Hi stats
2) Illegal activities and high-status firms
a. Illegal activities – to maintain quality
i. High status firms are more
susceptible
3) Why do high status firms get nervous?
a. Performance decline
b. Peers (in same bracket) doing better than
them – they can’t keep up
c. Willing to take risks to fix problems
4) Partner firms may ignore illegal acts (or we can)
5) Study on Indian Commercial Banks
a. High status firms with performance decline
– more illegality
b. Harder competition – more
c. Firm’s associated with partners with
integrity – less
6) High stat ORGs react to failure  may resort to
illegality to save rep and status
7) How do ORGs learn from prior errors?
a. Heterogeneous
i. Complex cause
ii. Variance – may be a deeper issue
iii. Cause conflict in ideas
iv. Better causes for accidents
b. Homogeneous
i. Simple and easy to understand
ii. Systematic Errors
iii. Extreme circumstance
8) Do all companies learn equally?
a. Specialists
i. Better for Heterogeneous issues
b. Generalist
i. Wider ranging
ii. Hetero is hard for them
iii. Learn from accumulated exp and
outside factors