Aldrich 1976

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ENVIRONMENTS OF +10520
ORGANIZATIONS
Annu. Rev. Sociol. 1976.2:79-105. Downloaded from www.annualreviews.org
by North Carolina State University on 06/28/13. For personal use only.
Howard E. Aldrich
New York State School of Industrial and Labor Relations, Cornell University,
Ithaca, New York 14850
Jeffrey Pfeffer
School of Business Administration University of California, Berkeley, California 94720
INTRODUCTION
The relationship between organizations and environments has drawn increasing

attention in the recent literature of the sociology of organizations. We consider the
subject of interorganizational relations to be a special case of the more general study
of organizations and their environments. Dimensions of interorganizational rela
tions have been listed (Marrett 1971), and partially developed paradigms for analyz
ing organization-environment relations have been proposed. The natural selection
model, developing the strongest argument for an environmental perspective, posits
that environmental factors select those organizational characteristics that best fit the
environment (Hannan & Freeman 1974, Aldrich' 1971b). A complementary model,
variously called a political economy model (Benson 1975, Wamsley & Zald 1973),
a dependence exchange approach (Jacobs 1974, Hasenfeld 1972), and a resource
dependence model (Pfeffer 1972b), argues for greater attention to internal organiza
tional political decision-making processes and also for the perspective that organiza
tions seek to manage or strategically adapt to their environments.
The two models agree on the importance of organizational environments for
understanding organizational decisions and structures, but differ in their evaluation
of the importance of the role of environmental selection. Current literature has
elements of both incompletely developed perspectives and the shape of organiza
tional sociology will be determined by the implicit debate taking place. As it is
impossible to ascertain the ultimate resolution of this argument, we have chosen to
examine both perspectives in this chapter, and to include literature from industrial
organization, and administrative science and organizational behavior, as well as
from organizational sociology.
79
80 ALDRICH & PFEFFER
Historical Precedents
The emphasis on organizational environments is not a recent development, since
Weber's (1968) historical and comparative studies examined the effect of social
structure on bureaucracy. Selznick's studies of the TVA (1949) and the Communist
Party (1960) explicitly included the environment as an important external con
straint, and the work of Bendix (1956) on the relationship between entrepreneurial
and managerial ideologies and social structure is also in this tradition. The theory
of the firm in economics treats the relationship of a single organization to its
environment and posits that organizational decisions concerning price and output
are the outcome of market forces (e.g. Stigler 1966). Industrial organization econo
mists have been concerned with the ability of organizations to acquire market power
and modify their environments (Phillips 1960, Scherer 1970). Anthropologists

brought the environment into their theories with the concept of societal evolution
(White 1949, Sahlins & Service 1960), and a similar interest in societal evolution
occurred in the 1960s in sociology (Parsons 1966).
One could pose several questions about the extent to which this work has been
cumulative, beginning with the intriguing question of why there has been little
cross-fertilization between the fields of industrial organization in economics and
organizational sociology. It is also interesting to consider why research on the effects
of environments on social structure waxes and wanes, with attention sometimes
focused on external effects, and at other times on internal processes. These questions
are best left for sociologists of science to answer (cf Hirsch 1975a). There is currently
great interest in environmental effects and the journals are filled with papers contain
ing the words environment or interorganizational in their titles.
THE NATURAL SELECTION MODEL
Two possible approaches to the study of organizational change are the natural
selection model of evolutionary theory and the decision-making perspective on
organizations that subsumes the resource dependence model. The natural selection
model will be presented first and serve as a point of contrast for other perspectives.
While Campbell (1969) has applied the term evolution to the process of natural
selection operating on social structures, we will use either the terminology natural
selection or ecological to refer to this process. Evolution contains some connotation
of a progression; for example, in biology, from less to more complex forms. Evolu
tion also carries some connotation of progress, as each succeeding generation is
presumably more advanced in the evolutionary process. By using the term natural
selection or ecological, we emphasize that the process of organizational change,
while controlled by the environment, does not necessarily involve progress to more
complex or higher forms of social organization or to better organizations. The
process of natural selection means the social organizations are moving toward a
better fit with the environment, but nothing more.
The natural selection model in its original form applies at the population level of
organizations rather than at the level of single units. Environments differentially
ENVIRONMENTS OF ORGANIZAnONS 81
select organizations for survival on the basis of the fit between organization structure
(and activities) and environmental characteristics (Hannan & Freeman 1974, Buck
ley 1967). Those organizations that have the appropriate social structure, for what
ever reason, are selected over those that do not.
As developed by Campbell (1969), the natural selection model has three stages.
The model is not intended to account for short-run changes, which are temporary
responses to local conditions, but rather for long-run transformations in the form
of the elements being examined. In biology the forms that are changing are typical
species genotypes, whereas in social science we are interested in changes in the form
of social organization. In organizational sociology, forms are currently identified
through various typologies, such as mechanistic-organic or bureaucratic-profes
sional, or through an empirically developed typology (cf Hall 1972, chap. 2). Such
typologies are often not complex or developed sufficiently to permit a very compre
hensive ecological analysis.
The first stage in the natural selection process is the occurrence of variations for
whatever reason, planned or uplanned. In organic evolution, variations occur
through the genetic mutation process, while in the learning process variation occurs
in the exploratory responses made to stimuli. Variations are the raw material from
which the selection process culls those structures or behaviors that are most suitable.
The second stage is the operation of consistent selection criteria that differentially
select some variations over others or selectively eliminate certain variations. In
organic evolution the differential survival of certain mutant forms that are better
able to exploit the food supply in their environment reflects the operation of a
resource-based selection criterion. Differential reinforcement of particular explor
atory responses by animals, in a consistent manner, is the selection stage in the
learning process.
The third stage in the ecological process involves the operation of a retention
mechanism for the selective retention of the positively selected variations. Retention
occurs when certain variations are preserved, duplicated, or reproduced. In organic
evolution the retention mechanism is the chromosome-gene system. Positively se
lected variations survive and reproduce similar others. For the learning process the
memory system is the means whereby positively selected responses can be recalled
for future use.
The process as described is perfectly general and can be applied to any situation
where the three stages are present. The three-stage model completely describes the
evolutionary process. As Campbell (1969:73) noted, "Given these three conditions,
an evolution in the direction of better fit to the selective system becomes inevitable."
Before considering some of the theoretical problems of the ecological model, we
should note three problems that have limited the application of this model in
organizational sociology. First, it is most appropriately applied at the field or
population level, as it is not the fitness of any single organization, but rather the
distribution of fitness across a population of organizations that is of interest. This
requires the study of relatively heterogeneous populations of organizations over a
fairly long time span, something few investigators have the funding or the time to
do, although Stinchcombe (1965) attempted a partial version of such an analysis in
his paper on social structure and organizations. There are few longitudinal studies
of organizations beyond isolated case studies, although recently interest has been
growing in such work (Aldrich & Reiss 1976, Meyer 1 972, Warren, Rose & Ber
gunder 1974). It might be noted that the availability of archival data, particularly
on economic organizations, potentially reduces the cost of such research.
Second, the natural selection model focuses on outcomes involving the selective
propagation of changes, however generated, in the structure of a large number of
organizations, rather than on the route taken by any single organization in adapting.
Indeed, the focus on survival, in contrast to adaptation, as the mechanism of change
is one of the unique contributions of this perspective. However, investigators run
the risk of merely compiling a chronicle of changes whose causes cannot be ascer
tained. We would suggest that without a complementary theory of managerial

behavior, such an outcome is highly probable.

Third, a proper application of the natural selection model requires a system of
classification and categorization of organizational forms analogous to species in
biology. In studies of biological evolution, when one particular type of organism
disappears and another rises into prominence in the same niche, the system of
categorization is able to assess, to some extent, whether the new organism is really
a different species, a mutation directly related to the old species, or a temporary
phenotypic adaptation. No such system of classification exists in the study of orga
nizations. The difference between structural modifications and the emergence of
fundamentally new organizations is frequently unclear. Another way to think of this
problem is to note that we do not know the length of an organizational "generation,"
if such a thing exists.
Summary
As a model of organizational change, the natural selection perspective is indifferent
regarding the source of variation or change in the first place. Selection of social
structures is accomplished by differential survival of structural forms, rather than
by the adaptation of a single organizational unit. While in this model selection is
determined by fitness to the environment, no further specification is provided as to
the selection criteria. Retention, the opposite of variation (Weick 1969), is accom
plished through organizational stability, manifested in the use of unchanging stan
dard operating procedures or formal rules.
Since selection is made by the environment according to some dimension of
fitness, a theorist using this model could, in explaining only long-run changes, safely
neglect intraorganizational managerial processes. In the long run only those orga
nizations that fit the environment will survive and, consequently, one need not be
as concerned with the processes by which such an organization-environment match
is achieved. Stated in this form, the ecological perspective can be seen to be virtually
isomorphic with the economic theory of perfect competition (Winter 1971) and
similar to elements of what has been called structural contingency theory (Pennings
1975). Microeconomic theory, or the theory of the firm, also neglects internal
decision-making realities. Friedman (1953) argued that since firms are forced to
behave as if they are maximizing profit because of competition, the assumptions of
ENVIRONMENTS OF ORGANIZATIONS 83
profit maximization will lead to correct predictions in equilibrium, regardless of the

process by which such equilibrium states are reached. In both natural selection
theory and microeconomics, the environment selects the most fit, or optimal orga
nizations, and both implicitly assume that the individual social unit is itself power
less to affect the selection process. Both models focus strongly on the process of
selection, concerning themselves less with variation. Indeed, one might characterize
the theory of the firm as a theory of the selection criteria that are inevitable given
certain assumptions about decision making and the competitive nature of the envi
ronment. Both structural contingency theory and ecological models posit an optimal
fit between the organization and its environment and structural contingency theory
differs chiefly in its emphasis on managerial adaptation to find the fit, rather than
on change being accomplished through differential survival.
THE RESOURCE DEPENDENCE MODEL
The natural selection model leaves out questions about how decisions are made in
organizations. If all decisions are confined to some limited set of solutions (in the
case of microeconomic theory, a single optimal solution), then it would be proper
to treat them as irrelevant, if one assumes further that equilibrium is achieved
relatively rapidly and the process of adjustment is not interesting in its own right.
However, there are few industries in the United States that fit the model of perfect
competition (Galbraith 1967), and furthermore, public and social service organiza
tions face situations of little or no competition. In the absence of environmental
demands that must inevitably be heeded if the organization is to survive, how and
why decisions are made in organizations becomes a more important focus of re
search attention.
The resource dependence model proceeds from the indisputable proposition that
organizations are not able to internally generate either all the resources or functions
required to maintain themselves, and therefore organizations must enter into trans
actions and relations with elements in the environment that can supply the required
resources and services. Since organizations are constructed or enacted systems that
must satisfy the demands of members, owners, or constituents (White 1974) and are
subject to evaluation (Thompson 1967), administrators face the task of ensuring a
continued supply of resources and performances and ensuring the satisfaction of
powerful groups in their environment. The resource dependence perspective argues
that in addition to the interdependencies among organizations that are based on
differentiation and the interorganizational division of labor, some interdependencies
are sought or avoided by administrators because of the power and control possibili
ties inherent in the situation of dependence (Blau 1964). Administrative strategies
range from vertical integration to deny the competitor the use of raw materials to
horizontal mergers undertaken to restrict competition.
The resource dependence model portrays the organization as active, and capable
of changing, as well as responding to, the environment. Administrators manage their
environments as well as their orgariizations, and the former activity may be as
important, or even more important, than the latter (Pfeffer 1976). The presumed end
result of such strategies is the acquisition of resources and the survival of the
organization, as well as the stabilization of relationships with environmental ele
ments.
Since the environment, according to the resource dependence perspective, does
not impose as strict requirements for survival, many possible actions and structures
are consistent with the survival of the organization. Therefore, the criteria by which
decisions are made and structures determined become iIpportant and problematic.
Internal power differences become important, because there is no longer a single
optimal structure or set of actions that will fit the organization with its environment.
There is a range of choices or strategies available (Child 1972, Chandler 1962), and
the influence of internal subunits may come to determine, in interaction with the
demands of various external groups, the outcome (cf. Jacobs 1974, Pfeffer & Salan
cik 1974). The resource dependence model calls attention to the importance of
environmental contingencies and constraints, at the same time leaving room for the
operation of strategic choice on the part of organizational members as they maneu
ver through known and unknown contexts.
If the ecological model is analogous to the microeconomic theory of the firm, then
the resource dependence model is analogous to theories of oligopoly and the behav
ioral theory of the firm (eyert & March 1963). The resource dependence model
posits, therefore, that while environmental influences are important, environmental
constraints do not reduce the feasible set of social structures to a set consisting of
only one form. The possibility that there are a variety of internal structures and
actions consistent with the survival of the organization means that while the orga
nization may have the goal of survival, survival does not imply only a single or very
limited set of social structural forms. Not all internal decisions are relevant to
survival, and thus not all are affected by the environment.
The goal of survival and the corollary idea of environmental constraint provide
a calculus for understanding organizational structures over the long run. In the
absence of such strict restraint, another way of understanding internal organiza
tional structures and actions is required. The political economy model (Zald 1970),
which emphasizes the acquisition and use of power in understanding organizational
processes, provides such an alternative perspective. The relationship between the
political economy model and the resource dependence model should be clear. Only
if one assumes that the environment is not completely binding does the operation
of internal organizational political processes become interesting. If the environment
inevitably constrains social structures to a unique configuration, then internal politi
cal processes relevant to organizational decision making become uninteresting, as
they must all lead to the same end result or the organization will fail.
The resource dependence model also posits an active role of the organization
affecting its environment, as well as arguing that environmental constraints leave
a range of possible social structures consistent with survival. In contrast to the
ecological perspective, the resource dependence model posits an active, managerial
process of selection, as opposed to a process of natural selection controlled by the
environment. While it is of course possible to argue that political and decision
making structures are themselves the outcome of a process of natural selection, such
an attempt to subsume the resource dependence approach under the natural selec
tion model would only tend to hide the fundamental difference between them. We
might note that this difference between emphasizing personal action versus environ
mental effects is found throughout the social sciences-in history, in the contrast
between the great man approach versus the approach that stresses the effect of
context, and in psychology, in the difference between operant conditioning, stressing
the control of behavior by the environment, and theories of personality and cognitive
choice that emphasize more the effect of intended, conscious action.
In the following sections we review recent research on organizations in terms of
its relationship to the three stages of the natural selection process, variation, selec
tion, and retention, noting disagreements among the perspectives. The greatest
amount of theoretical divergence is with respect to the selection stage, with the
resource dependence model assigning more importance to managerial and organiza

tional decision making than the ecological perspective.
VARIATION
The natural selection model is indifferent to the source of variation, as both random
and planned variation serve equally well in providing the raw material from which
selection is made. The general principle is that the greater the heterogeneity and
number of variations, the richer the opportunities for a close fit to the environmental
selection criteria.
Following suggestions made by Buckley (1967) and Hannan & Freeman (1974),
we believe that the natural selection model can be applied not just to the survival
or failure of entire organizations but also to the partial modification of structure and
activities that falls short of elimination of the total organization. This modification
of the biological model takes into account the capacity of social organizations to
alter structure, a process that is qualitatively different from homeostatic changes
made by biological organisms in response to environmental change. Whereas or
ganic evolution proceeds by a process of differential survival of the entire unit, the
changing of social organizations can also occur through adaptations of structure or
conduct in one part of the organization while the rest of the structure remains
unchanged.
Modifying the natural selection model in this fashion complicates an ecological
analysis, since the criterion for successful adaptation to the environment is changed
from the easier-to-observe survival or failure to the more problematic criterion of
structural change or stability. Rather than being able to observe a population of
organizations adapting by the selective elimination of the less fit, we may find that
almost all survive, but that each has undergone significant internal transformations
of structure. Nevertheless, modifying the ecological model is a necessary step toward
recognizing the difference between organic and social evolution (Zachariah 1971)
and toward making natural selection theory useful for organizational analysis.
Ecological change may arise from variation both between and within organiza
tions. There are likely to be significant variations within a differentiated organization
in individual abilities to fill particular roles, just as there will be variations over time
in carrying out important activities (Campbell 1969). Hirschman's (1970) assertion

that all organizations drift into deterioration through random errors in the perfor
mance of everyday duties is consistent with the ecol ogical approach.
While the natural selection model does not specify the source of variation, econo
mists, management scientists, and many sociologists have argued for the importance
of variation as a planned response to environmental contingencies. Penrose
(1952:819), for instance, wrote, "Our knowledge of why men do what they do is very
imperfect, but there is considerable evidence that consciously formulated human
values do affect men's actions, that many decisions are reached after a conscious
consideration of alternatives, and that men have a wide range of genuine choices."
Similarly, sociological theories of organization treat leadership and organizational
design as rational, conscious, planned actions (G ouldner 1954, Selznick 1957).

Variation between organizations is inherent in the interorganizational division

of labor across industries and since the distribution of organizations by industry
changes over time, we might infer that selection at this level is occurring. There are
also variations within industries or generic types, e.g. within the manufacturing
sector and within firms manufacturing particular products. Emery & Trist's (1965)
example of the firm manufacturing canned foods and the firms manufacturing frozen
foods is a case of such within-industry variation.
Innovating organizations may introduce variation into a population by deliber
ately varying from customary modes of behavior. Innovation, however, need not be
a conscious strategy and may be a result of imperfect attempts to imitate other
organizations perceived to be successful as pointed out by Alchian (1950:218-19):
"While there certainly are those who consciously innovate, there are those who, in
their imperfect attempts to imitate others, unconsciously innovate by unwittingly
acquiring some unexpected or unsought unique attributes which under the prevail
ing circumstances prove partly responsible for the success." A continuing cycle of
imitation-innovation may occur if other organizations, in tum, attempt to imitate
the unwitting innovator.
Variations may be introduced into the organizational popUlation through the
creation of new organizations. Economic organizations are presumably created by
entrepreneurs seeking profit and confronted with the risks of undertaking a new
venture. Theories of the formation of new economic organizations have been pre
sented by Schumpeter (1934) and Knight (1921), while Stinchcombe ( 1965) has
treated the problem of organizational formation more generally. Given the risks and
uncertainties involved, the rate of creation of new organizations is surprisingly high.
While there is no systematic data on the formation of nonbusiness organizations,
in the period between 1944 and 1954 over 5.4 million new small firms were estab
lished in the United States and another 4.5 million were transferred to a new owner
(Aldrich 1971 b). The large number of voluntary associations (Hausknecht 1962)
and social movements that come and go quite regul arly (Za1d & Ash 1966, Zurcher
& Curtis 1973) provide further evidence that a great deal of variation in the form
of new organizations is introduced into the organizational population over time.
The resource dependence model posits that organizations attempt to manage their
environments and that variations are conscious, planned responses to environmental
contingencies. Organizations attempt to absorb interdependence and uncertainty,

either completely, as through merger (Pfeffer 1972b), or partially, as through coop
tation (Pfeffer 1972a, Allen 1974) or the movement of personnel among organiza
tions (Pfeffer & Leblebici 1973b). Attempts are made to stabilize relations with other
organizations, using tactics ranging from tacit collusion (Scherer 1970:157) to legal
contracts (Macaulay 1963). Research on strategies has been designed to test the
hypothesis that observed variations are planned responses to environmental condi
tions or at least that organizations behave as if they were guided by norms of
rationality. Pfeffer (1972a) found that regulated firms were more likely to include
representatives of outside groups on their boards than nonregulated firms and that
the pattern of merger activity followed the pattern of resource transactions (Pfeffer
1972b). Alexander (1971) noted that after traditional forms of mergers were chal
lenged by the antitrust authorities, firms switched to the rarely challenged conglom
erate merger.
Since the ecological model is indifferent to the source of variations, studies show
ing that specific variations appear to be responses to environmental conditions are
not inconsistent with the model. More troublesome is the fact that no attempt has
been made to test the alternative hypothesis, namely that random or unplanned
variations play an important part in organizational change. A well-known study in
economics is the attempt by Mansfield (1962) and others to test Gibrat's Law, which
states that given equal starting points, the size distribution of a population of firms
can be fairly well approximated by allowing growth over time to be determined by
a random sampling from a distribution of growth rates. In reviewing some experi
ments, Scherer (1970:126) noted that "contrary to what untutored intuition might
advise, the firms do not long remain equal in size and market share, even though
their growth prospects are identical ex ante. Patterns resembling the concentrated
structures of much American manufacturing industry emerge within a few (experi
mental) decades." However, Scherer concludes by calling for caution in the use of
Gibrat's Law, as it patently excludes many variables of interest to economists.
SELECTION
A critical distinction between the resource dependence and natural selection models
of organizational change is the relative importance of environmental selection as
opposed to strategic decision making by organizational members. For systematic
environmental selection criteria to have an effect, two conditions must be present
(Campbell 1969): (a) there must be numerous instances involved, i.e. a high rate of
variation, and (b) there must be a fairly high mortality rate for the organizations
or structures involved. Without variation, there is no raw material for the selection
process, and without a high mortality rate environmental selection criteria would
be irrelevant.
The purest form of environmental selection is the selective survival or elimination
of complete organizations, depending on their fit with the environment. For in
stance, if the selection criteria were based on administrative rationality, nonbureau
cratic organizations might fail to survive, leaving only bureaucracies. This type of
selection process is limited in its applicability to organizational populations of

industrial societies because (a) the population of business organizations is bifurcated
into a segment of very large organizations with a very low mortality rate and another
segment of small organizations with high variation and turnover; and (b) as the size
of the public sector of the societies grows, more and more organizations are pro
tected from the possibility of failure since they rely on public funding.
As an example of our first point, in 1964 there were about 1.5 million incorporated
businesses in the United States. Of these, the largest 325 nonfinancial corporations
controlled 42% of the assets of all US nonfinancial corporations (Scherer 1970:39).
There were another 10 million or so proprietorships and partnerships, most with
less than four employees. Large businesses rarely disappear, and when they do it is
generally because of mergers or acquisitions. Collins & Preston (1961) compiled lists
of the 100 largest manufacturing, mining, and distribution firms for six fairly evenly
spaced periods from 1909 through 1958. An average of 2.5 firms per year disap
peared from the list and the rate of turnover declined over time. Mergers and
acquisitions account for most of the disappearances. At the other end of the size
distribution the rate of turnover among small businesses is extremely high. It is
estimated that as many as half of all new small businesses fail within two years of
their creation (Mayer & Goldstein 1961).
Our second limitation of the applicability of the natural selection model is related
to the expanding role of government in all industrialized nations. Governmental
bureaucracies rarely go out of existence. Organizations that come under the protec
tion of various federal, state, or local governments, e.g. public hospitals, social
service agencies, schools, or manpower programs, can also be expected to have very
low failure rates. National governments have come to the aid of private enterprise
as well, particularly large firms, further reducing the mortality rate in that sector.
Environmental selection of entire organizations exists mainly for small businesses,
organizations not linked to or subsidized by governmental units, and voluntary
associations. Less complete forms of selection, however, exist for all organizations,
as particular structures or behaviors may be eliminated, added, or modified under
the impact of environmental forces (Burns & Stalker 1961, Pfeffer & Leblebici
1973a). As is the case in organic evolution, selection among organizations is on the
basis of relative, rather than absolute, advantage, except in the case of completely
nonviable forms.
Selection Processes
The work of Hickson et al (1971) and others who have noted the importance of
ch-. . ce and power in organizations (e.g. Child 1972) provides an important theoreti
cal link between the organization-environment literature and theories of organiza
tional behavior. In Hickson's strategic contingencies' theory, power within the
organization comes from a subunit's capability for coping with critical organiza
tional uncertainties, as well as from the importance of the uncertainty and the extent
to which other subunits can substitute. Power within the organization, in other
words, is related to the uncertainties and contingencies the organization faces
(Crozier 1964, Thompson 1967). Power within the organization, in turn, affects the
choices made within organizations about structures (Child 1972) and about resource
allocations (Pfeffer & Salancik 1974). Thus, the process by which environment
comes to affect social structure may be the following:
1. The environment provides many of the constraints, uncertainties, and contingen
cies because of the necessity for transacting with the environment.
2. These contingencies affect the distribution of power and influence within orga
nizations, providing some subunits with more power and others with less.
3. Power is used in determining organizational social structures, particularly to the
extent that there is uncertainty and the decisions concern critical issues.
Therefore, by affecting the distribution of influence within organizations, organiza
tional environments come to affect structure and decisions.

Organizations may actively monitor the environment and borrow successful inno
vations in structure or conduct from other organizations (Aldrich & Reiss 1971).
Alternatively, we need only posit that organizations that adopt the innovations of
relatively successful organizations will have at least a short-run advantage over
others. If information flows relatively freely throughout the population, we would
expect selective diffusion of innovations among organizations to be an important
selection mechanism for changes that do not involve the elimination of entire
organizations. As Mueller (1972: 200) noted, the initial advantage of an organiza
tion, derived from an innovation, is eventually lost when information about the
innovation is diffused. Selective diffusion and borrowing will occur most readily
when organizations are relatively similar and when communications are inexpen
sive, permitting the free flow of information (Stinchcombe 1965).
Within an organization the process of selection may occur through the selective
promotion to leadership roles of persons whose past behavior has been most adap
tive and successful in a given environment (Campbell 1969). Similarly, variations
in task performance that prove more successful will be selected if they occur fre
quently enough and there exists a mechanism for retaining the processes of the
successful new activities or structures. Variations in the environment must be
matched by parallel variations in organizational structure or activity if adaptive
selection is to occur (Buckley 1967).
One of the major problems of using the ecological model's conception of selection
processes is the difficulty of avoiding circularity or tautological arguments (Camp
bell 1969). Since organizations or partial structures that are not suited to the
environment presumably fail, the surviving organizations or structures are, almost
by definition, suited. It is easy to retrospectively construct rationales for the charac
teristics that caused organizations to fail or survive. Since evolutionary theory
focuses on differential survival rates which can only be known restrospectively, the
temptation to construct tautological explanations for survival and death is great. We
may find ourselves saying that bureaucratic organizations were produced by selec
tive criteria favoring bureaucratic organizations. At that point the concepts of
environmental fitness, survival, and selection criteria become conceptually indistin
guishable (Alland & McCay 1973).
For evolutionary theory to be successfully applied, it appears that it is necessary
that variables be identified that are generalizable across contexts and that permit the
formulating of a priori as well as ex post hypotheses. Since organizations typically
require resources in order to survive, a linkage between evolutionary theory and the
various models of resource dependence can be made. It is possible that" the critical
variable affecting survival probability is the relative resource abundance or scarcity
for the particular organization in the environment. In order to develop this idea, it
will be necessary to derive measures of resource scarcity or munificence that are
generalizable across contexts and types of organizations (Staw & Szwajkowski
1975), and then to examine the extent to which these resource measures account for
survival or organizational death.
Strategic Choice
Selection in the ecological model is a matter of certain organizational variations

being either positively or negatively selected, depending on their match with envi
ronmental conditions. The model is indifferent as to how the variations arose in the
first place and the emphasis in selection is on the role of the environment. We have
already noted that in the case of large or public organizations the notion of selection
being accomplished through differential survival is probably incorrect. Further
criticisms of the basic concepts of the selection process as developed in evolutionary
models are implicit in the work of theorists writing in the strategic choice (Child
1972) or political economy (Zald 1970) traditions.
Child (1972) raised three arguments to counter the claim that environmental
influence is an overwhelming constraint on organizations. First, he noted that
organizational decision makers have more autonomy than might be inferred from
the perspective of environmental determinism. Decision makers can both select
from a range of viable alternatives compatible with the niche they currently occupy
and choose the type of environment in which the organization is to operate. Busi
nessmen, for example, may choose to enter or leave markets. Further, Cyert &
March (1963), Williamson (1964), and Hirschman (1970) have. proposed that there
is typically slack in organizational operations and that few, if any, organizations
operate at the limits of efficiency. While contingency theorists have argued that there
is no universal, best way to organize, they have searched for the best structure for
a given environment (Lawrence & Lorsch 1967). The point made here is that there
may be a variety of structures that are viable in a given environment. The inconsis
tent support for theories of structural contingency (Mohr 1971, Pennings 1975), and
the literature which indicates that there are a variety of structural mechanisms that
may accomplish an organizational purpose, such as control (e.g. Meyer 1972, Child
1973) are both consistent with this first challenge to evolutionary theory.
Strategies such as product differentiation and market segmentation can be viewed
as attempts by business firms to achieve a wider range of discretion. The traditional
marketing strategy was to convince consumers that a product served their needs
better than products of competing firms. Market segmentation involves an attempt
to meet the perceived specialized requirements of consumers in a disaggregated
market . Market segmentation was the strategy used by adult education programs
in California (Clark 1956), in which programs meeting the needs of different groups
were offered. Voluntary associations must often choose between these two strategies.
If the association stresses the general needs of all, it may lose potential members with
specialized requirements. If special programs are established to meet the needs of

subgroups, the overall objectives of the association may be diluted (Aldrich 1971a,
Demerath & Thiessen 1966).
The second point is that organizations are not always passive recipients of envi
ronmental influence but also have the power to reshape the environment (Hirsch
1975b). Perrow (1970) has made the same point, while Galbraith (1967) has argued
that large business corporations are able to create demand for their products and
control their competitive environments. Theories of oligopoly were developed by
economists precisely to examine the conditions under which groups of firms can
acquire the power to alter market parameters (Phillips 1960).
If the number of firms in a particular market is small, competition can be regu
lated through informal interfirm arrangements (Phillips I96O). Such informal ar
rangements tend to be more effective when the organizations have similar objectives
and similar operating characteristics. Semiformal interfirm linkages, such as joint
ventures (Pfeffer & Nowak 1976) and the movement of executive personnel (Pfeffer
& Leblebici 1973b) can be used when there are more, but still relatively few,
organizations to be coordinated. The problem of managing the environment under
the uncertain conditions produced by a large and heterogeneous population of firms
has been solved in many instances by turning to government regulation or other
political interventions in the marketplace. Regulation has frequently operated to
restrict entry and to stabilize market prices and product characteristics (cf Pfeffer
1974).
Slightly more subtle is the role played by the Commodity Standards Division of
the US Department of Commerce in reducing the number of different products
manufactured for a given market and in standardizing their characteristics. These
standards remove a major obstacle to interfirm collusion by ensuring that there are
standard products, hence easing the task of monitoring market sharing agreements,
and also tending to stabilize production characteristics across organizations. Public
organizations and private nonprofit organizations may form clearinghouse associa
tions, review committees, and other centralized structures to reduce the uncertainty
that might otherwise exist in a multi-organizational field (Warren 1967). Also, both
private and public organizations seek assistance of various kinds from the gov
ernment, ranging from direct financial assistance as in the case of cities and uni
versities to the protection of markets from foreign competition using tariffs and
quotas.
Child's (1972) third argument against environmental determinism is that the
theories stressing the importance of the environment have frequently blurred the
distinction between characteristics of the environment and the perception and evalu
ation of these characteristics by persons within the organization. This distinction
would not be crucial if people always accurately perceived environmental dimen
sions. Such is not likely to be the case, however, and Pennings (I973) has indicated
that there are minimal correlations between objective and subjective measures even
of dimensions of organizational structure. One interesting but thus far unexplored
research question is the causes and consequences of the extent to which organiza
tional members accurately perceive the environment.
Conceptions of the Environment
Following up Child's insight, Aldrich & Mindlin (1976) identified two different
conceptions of the environment in the organizational literature. One approach,
exemplified by Dill (1958), Weick (1969), and Duncan (1972), treats an organiza
tion's environment as the flow of information perceived by members at the organiza
tion's boundaries. The other approach, exemplified by Pfeffer (1972a, b) and Aiken
& Hage (1968), treats an organization's environment as the resources available,
more or less ignoring the process by which information about the environment is
apprehended by decision makers. Analysts from both approaches tend to stress the
active role played by an organization in selecting structure, rather than the role of
the environment in selecting appropriate organizations and organizational re

sponses.
When the environment is considered as a stock of resources, the basic concept
used by investigators is dependence, defined in terms of the bargaining position of
the focal organization with respect to interacting organizations (Mindlin & Aldrich
1975, Jacobs 1974). Although the term dependence has not always been used,
references are made to resource exchange (Levine & White 1961), power and control
over sources of support (Selznick 1949, Evan 1972), and importance of input and
output transactions for determining organizational structure (Katz & Kahn 1966).
Dependence on external agents for resources is hypothesized to lead to such interor
ganizational actions as mergers, joint ventures, and cooptation.
When the environment is considered as a source of information, the basic concept
used by investigators has been uncertainty. Theorists have generally assumed that
complexity and instability of the environment generates uncertainty (Duncan 1972),
though it might be argued that uncertainty is caused by the organization's search
and analysis methods. Uncertainty has been hypothesized to lead to less formalized
and less centralized structures (Bums & Stalker 1961), though it might be argued
that complex and contingent structures simply perceive more of the uncertainty in
the environment.
Both Weick (1969) and Child have argued that environments are enacted or
created through a process of attention . It does seem reasonable to argue that
organizational actions will be determined by perceived reality, which may or may
not be the same environment that the researcher perceives. It is also reasonable to
argue that in different organizations with different structures and information sys
tems, decision makers will perceive the environment differently. Organizational
monitoring and scanning systems are highlighted by the concept of environmental
enactment and deserve further exploration. Of course, if the organization is severely
constrained by the environment, as in a very competitive market, then perception
is not important. The personnel in the organization will operate and perceive effec
tively or else it will soon go out of existence. Perception becomes important to the
extent that the organization is insulated from or immune to environmental effects.
To the extent that the organization is not tightly constrained, variations in percep
tions of organizational reality have more importance in understanding organiza
tional structures and processes .
Limits to Strategic Choice
While the arguments raised against the general applicability of the evolutionary
model to the study of social organization are persuasive, these alternative points of
view also have their limitations. While environments are selected by organizational
decision makers, there are constraints on the operation of this selection process.
Potential environments may be excluded by law because of funding restrictions or
legal barriers to entry. For business organizations, economists have identified a
number of barriers that prevent potential entrants from gaining a position in a
market already served by existing organizations. Caves (1972) discusses three such
barriers.
Economy-of-scale barriers exist when an organization's unit production costs
remain higher than those of competitors until the organization accounts for a
substantial share of the market. Until its costs are competitive, the firm must absorb
higher costs and hope that a larger share of the market is obtained before it exhausts
its capital. Alternatively, a firm could build a large plant of efficient size at the outset
and hope to achieve enough market share to dispose of its output. For example, an
entrepreneur wishing to enter the cigarette market must build a plant that produces
about 15-20% of the cigarettes sold. in the national market if economies of scale are
to be realized. While scale economies are present in many industries (Caves 1972),
two points should be noted. First, scale economies apply primarily to plant size
rather than firm size. Second, Bain (1956) found that the factor of economies of scale
could not account for the large size of many major industrial corporations. Scale
economies are typically not great and are achieved at a scale of operations far
smaller than that which prevails in many industries.
While introduced in economic analysis to explain entry into markets by profit
seeking firms, the concept of economies of scale applies to other organizational
forms as well. State and federal legislation may only grant a place on the ballot or
campaign subsidies to political parties that achieve a given level of self-financing or
votes, and this effectively limits the growth of new political parties. The United Fund
requires new applicants for funds to demonstrate the existence of a sufficiently large
market for their services, while universities only subsidize those student associations
that are able to demonstrate sufficient student interest.
Absolute cost barriers to entry exist when a new firm's costs are higher than those
of existing firms, regardless of the firm's output, or when the cost of entry to achieve
economies of scale or to achieve market acceptance is so great as to exclude most
entrants. Existing firms may possess knowledge not available to new entrants,
perhaps because of patents or the prohibitive expense involved in doing the research
or building a plant big enough to compete. A classic example is the Coca Cola
Bottling Company with a formula for the product that is known only to a few
persons in the organization. Existing firms may have acquired control over the
supply of an important resource, thus denying its use to a new firm. Until the end
of the second World War the Aluminum Company of America maintained its
position as the single supplier of aluminum through its monopolization of the
bauxite supply. The amount of capital required to start a new firm may be so
enormous as to be prohibitive. For example, in 1954 it was estimated that the capital
required to build an efficient automobile plant was $250--500 million. Thus it is not
surprising that there has been limited entry into the automobile market.
Product differentiation barriers to entry exist when established firms have
achieved high visibility and their brands have gained wide recognition. For a new
firm to enter the market, regardless of the production economics involved, the firm
must spend an enormous amount on advertising to develop brand recognition and
market acceptance. The existing competitor need spend only enough to maintain an
image that has been developed over a long period of time. This added expenditure
required for overcoming advertising economies of scale provides the new entrant
with cost disadvantages that must be absorbed or reflected in higher selling prices.
Voluntary associations face similar problems, as particular objectives or causes

come to be identified with particular associations (Aldrich 1971a). Consider, for
example, the problem a new group working in the ecology area would have winning
members away from the Sierra Club. Many public sector organizations further raise
the barriers to entry by being recognized legally or socially as monopolies for the
service or product they offer.
The existence of barriers to entry makes clear the limits to organizational choice
of environment. Further, barriers to entry provide a partial explanation for why
rates of change in some populations are much slower than in others. Barriers to
entry limit the range of variation in a population and are a negative selective force
operating against new organizations. The higher the barriers to entry, the lower the
pressure for change in the structure or activities of existing organizations.
The idea of choice of an environment may be an overstatement of the actual
degree of planning and rationality exercised by organizations in moving into new
niches (Starbuck 1975). Behavioral theories of the firm typically assume that orga
nizations examine their environments only when they are under some pressure
(Cyert & March 1963) or that search for new opportunities occurs only when the
organization faces problems with its current activities. Studies of organizational
managers find that the managers often operate on the basis of folk theories or
conventional wisdom (Mintzberg 1973), taking their environment as given and
working within the constraints. Organizations occasionally move into a new envi
ronmental niche on the basis of misperceptions of their fitness for the niche, such
as RCA's entry into the computer business.
The second criticism of environmental determinism, that organizations have the
power to modify their environments, is true chiefly for the largest organizations or
those that are politically well connected. However, only slightly more than 3% of
all business enterprises, as enumerated by the US Social Security Administration,
have over 50 employees. It is unlikely that firms of under this size have much power
to affect their environments, although this varies by local circumstances. At the
same time, we should recognize that there is some evidence that concentration of
resources in fewer large organizations is increasing, and that clearly these larger
organizations and comparable organizations in the public sector dominate many
aspects of current life.
While it is true that actions are based on managerial perceptions of reality, and
that Child (1972) is correct in stressing the role of perceptions, it is also the case
that such perceptions are not likely to be completely idiosyncratic to a particular
organization. A variety of social processes combine to induce a common perception
of the environment within a subpopulation of organizations. Organizations tend to
hire management personnel from within the same industry (Pfeffer & Leblebici
1973b) or subpopulation (Baty, Evan & Rothermel 1971). Imitation and borrowing
are important sources of new ideas and business, trade, and professional publications
promote the development of a common frame of reference. Managers and staff are
sent to the same institutes and training institutions, and various types of coalitions
depend on shared perceptions for the coordination of interorganizational behavior.
The effect of these processes is to homogenize perceptions across organizations

and to make each organization less sensitive to the unique characteristics of its local
environment (Starbuck 1975). If a local environment is benign and has a wide
tolerance for deviations from the ideal structure or performance, then socially
induced misperceptions are not fatal. When perceptions are universally shared, no
single organization is at a relative disadvantage in the competition for resources.
When an environment is changing rapidly or is less munificent, deviant organiza
tions that do not share the common misperceptions may be positively selected and
take over the niche.
Our review of the selection stage of the natural selection process has disclosed
three major issues that confront research on organizational change. First, environ
mental selection is not only between organizations as wholes but also between
particular structures or behaviors within organizations. While selection may occur
through the failure of an entire organization, the more typical case is for the
organization to adapt by means of structural or behavioral modifications. Organiza
tional change, therefore, must be examined at both levels: selection at the population
level between competing firms and selection at the organizational level between the
variations internal to the organization.
Second, the organizational population is structured in such a way as to make
selection much more problable in one subpopulation than in the other. One sub
popUlation, consisting of very large organizations, associations, and public agencies,
contains organizations that are relatively unlikely to fail, and, moreover, frequently
have the power to alter their environments to fit their own dimensions and capabili
ties. The other sUbpopulation consists of smaller organizations that have a signifi
cant probability of failure and a high rate of turnover. The latter group is much
larger in number than the former, though the former is of greater total societal
significance. While large firms and public agencies may not fail, this does not mean
these organizations are immune to environmental effects on structure or activity. As
we have indicated, autonomous strategic choice is problematic even for very large
organizations.
Third, Child's point about the importance of perceptions is probably true, in
general. As Starbuck (1975) has noted, however, the critical questions concern the
extent to which organizational perceptions vary from objective indicators of envi-
ronment and the factors that cause variations in perceptions and in divergence from
other indicators. Unless such differences are critical, the point is not likely to affect
analyses of organizational change.
RETENTION
The retention stage of the natural selection process can be thought of as stability
in the structure or decision rules of an individual organization, as the preservation
of organizational forms over time, or as stability in the pattern of interdependencies
between organizations in an environment. Retention in social evolution is at this
time more difficult to conceptualize than in organic evolution and we do not want
to force the issue by searching for the organizational analogues to chromosomes and
genes. Instead, we consider some general characteristics of retention mechanisms in

social systems, identify possible social retention mechanisms, and then consider
anew the data on the retention of organizational characteristics presented by Stinch
combe (1965).
Retention of successful adaptations in social systems depends upon the retention
and transmission of knowledge from one generation to the next (Campbell 1 969).
Calling this knowledge culture and the retention process institutionalization links
evolutionary theory to traditional sociological concepts but does not constitute an
explanation (Parsons 1966). In preliterate societies with few written records, knowl
edge is passed through the generations via an oral tradition and there are strong
sanctions against innovation or variation in the information passed along (Campbell
1969). The evolutionary model explains sanctions against varying successful tradi
tional practices in terms of the extreme vulnerability of societies with few surplus
resources to short-run misfortune. A series of unsuccessful variations may mean not
the selective elimination of particular practices but the failure of the entire society.
Negative sanctions need not have been consciously designed with this objective in
mind, as the evolutionary model predicts simply that societies without such sanc
tions will not survive. As surplus resources accumulate, variation and innovation
are less threatening and innovators may find a niche in the societal division of labor
(Lenski 1966).
Campbell (1969) argues that as societal forms have matured, there has probably
been a trend toward the externalization and rationalization of culture. Material
culture rather than the oral tradition now carries societal traditions and history, and
there is less danger of adaptations being lost because of random variations. Written
records, machinery, the physical and material components of cities, and what one
might call the capital improvements in a society represent the externalization of past
successful adaptations to the environment. This process is similar to that described
by Berger & Luckmann (1967) for the social construction of knowledge.
The continuing existence of certain forms does not mean that the form has
retained the original function for which it was selected. Forms can and do change
functions as evolution takes place and as the environment and other forms change.
For example, some theorists (Bellah 1970) have argued that in the past century
traditional religious organizations have been displaced in their function of providing
meaning and value by secular institutions; their chief function is now social welfare
services. Such transformations of function mean we must guard against assuming
continuity in the development and meaning of previously successful adaptations.
Perhaps the most important point made by Campbell (1969) with regard to the
retention of forms is that complex structures are only maintained by consistent
environmental pressure. Without consistent pressure, two factors combine to dis
rupt the complexity of a structure. First, the continuous occurrence of random
variation, if unchecked by selective elimination, gradually takes a system to a
simpler and less organized state. Second, internal selection pressures are biased
toward simplicity in the interests of stabilizing intraorganizational conduct. Devi
ance is rooted out and there are strong pressures toward a uniformity of outlook
among all members. These pressures, if not countered by strong environmental

pressure rewarding complexity, will eventually remove a structure's complexity. For

example, complex oligopolistic arrangements are highly vulnerable to short-term
deviations from policy by individual members, and pressures toward a common
product development policy may leave the oligopolists at the mercy of a new entrant
with a technologically superior product. In general, if we observe a complex and
long-lived structure, we should look to the environment for the source of pressures
that have maintained it.
Mechanisms of Social Retention
Internal and external retention mechanisms in organizations can be identified, al
though the structures and behaviors we describe here have not usually been consid
ered in an evolutionary framework. Most of the characteristics of bureaucracy
described by Weber (1947) can be thought of as contributing to the retention of a
specific organizational form. Documents and files are the archetypal characteristic
of bureaucracy and as the material embodiment of past practices, they serve as ready
references for the appropriate procedure to be followed for normal contingencies.
Specialization and standardization of the duties of each role limit the discretion of
officeholders and thus protect the organization against random variations from
policy. Given that top managers have a clear image of their organization's character
(Selznick 1957), centralization of authority allows them to preserve it. Making
membership in the bureaucracy a career and basing mobility through the ranks on
universalistic performance criteria rewards persons for conforming to the special
ized and standardized duties they are assigned. We are not arguing that these
characteristics are optimal for all organizations; rather, we are emphasizing the way
in which bureaucratic structures help to preserve a given form.
The informal organization and informal culture also help to preserve stability in
behavior on the part of organizational members. Just prior to and immediately upon
entering an organizational position, a person goes through a process of acquiring
an organizational role (Thornton & Nardi 1975). As part of this process, expecta
tions concerning actions and attitudes appropriate to that position are communi
cated. Persons entering an organization are socialized (Dornbusch 1955), and as an
outcome of this socialization process the culture of the organization is transmitted
to new members.
Continuity in an organization's leadership may be another retention mechanism

that preserves patterns of behavior and structure. Similarity in leadership is en
hanced by a stable selection and promotion system that rewards and filters people
according to their similarity in outlook and background. Because the filtering is
typically done by those already in leadership positions and because people are
attracted to others who are similar to themselves, the likelihood of perpetuating
current patterns of leadership are great. Furthermore, since the promotion of leaders
is based on their experience and expertise in dealing with critical organizational
contingencies, to the extent that the definition of organizational uncertainties re
mains the same, similarity in leadership characteristics is further assured. Organiza
tions that are marketing-oriented, such as consumer goods companies, may tend to
promote people with sales or marketing experience who, because of similar back
grounds and socialization, will have fairly similar ideas about organizational policy.
Grocery store chains are run by persons with experience in store management rather
than those who were promoted from staff positions. In many organizations there are
clearly defined paths to the top positions, which ensure some similarity in back
ground and information on the part of those who achieve those positions.
External pressures for retaining a given structure include all the environmental
demands that originally selected (or were compatible with) that structure or behav
ior. Competitive pressures on business firms, member pressures on voluntary associ
ations, and political pressures on public agencies may help to explain the retention
of past structures by these organizations. Indeed, it is possible for the organization
to seek to generate external pressures intentionally as a way of helping it to maintain
present form.
As implied in our discussion of social forces that induce common perceptions
among persons in an industry or subpopulation, information processing anc.l trans
mitting organizations may assist in the retention of a limited range of forms. Busi
ness schools, training and educational institutes, consulting firms, and trade or
professional associations promote specific procedures and organizational forms that
become part of the culture of an organizational population. Some of these proce
dures catch the popular fancy and spread to most organizations, where they become
entrenched and encrusted with organizational mythology, e.g. divisional as opposed
to functional forms of departmentalization. Others, e.g. business schools, are popu
larized in one subpopulation, but do not achieve a long-lasting place in the larger
population, e.g. the Planning, Programming, Budgeting Systems movement of the
1960s.
Folk wisdom and industry rules of thumb (Scherer 1970) are also part of organiza
tional culture, perpetuated by all the forces discussed in the section on selective
perception. They play a role in the retention of specific forms because they become
part of the habitual behavior of members of organizations and are resistant to
change. Since selective elimination or retention depends on variation in the forms
of a population, a widespread habit can effectively insulate a population against a
changing environment, if no competing forms arise in other industries or subpopula
tions and new entrants adopt the traditional behavior or structure.
Examination of Stinchcombe 's Analysis
In considering why different organizational forms appear in different periods in

history, Stinchcombe (1965:160) concluded that "certain kinds of organizations . . .
could not be invented before the social structure was appropriate to them." From
the perspective of the evolutionary model, one would argue that the environment
must have changed to give a selective advantage to particular forms at a given time.
The specific characteristics of the form depended upon the nature and distribution
of resources available in the environment, technological development, wealth and
power, and the structure of labor markets (Stinchcombe 1965: 160-64). Stinchcombe
also considered why certain forms, once created, persist over time, i.e. have the same
structural characteristics as when they were founded. We shall use the ideas of the
evolutionary model to reexamine this analysis, as there is compatibility between

Stinchcombe's position and the concepts of evolutionary theory.
As evidence for the stability of organizational forms over time, Stinchcombe
presents US Census data on the work force characteristics of four groups of indus
tries: pre-factory, early nineteenth-century, railroad age, and modern. Some general
differences are apparent between these groups. Pre-factory industries, such as agri
culture and retail trade, still use more unpaid family labor than industries founded
later. Early nineteenth-century industries, such as woodworking and apparel, are
still family firms, but differ from earlier forms in that they are bureaucratized below
the top management level. Railroad age industries, such as railroads and coal
mining, have career officials rather than family members at the very top, but their
staff departments are not as professionalized as modem industries. Modem indus
tries, such as motor vehicles and air transport, are extensively bureaucratized, with
a high proportion of clerical and professional workers at the top and with almost
no family labor or management.
Stinchcombe derived an ad hoc set of three hypotheses to explain why these
historical differences have persisted. First, the original form may still be the most
efficient, given the competition it has had to face. Second, institutionalization may
have preserved the form, whether through traditionalizing forces, vested interests,
or a strongly legitimated ideological position. Third, the original form may have had
no competitors because it is a natural monopoly or is assured of a stable funding
source. While these explanations are not tested empirically, they appear to be
plausible and are similar to explanations that would be deduced from consideration
of the natural selection model of organizational change.
Before looking at these explanations from an ecological perspective, we should
note the presence of a problem previously mentioned-the arbitrary nature of the
definitions of organizational forms. Stinchcombe used the definitions of industries
as adopted by the Bureau of the Census, and therefore classified railroads and air
transport as different industries. A different outcome might emerge if organizations
were classified by their functional niche in the interorganizational division of labor.
At the very least, one could argue that innovative organizations and new forms have
appeared in niches adjacent to existing niches, perhaps making use of different
resources at the outset, but eventually expanding to take over the adjacent niches.
For example, the trucking industry has made inroads into the functions once per
formed by the railroad industry. If we call these new forms new industries, then
Stinchcombe's analysis remains unchanged. However, one could argue for the func
tional continuity of certain industries that Stinchcombe separated. Thus, water, rail,
and air transport might be considered evolving forms of transportation and printing
and publishing might be considered the forerunner of telecommunications. Simi
larly, coal mining, crude petroleum, and natural gas might be considered alterna
tives within the energy industry.
If such a reclassification is made, different inferences emerge from Stinchcombe's
data. Now there is evidence of forms evolving toward more bureaucratic structures.
This argument might be examined by considering rates of growth in each of the
component industries within the larger functional classifications. If the argument is

correct, then newer forms should be gradually displacing older forms and achieving
a larger share of the market. At some point, in fact, the new form might completely
eliminate the older form. The stability of forms uncovered by Stinchcombe may not
be an accurate portrayal of the evolutionary process that is actually occurring. An
investigator might still choose to focus on the reasons for the stability of the
declining forms, but the implications of such an analysis would be quite differ
ent.
If we focus on the explanation of stability, the question can be recast to consider
the selective retention of organizational forms. We would first examine the possible
sourceS of variation within an industry. Environmental selection has maximum
effect where the rate of variation is high and the life span of any one unit is relatively
short. (If we were examining change in a single organization, our premise would be
that only an organization with a short memory can move in concert with environ
mental changes impinging on it.) An industry may be stable because the length of
a generation is relatively long or there are few failures and few new starts. This may
be due to barriers to entry, a slow rate of technological change, or a high proportion
of owner-controlled firms. An organization that is controlled by its owner is rela
tively well protected from takeover by external organizations through tender offers
or by management coups within the organization. There is some evidence that
owner-controlled business firms can survive for a long time in spite of relatively poor
economic performance (Hindley 1970). Another example of a factor suppressing
variation is the passing of the business between successive generations of the family,
as when a son takes over the father's firm, a practice especially noticeable in
agriculture.
Forms may also change slowly because there is little variation across organiza
tions within the industry or subpopulation. This result might occur because the
environment at one point had a powerful effect in selecting a homogeneous popula
tion of organizations and the environment is now stable, or some factor insulates
the organizations from environmental change, for instance the provision of govern
ment subsidies.
Variation may be relatively infrequent because there are few entrepreneurs willing
to undertake the risk of starting a new organization. Without variation, which is
ENV,IRONMENTS OF ORGANIZATIONS 10 1
most likely to occur in new organizations, environmental selection criteria are

irrelevant in affecting the direction of change in a subpopulation.
Stinchcombe's explanations for stability in forms can thus be reduced to the
following cases: (a) conditions where environmental selection operates freely and
the original form continues to be chosen because environmental parameters have not
changed or new entrants have not developed a more advantageous form; and (b)
conditions where environmental selection is severely restricted either because there
are barriers to entry or because organizations are insulated from environmental
effects. Stability of organizational forms can be explained by the natural selection
model, though care must be taken in classifying organizations because of the arbi
trary definitions of organizational forms. Whether forms are treated as stable or
evolving depends partly on how widely an environmental niche is defined. It is

possible that some of Stinchcombe's stable forms are actually declining, if we use
a functional classification of industries.
In using the ecological model care must be exercised not to automatically equate
stability of form with stability of other features of the organization. For instance,
agriculture, a pre-factory industry, has exhibited the highest rate of productivity
improvement of virtually any industry in the United States. Thus, the form or
structure of an organization may at times remain unchanged, while improvements
in the functioning of the form continue.
Forms may be retained because the range of variation had been restricted, envi
ronmental selection criteria cannot operate, or the form is still the most fit. Proposi
tions from a resource dependence perspective may be developed about the types of
strategies organizations will pursue to ensure their retention in the population. One
strategy may be to carefully monitor the environment and change the activities and
structure to fit environmental demands. This strategy may be the only feasible action
for smaller organizations in competitive settings. Creating barriers to entry, either
through interfirm arrangements or through the use of governmental power is proba
bly the most common strategy and we have previously considered the different forms
of barriers to entry. Following the ecological perspective, one might argue that these
forms of entry barriers, as well as other strategies, themselves evolve over time as
environmental conditions change.
CONCLUSIONS
The environment of organizations is important because of its effects on organiza

tional structures and decisions. Progress in the study of organizations derives from
focusing on substantive problems rather than from the elaboration of conceptual
schemes. Models of environmental selection are useful only as they enrich our
understanding of stability and change in organizational forms, or, as Hannan &
Freeman (1974:10) ask, "Why are there so many kinds of organizations?" The
natural selection model answers this question by examining the nature and distribu
tion of resources in the environment, while the resource dependence model focuses
on the decisions and power and influence relationships that affect organizational
actions and strategies that seek to manage the environment.
The stages of variation, selection, and retention constitute a general model not
entirely incompatible with the resource dependence approach. A review of the
differences between the two perspectives indicates that an explanation of organiza
tional change must address issues of the level of analysis, sources of variation.
selection criteria and mechanisms. and the time frame for analysis that is used.
The natural selection model has usually been applied at the population level of
analysis. as in biological research on the evolution of species. Since forms of social
organization undergo major change in other ways besides the elimination of entire
units. the model must be modified to treat social evolution as also occurring through
morphogenesis (Buckley 1967). or major transformations of the structure and be
haviors of existing organizations. Most investigators of organizational change have

examined change at the level of individual organizations. This level of analysis is

encouraged by the attention investigators have paid to leadership. decision making,
and case studies of successful organizations. As research expands to encompass
samples of diverse organizations, investigators are more likely to confront issues
raised by the ecological model.
The resource dependence model stresses variations that arise through active
alternative generation and search procedures. These types of variation could be
subsumed under the more general approach to variation of the evolutionary model,
in which both planned and random variations are considered. Some theorists would
argue that planning for an unexpected future is largely an illusion and that planning
occurs only retrospectively (Weick 1 969). However, since people do have the capac
ity to maintain consistency in behavior, evolutionary studies of organizations might
incorporate the idea of planned variations.
Selection according to the ecological model occurs as a consequence of the envi
ronment. If the organization fits environmental requirements, it is selected. The
basis of structure selection. experienced as success from the viewpoint of a single
organization, may be imperfectly understood by organizational members. Without
knowledge of alternative forms that were not positively selected, it is difficult for a
single organization's members to accurately attribute the source of their success.
The resource dependence model also argues for the necessity of a fit between
organization and environment. The principal difference is that the resource depen
dence model argues that organizations can shape their environments to fit their
capabilities, and that environmental constraints leave the possibility of a variety of
activities and structures consistent with environmental requirements.
The time frame of most research on organizations, given its emphasis on leader
ship and decision making, is fairly short. Before natural selection processes can be
examined, enough time must pass so that variation. selection. and retention can
occur. The requirement for this longer perspective suggests that the use of archival
data, as well as the development of research projects that are longitudinal, will be
useful.
The ecological model, like models of operant conditioning in learning theory,
emphasizes the external control of organizations. The environment selects those
forms and activities that fit best. The role of decision making and choice is down
played and the possibility that people shape, as well as are shaped by, their environ-
ments is ignored. Regardless of the empirical validity of the natural selection or

resource dependence perspectives, it is likely that the active, planning orientation
of the resource dependence approach will make it more palatable to most organiza
tional managers as well as to many social scientists; however, the empirical validity
of both approaches must be examined in order to understand organizational change.
ACKNOWLEDGMENT
The authors appreciate the helpful comments of John Freeman, John Child, and Les
Metcalfe. The support of the International Institute of Management, Berlin, and the
Centre for Environmental Studies, London, is gratefully acknowledged.
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ANNUAL

Copyright @ 1976 by Annual Reviews Inc.

The relationship between organizations and environments has drawn increasing

and modify their environments (Phillips 1960, Scherer 1970). Anthropologists

THE NATURAL SELECTION MODEL

tained. We would suggest that without a complementary theory of managerial

behavior, such an outcome is highly probable.

profit maximization will lead to correct predictions in equilibrium, regardless of the

on change being accomplished through differential survival.

THE RESOURCE DEPENDENCE MODEL

resource dependence model assigning more importance to managerial and organiza­

in carrying out important activities (Campbell 1969). Hirschman's (1970) assertion

design as rational, conscious, planned actions (G ouldner 1954, Selznick 1957).

Variation between organizations is inherent in the interorganizational division

contingencies. Organizations attempt to absorb interdependence and uncertainty,

selection process is limited in its applicability to organizational populations of

tional environments come to affect structure and decisions.

Selection in the ecological model is a matter of certain organizational variations

specialized requirements. If special programs are established to meet the needs of

Conceptions of the Environment

the environment in selecting appropriate organizations and organizational re­

Limits to Strategic Choice

Voluntary associations face similar problems, as particular objectives or causes

The effect of these processes is to homogenize perceptions across organizations

genes. Instead, we consider some general characteristics of retention mechanisms in

among all members. These pressures, if not countered by strong environmental

pressure rewarding complexity, will eventually remove a structure's complexity. For

Continuity in an organization's leadership may be another retention mechanism

Examination of Stinchcombe 's Analysis

In considering why different organizational forms appear in different periods in

evolutionary model to reexamine this analysis, as there is compatibility between

component industries within the larger functional classifications. If the argument is

most likely to occur in new organizations, environmental selection criteria are

evolving depends partly on how widely an environmental niche is defined. It is

The environment of organizations is important because of its effects on organiza­

haviors of existing organizations. Most investigators of organizational change have

examined change at the level of individual organizations. This level of analysis is

ments is ignored. Regardless of the empirical validity of the natural selection or

Aiken, M., Hage, 1. 1968. Organizational in­ Personnel flows a s interorganizational

Cyert, R. M., March, J. G. 1963. A Behav­ trol of organizations. Admin. Sci. Q.

ence on managerial autonomy. Admin. nization and Environment. Boston:

nizational environments and perceived conceptual framework for the study of

Q. 1 7 : 3 1 3-27 min. Sci. Q. 5 :583-610

competition on some dimensions of or­ Warren, R. 1 967. The interorganizational

52:268-79 Sci. Q. 1 2:396-4 1 9

nomic Development. Cambridge: Har­ wood Cliffs, NJ: Prentice-Hall

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resource dependence model assigning more importance to managerial and organiza

the environment in selecting appropriate organizations and organizational re

The environment of organizations is important because of its effects on organiza

Aiken, M., Hage, 1. 1968. Organizational in Personnel flows a s interorganizational

Cyert, R. M., March, J. G. 1963. A Behav trol of organizations. Admin. Sci. Q.

competition on some dimensions of or Warren, R. 1 967. The interorganizational

nomic Development. Cambridge: Har wood Cliffs, NJ: Prentice-Hall