This week, we continue our study of organizations as open systems whose survival and success depends on their reaction to the environment. This week, we introduce the 10th and final theory of the course called Population Ecology or Organizational Ecology. There's actually a long history of work that applies biological and natural selection kinds of metaphors to the study of organizations. In fact, there are many of these applications even to social theories, theories of society. A few of the kind of seminal figures might be people like Milton Friedman, who relate neoclassical economics to natural selection arguments. There he would talk about utility maximization and firms survival depending on that. People like Carl Weick and Jeffrey Pfeffer are organizational theorists in the 60s and 70s who wrote more about the natural selection processes of variation selection and retention. But kind of in more metaphorical terms. Someone like Arch Stinchcombe though in the 60s talked about firm founding and the fact that firms, when they were established, had an organizational form that was highly inert and stable and then it was retained over epochs. Other people that we're going to draw on today in talking about population ecology are someone like Richard Nelson and Stanley Winter. And they offer an evolutionary account for how firms and industries change over time by relating them as organisms with DNA or proteins and those proteins and DNA of an organism happen to be strings of standard operating procedures or tasks. And they talk about how these firms have random mutations over time and that those more fit tasks or DNA strands actually get selected and retained and the others that don't have those die out. This week we're taking on Mike Hannon and John Freeman's theory of organizational ecology. And they take this metaphor of organizational populations, and apply natural selection arguments to it, to a far more elaborate degree. Organizational ecology begins with several questions. The first is, why are there so many kinds of organizations? And you'll note that this is a opposite question of neo-institutional theory. That theory asked, why are all the organizations looking the same? The second question that population ecology asks is, what can explain the diversity of organizations and then finally, where do all these organizations come from? If you recall again with the institutional theory, the question was why are they so similar? Why are they stable? A very different set of questions and approach. Here with the natural selection metaphor and the effort to talk about an ecology of organizations, there is a focus on diversity and selection. Organization ecology explains organizational change as the result of environmental forces acting on populations of organizations. So, here we have this open system view of many organizations within an environment. And the argument here is that the social, economic, and political conditions of this environment affect the relative abundance and diversity of organizations and that context or environment accounts for their changing composition over time. So, population ecology is distinct because it kind of talks about Darwinian selection in regards to the population of organizations within an environment. Now that you have a general sense for what a theory of population ecology says in general, lets take a little more deeply into the details and elaborate some of the core concepts. Perhaps the first concept to begin with concerns the notion of a population and if you recall, neo-institutional theory had an elaborate definition of something called an organizational field. In contrast, population ecology has this notion of a population, and it's similar in certain regards but with less emphasis on self awareness and more of an emphasis on regional boundaries and competition. So what is a population? A population of organizations Is composed of a class of organizations facing similar environmental vulnerabilities and sharing the same internal form, like the same technical kind of core. So This shared internal form is a consistent blueprint for action or a pattern of activities. So, it's kind of similar to what I've said Nelson and Winter were arguing standard operating procedures and tasks were, that kind of DNA, the blueprint of an organization. When I talk about shared environmental vulnerabilities, I'm referring to external sets of relations and dependencies that an organization has in its environment. The last thing to think about with regard to a population is that it's bounded within a common system and this means within a geographical region, whether it's a political kind of region, or even an economic market boundary. So, examples of what a population might be are things like financial institutions in Seattle, or car dealerships in Houston, Texas. Or now, in the digital era, an entire industry like beer, and the niche within it of microbrewing, might be considered slightly different notions of populations. So, there are populations of organizations. And organizational ecology contends that the environment can be partitioned into different kinds of resource spaces where populations of firms can persist, and they call these environmental niches. Organizational ecologists describe two kinds of environmental niches. The first is called a fundamental niche, and the second is a realized niche. In biology, a fundamental niche is where a species of animal is able to live and survive, and the realized niche is where the organism actually lives. So for example an animal might be able to live within the entire forest but because of human encroachment and noise it might only live in a small area of the forest. As such the entire forest is a fundamental niche and the realized niche is the small part of the forest the animal actually lives in. So think of it this way, With this figure here, you see all kinds of eco kind of systems, right? And with that in mind, a fundamental niche for bears might be very broad. They can live across all of these, right? But today of course, bears live only in a particular part of the United States which is the northern area, so their realized niche is the northern Parts of the United States and Canada whereas the fundamental niche could've been all across the continent. Coming up with an image or organizations and their kinds of fundamental and realized niches is actually quite a challenge. And I'm limited to what the internet and the Creative Commons can afford me, but I think this image to my side here does some of the work. And gives you some figurative understanding of, say, how certain products, if you think of each node as a different kind of corporation and their coloring as certain types or fundamental niches. But that they could have spread all over the place in this space, however they're kind of sequestered to, or segmented into, particular kinds of co-occurring domains. And those can be thought of as kind of environments where resources are co-assumed by these different kinds of firms in an effort to sell these products. So I think, while it's not a perfect image it gives you some favorites of idea of segmentation in markets and the kinds of environments that may link to each of those segments as kind of a niche. In organizational terms, a fundamental niche refers to a region of the resource space in which an organization can persist in the absence of competition. So examples of this might be health, education, entertainment, or the beverage industry. The realized niche is the subset of the fundamental niche in which an organization can sustain itself in the presence of given competitors. So examples of a realized niche might be music, dance, and movies within the entertainment industry or beer, wine, and soda within the beverage industry. Notice that the fundamental niche of education doesn't compete with health, but within that the realized niches have subsets of firms that compete with each other. Now the width of that realized niche can determine the degree to which one species of firm can coexist with others without out competing one another. So in the beer industry, for example, microbrewery companies find themselves in a partitioned resource space where they can survive, in spite of these huge brewers like Budweiser. Same thing in education, where there are these massive public school systems some of these private schools, charter schools, and public magnets find a way to, or even Catholic schools, find a way to survive and serve a realized niche that's partitioned off within that kind of environment. A key feature of population ecology is the process of ecological change, and much of this is borrowed from natural selection arguments in biology. The general idea is that environments are constantly changing and a healthy population of firms has some diversity and new organizations will emerge to meet these changes. So there's variation, right? However, societies have limited carrying capacities for organizations. Therefore in equilibrium, the surviving population of firms will occupy a niche wherein organizations are isomorphic and they fit the environment. So here you have processes of selection and retention like in natural selection. Any firm that deviates in form will be eliminated as unfit in this kind of context. So we have three features here to describe ecological change. Variation, selection and retention.