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Authors:Juha T. Mattsson (2008).Download file: 'Organizational Diversity and Industry Evolution: The Entry of Modern Biotechnology Firms in Finland 1973-2006' Doctoral dissertation, Helsinki University of Technology, Espoo, Finland.

Abstract

Cooperative and competitive interrelationships are central to organization theory. Organizational ecology, and density-dependence theory in particular, investigates how large-scale institutional and competitive processes affect the entry of new organizations, and thus large-scale industry evolution. To date, existing ecological research has focused on populations of organizations that are relatively homogeneous with respect to their organizational form – often defined through salient product markets. However, some organizational forms are complex, thus resulting in heterogeneous populations, as exemplified by the biotechnology industry. Biotechnology firms hold a common technology base but operate at diverse product markets with different strategies and organizational forms. The present study investigates what implications such heterogeneity has on the mutualistic and competitive relationships within a population, and how this affects the predictions of density-dependent entry.

The identity approach to organizational forms is used as a basis for conceptualizing complex forms as systems of hierarchically nested sub-forms. Hypotheses are derived regarding density-dependent entry in heterogeneous populations characterized by complex organizational forms. The hypotheses are tested with comprehensive data on the modern biotechnology industry in Finland in 1973-2006, including its twelve sub-forms and four intermediate clusters of sub-forms. All of the hypotheses receive full or partial support, depending on the system structure applied.

A key finding of the study is that the systemic structure underlying the complex form of Finnish modern biotechnology has clear implications to the density-dependent processes of legitimation and competition. In other words, the sub-populations are not isolated from effects stemming from other sub-populations. In addition, it is found that the processes of legitimation operate on a broader scale than the processes of ecological competition.

The present study contributes to organization theory by shedding additional light on (i) the mechanisms creating organizational diversity, (ii) how such diversity is structured, and (iii) what implications such diversity has on the large-scale mutualistic and competitive interdependencies between organizations. In particular, the study brings additional understanding on the levels at which mutualistic and competitive forces operate. For the domain of organizational ecology the study shows that the distinction between simple and complex organizational forms is meaningful, and demonstrates the analytical power of the identity and systems approaches. Density dependence theory is extended by proposing how legitimation and competition operate in settings with complex organizational forms.

A key implication to policy-making is that the excessive focusing on a single sub-sector may have negative consequences on organizational entry. Government intervention and different forms of collective industrial action may also work to deliberately boost legitimizing effects and minimize unnecessary competitive constraints. Finally, management practice is advised to follow legitimized forms, to avoid low-legitimation-high-competition traps, and to promote the general legitimation of the field.

Keywords: organizational ecology, density-dependence, complex organizational forms, heterogeneous populations