Density Dependence Versus Population Dynamics: An Ecological Study of Failings in the California Wine Industry

Decomposing Uncertainty and Its Effects on Imitation in Firm Exit Decisions

“…In general, ecological theory conceptualizes firm exit as firm failure. Scholars invoking population dynamics most commonly predict (and often find) that prior exits free up resources that can be recycled by incumbents, reducing their risk of failure (Baum and Oliver 1992, Delacroix et al 1989, Wade et al 1998. Prior entries have also been related to subsequent exits, but not via a direct causal mechanism as proposed in our study.…”

“…Research in organizational ecology has paid considerable attention to the effects of both population density (e.g., Carroll and Hannan 1989a, b;Hannan and Freeman 1989) and population dynamics (Delacroix et al 1989) on firm exit. For our study, arguments from population dynamics are of particular interest because this perspective focuses, as we do, on the dependence of a focal firm's exit on prior exits and entries (rather than density).…”

“…Prior entries have also been related to subsequent exits, but not via a direct causal mechanism as proposed in our study. Instead, such analysis views prior entries as reflecting the emergence of a new niche; a negative relationship between prior entries and subsequent exits is thus interpreted as indirect evidence that incumbents are moving to that new niche, which in turn reduces their exit rates (Delacroix et al 1989). …”

“…Instead, exits are mostly presumed to reduce subsequent exit in a linear way via freeing up resources that can be recycled by incumbents (Baum and Oliver 1992, Delacroix et al 1989, Wade et al 1998. Where scholars have considered exits (and entries) to shape subsequent firm exit in a curvilinear fashion, results have been inconclusive (Carroll and Hannan 1989b, Hannan and Freeman 1989, Ingram and Inman 1996.…”

“…Indeed, many studies in organizational ecology focus on industries with large, capital-intensive firms that have high fixed costs in terms of expensive and highly specialized equipmente.g., semiconductor firms (Freeman 1990), breweries (Carroll and Swaminathan 1991), newspapers (Hannan and Freeman 1989), and wineries (Delacroix et al 1989). These fixed costs can be barriers to exit, making it less reasonable to view exit as a decision problem that is subject to the direct informational influences of prior exits and entries.…”