Determinants of Organizational Failure in the Milwaukee School Voucher Program

Abstract

In this article, we utilize 25 years of data on the Milwaukee voucher program to test the relationships among organizational liabilities of newness, institutional affiliation, market‐share, and regulatory environment on the cumulative risk of school failure. Overall, we find that 41 percent of all private voucher schools operating in Milwaukee between 1991 and 2015 failed. Start‐up voucher schools, and those unaffiliated with a larger institution, have comparatively higher failure risk over time. The results of our analysis shed light onto one of the long‐term impacts of a public policy reform premised on social entrepreneurship. We conclude that policymakers should consider the consequences of organizational failure when utilizing nongovernment entities in the provision of public goods, and that scholars focus increased attention to understanding the negative externalities created by public entrepreneurship.

Population Ecology Theory of Organizations

“…The fourth theory refers to the issue of public legitimacy. Ford and Andersson (2016) utilize this approach in their study of the lifecycle of private voucher schools in Milwaukee, speculating that the quick failure rate of many entrepreneurial private schools is a result of their failure to gain legitimacy in the eyes of parents. Studies premised on questions of public legitimacy rely on external stakeholder perceptions of a public or nonprofit organization.…”

“…Inertia could arguably be an asset or a liability in terms of organizational survival, depending on factors existing in the larger population of organizations. Consider the Milwaukee school voucher example used by Ford and Andersson (2016), who found that wellestablished private schools had higher survival rates than new entries into the voucher school marketplace. In that case inertia was an asset, and older schools were household names with a parent-accepted and established approach to educating students.…”

“…If nonprofit and private sector organizations are to be effective network governance actors, policymakers will naturally want to ensure they remain viable organizations over time. Many of the same factors leading to organizational entry, like regulation and resource availability, can also be applied models predicting organizational failure (see Anderson and Ford 2015;Ford and Andersson 2016).…”

“…The species approach, discussed in detail by Amburgey and Rao (1996), recognizes that different types of organizations have different environmental factors that impact their behaviors and lifecycles. For example, the factors leading to the exit and entry of schools in Milwaukee's school voucher program (Ford and Andersson 2016) should logically be different than the factors determining entry and exit for human service organization populations (Twombly 2003) or mutual aid organization populations (Archibald2007). Being able to account for environmental differences allows for a more precise assessment of the factors leading to nonprofit behaviors.…”

Editorial Team Introduction

“…This inaugural issue’s final two articles address topics of educational policy, one focusing on multiple factors affecting school success, and the other on one specific element that may affect success at the individual student‐level. Building upon the previous work of Percy and Maier (), Ford and Andersson () explore the role of policy innovation through means of public entrepreneurship, specifically focusing on the failure rates of schools within the Milwaukee School Voucher Program. Using 25 years’ worth of data from 1991 to 2015, Ford and Andersson () find that start‐up voucher schools have substantial difficulty overcoming their “liability of newness” (Stinchcombe, ), leading the authors to conclude that school failure rate can be attributed to risks associated with high levels of entrepreneurial activity.…”