Size (and competition) among organizations: modeling scale‐based selection among automobile producers in four major countries, 1885–1981

Abstract

Based on previous empirical research, size is perhaps the most powerful explanatory organizational covariate in strategic analysis. We suggest that theoretical arguments about size be examined carefully to specify models with explicit comparison sets and with mechanisms linking size and underlying processes to outcomes. We illustrate the approach here by advancing arguments about scale competition within an organizational population. In this effort, we feature a theoretical model of scale-based selection, which posits that a firm's chances of survival decrease with its aggregate distance from larger competitors on a transformed size gradient. The model assumes that the appropriate comparison set consists of all contemporaneous similar organizations competing on the basis of scale and operating in a localized geographic setting. We argue that aggregate distance of a focal firm from larger other firms (a specific form of relative position in the size distribution) reflects the extent to which it can capitalize on potential competitive advantages of scale emanating from economic, political, and social processes. Analyzing the mortality rates of large organizations across the entire histories of automobile industries in four major countries provides support for the theory. We discuss the general implications of our findings for strategic and organizational analysis.

Shifting Gears, Shifting Niches: Organizational Inertia and Change in the Evolution of the U.S. Automobile Industry, 1885–1981

“…So the "coreness" of any structural element is based on analysts' assumptions about a specific class of organizations. For example, Singh et al (1986) regard CEO succession as a peripheral change, while editor-in-chief replacement is defined as an indicator of core change by Dobrev (1999). The problem pertains partly to excess generality in conceptualizing the core-periphery distinction: What constitutes a core organizational feature in one organization can be a peripheral structure in another.…”

“…The argument runs counter to traditional perceptions about organizations as adaptive to environmental shifts and able to implement change from within (Pennings 1975). 1 Despite the volubility of early debates, much contemporary research on organizational change aims to reconcile the different perspectives about adaptation (Levinthal 1991, Haveman 1992, Dobrev 1999, Gavetti and Levinthal 2000. A popular approach that has been offered within this vast literature might be called "the content-process modeling framework" (Barnett and Carroll 1995).…”

“…The conceptual utility of the niche is twofold here: First, it allows us to formulate concrete theoretical arguments and use them to develop testable empirical propositions, and second, it facilitates the integration of various theoretical frameworks and ideas from an established and growing stream of research. 3 In particular, we use a dynamic model of the evolution of organizational niches (Dobrev et al 2002) to define state effects in the content-process analysis of transformation. Tying "micro" processes within the niche to long-term changes in the broader environment, this model builds on evidence about the relationship between an organization's niche and evolution in the structure of its organizational population over time.…”

“…Substantively, the model posits that the propitious effects of both niche width and position in the favorable market center depend on the overall consolidation of the industry, reversing themselves in cases of high concentration. Informed by the theory of scalebased selection Swaminathan 2000, Dobrev andCarroll 2003), the model predicts intense scale competition among most automobile producers and predicts that the smallest producers benefit from a highly concentrated market. It also posits that crowding within a firm's specific technological niche elevates mortality, but that when concentration is high, crowding becomes beneficial.…”

“…For both dependent variables, we develop hypotheses concerning how repeated niche changes of a firm interact with three independent variables: market stability, organizational size, and organizational niche width. We test these hypotheses within the cumulative model specification mentioned above, which includes many previously established effects of organizational age, size, and environmental characteristics (Dobrev et al 2002).…”