The Population Ecology of Organizational Founding: Location Dependence and Unobserved Heterogeneity

Abstract

I wish to thank John Freeman and Glenn Carroll for finding the time to read earlier versions of the manuscript and offering their advice and Michael Hannan for his constant encouragement. My gratitude extends to Pradeep Chintagunta and Sachin Gupta for their help with the estimation procedures. The final version of the manuscript benefitted from the comments of Marshall Meyer, Linda Pike, and three anonymous referees. Using pooled cross-sectional time series data collected at the level of 13 geographical regions, this paper investigates the effects of location dependence and unobserved heterogeneity on founding rates of rural cooperative banks in Italy from 1964 to 1988. Parametric and semiparametric models of organizational founding reveal that the organizational population is internally differentiated and that different segments of the population respond heterogeneously to general processes of legitimation and competition. This study emphasizes the importance of identifying the correct level of analysis at which population-level processes operate and of accounting for unobservable factors related to the cross-sectional structure of organizational populations. The findings demonstrate how an ecological approach that incorporates information on the spatial structure of the population can provide a more detailed understanding of the evolutionary dynamics of organizations.'