Success and Failure in Institutional Development

Abstract

This article employs a network approach to analyze two competing perspectives on success and failure patterns in organizational development: Michels's oligarchy thesis, which predicts that successful organizations are characterized by an elite that dominates marginal members, and Olson's free rider thesis, which posits that success depends on the extent to which marginal participants can benefit from public goods provided by a small group of highly active members. Using blockmodel analysis, we explore both perspectives in the context of interorganizational networks among private development organizations in Africa and examine underlying motivations of participation. In an effort to understand contextual effects, we add qualitative observations of both networks. Although overall our results support Michels's oligarchy thesis, we find that contextual factors and path dependencies can override interorganizational dynamics that would otherwise lead to either success or failure. Thus our results support key aspects of neoinstitutionalism in organizational studies.