Organizations … The Smaller They Get

Data on business entities are taken from the Statistical Abstract of the United States. See U.S. Government Printing Office, Statistical Abstract of the United States (Washington, D.C.: U.S. Government Printing Office, various years).

Data on the economically active labor force are taken from the International Labour Organization's Yearbook of Labour Statistics. See International Labour Organization, Yearbook of Labour Statistics (Geneva: International Labour Office, various years).

Although the U.S. government collects an enormous amount of social and economic data, a publicly available set of organizational indicators does not exist. So in searching for trends in organizational size, we must construct our own measures from sources collected for other purposes. Here we use aggregate data on business organizations and the labor force to obtain estimates of central tendencies in size of organizations. Such estimates are rough and imperfect. For instance, calculations of average organizational size include workers in the public and nonprofit sectors but not their organizations; the numbers also exclude overseas employees of American businesses. However, one attractive feature of these estimates is that they can be calculated consistently across time. So although these data do not allow us to dwell on any specific estimated figure, our usage here—looking for strong and general trends across time—seems reasonable.

For discussion of organizational size and its associated features, see Scott W.R. , Organizations: Rational, Natural and Open Systems, third edition (Englewood Cliffs, NJ: Prentice Hall, 1992).

“The Rise and Fall of American Small Firms,” The Economist, January 21, 1989, pp. 67–68; “The Incredible Shrinking Company,” The Economist, December 15, 1990, pp. 65–66; “The Fall of Big Business,” The Economist, April 17, 1993, pp. 13–14.

See also Baily M.N. Bartelsman EJ. Haltwinger J. , “Downsizing and Productivity Growth: Myth or Reality?” Discussion Paper 94-4, Center for Economic Studies, U.S. Bureau of the Census, 1994, for evidence suggesting that downsizing has little to do with overall productivity growth in manufacturing.

The Economist, December 1 5, 1990, p. 65.

“The Pain of Downsizing,” Business Week, May 9, 1994, pp. 60–69.

Bahrami H. , “The Emerging Flexible Organization,” California Management Review, 34/4 (Summer 1992): 33–52.

The size distribution of the service sector also looks stable across the recent time period.

For more discussion of these organizational forms and the contemporary brewing industry, see Carroll G.R. Swaminathan A. , “The Organizational Ecology of Strategic Groups in the American Brewing Industry from 1975 to 1990,” Industrial and Corporate Change, 1 (1992): 65–97.

For evidence related to these industries see Powell W.W. , Getting Into Print (Chicago, IL: University of Chicago Press, 1985) and Powell W.W. , op. cit., for book publishing; Carroll G.R. , Publish and Perish: The Organizational Ecology of Newspaper Industries (Greenwich, CT: JAI, 1984) for music recording and newspaper publishing; Swaminathan A. , “The Proliferation of Specialist Organizations in the American Wine Industry: 1941–1990,” unpublished manuscript, Ann Arbor, University of Michigan Business School, 1994, for wine making; and Freeman J. Lomi A. , “Resource Partitioning and Foundings of Banking Cooperatives in Italy” in Baum J. Singh J. , eds., Evolutionary Dynamics of Organizations (New York, NY: Oxford, 1994), pp. 269–293, and Lomi A. , “The Population and Community Ecology of Organizational Founding: Italian Cooperative Banks, 1936–1989,” European Sociological Review (1994, in press) for banking.

For theoretical discussions of resource partitioning, see Carroll G.R. , “Concentration and Specialization,” American Journal of Sociology, 90 (1985): 1262–1283; Carroll G.R. Hannan M.T. , “Resource Partitioning,” in Carroll G.R. Hannan M.T. , eds., Organizations in Industry: Strategy, Structure and Selection (New York, NY: Oxford, 1995), pp. 215–221.

Powell W.W. , “The Good Books Business,” The New Republic. September 15 and 22, 1986, pp. 32–38.

For a more thorough discussion of resource partitioning, see Carroll Hannan , op. cit.

Bahrami , op. cit.

See, for example, Amburgey T.L. Kelly D. Barnett W.P. , “Rescuing the Clock: The Dynamics of Organizational Change and Failure,” Administrative Science Quarterly, 38 (1993): 51–77.

See, for instance, the study by Freeman J. Hannan M.T. , “Growth and Decline Processes in Organizations,” American Sociological Review, 40 (1975): 215–228.

These data and related discussion are taken from “The Graying Factory,” The New York Times, February 20, 1994.

For technical discussion of these issues, see Ghemawhat P. Nalebuff B. , “Exit,” Rand Journal of Economics, 16, (1985): 184–194; Lieberman M. , “Exit from Declining Industries: ‘Shakeout’ or ‘Stakeout’?” Rand Journal of Economics, 21, (1990): 538–554.

See Burgelman R. , “Fading Memories: A Process Theory of Strategic Business Exit in Dynamic Environments,” Administrative Science Quarterly, 39, (1994): 24–56 for a full discussion of Intel's decision to leave the DRAM business.

See the analysis of plant closings by Sutton R. , “Managing Organizational Death,” in Cameron K. Sutton R. Whetten D. , eds., Readings in Organizational Death (Cambridge. MA: Ballinger, 1988), pp. 381–396.

For discussion of the specialist form and its strategic dilemmas, see Carroll G. R. , “The Specialist Strategy,” California Management Review, 26/3 (Spring 1984): 126–137.

See Galbraith J.K. , The New Industrial State (Boston, MA: Houghton-Mifflin, 1967).

For extension of this line of thought, see Carroll G.R. Haveman H. Swaminathan A. , “Careers in Organizations: An Ecological View,” Life span Development and Behavior, 11 (1992): 111–144.

According to The Wall Street Journal, “Women Making Strides But Men Stay Firmly in Top Company Jobs,” The Wall Street Journal, March 29, 1994, women increased their number of management jobs a net 520,000 between 1982 and 1992 while men lost a net 93,000 in the same period. The percentage of women in management jobs rose from 27.1% to 30.5%.