Organizational Foundings in Community Context: Instruments Manufacturers and Their Interrelationship with Other Organizations

Abstract

Combining insights from organizational ecology and social network theory, we examine how the structure of relations among organizational populations affects differences in rates of foundings across geographic locales. We hypothesize that symbiotic and commensalistic interpopulation relations function as channels of information about entrepreneurial opportunities and that differing access to such information influences the founding rate. Empirical analyses of U.S. instruments manufacturers support this argument. The founding rate of instruments manufacturers rises with the densities of organizational populations that have symbiotic and commensalistic relationships with instruments manufacturers. These factors encourage the initial foundings of instruments manufacturers in areas where such organizations were not previously found. The dominance of organizational populations tied to instruments manufacturing by symbiotic or commensalistic relations increases the rate of foundings of instruments manufacturers, whereas the dominance of organizational populations that lack these relations decreases it. Finally, we find that interpopulation relationships that hinge on direct contact have less impact on initial foundings as geographic distance increases. These results have implications for research on organizational ecology, entrepreneurship, urban sociology, and economic geography.• Where organizational foundings occur has been a topic of considerable interest to scholars of organizations. Most of the work seeking to explain differences in founding rates has identified internal attributes of spatial units-be they nations, states, regions, cities, or even zip code areas. Laws (Dobbin and Dowd, 1997), infusions of capital derived from initial public offerings or acquisitions (Stuart and Sorenson, 2003b), and the number of preexisting organizations (Carroll and Wade, 1991;Lomi, 1995) are examples of internal attributes of spatial units that have been shown to influence the founding rate. The relations that link spatial units to each other and that determine their structural position have received relatively less attention. A few studies have examined the relations of spatial units in geographical space, focusing in particular on the effect of geographical proximity on founding rates (e.g., Hedstrom, 1994;Wade, Swaminathan, and Saxon, 1998). The potential effects on founding rates of the position that communities occupy in market space have been largely overlooked. Yet previous research has shown that organizations gain access to resources as a function of their structural position in networks (Podolny, Stuart, and Hannan, 1996;Dobrev, Kim, and Hannan, 2001;Sørensen, 2004) and that the community is most often the habitat in which these structured flows of resources have an impact on concreteIn terms of foundings, then, where one chooses to start a specific kind of organization matters greatly, because the resources employed by those who would start such organizations are unevenly distributed in space. Communities are situate...

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