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Summary Organization Theory + Exam Questions

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Tilburg University (UVT)

This is a full summary of the course Organization Theory. The summary includes notes of all lectures and exam questions to practice. (past this course with a 8.3)

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LECTURE 1
Theories explaining and increasing our understanding of organizations aspects. For example:

 Why do organizations exist?
 How do organizations set goals?
 How are organizations different/similar?
 How do environmental pressures select in or out
populations of organizations?
 When and why do organizations collaborate?

 Goal interdependence = the extent to which a
goal’s achievement is hindered of facilitated by other goals
o Positive = the achievement of goal a facilitates the realization of goal b.
o Negative = the achievement of goals a hinders the realization of goal b.

Function and use of (organization theories
 Partial truths
o An elephant is like a wall, a spear, a snake, a tree, a fan, and a rope
o The organization is like a sales department, a purchase department,
quality management, production, … ONLY

 To see and understand an elephant, an integrative view is needed
o Only when you add two ears, a trunk, two tusks, four big legs, a big body, a bunch of
intestines, a hairy tail, etc., you have an actual elephant.
o Only when you add up/combine the goal achievement/ bonuses at the level of the
organization, we can observe the goal interdependencies and their organizational effects.

 Integrative view: only when we add up.. (humans, division of power, management etc.).. we
heave a full organization, including its synergic effects.
 Focused view: only when we understand in detail.. (humans, division of power, management
etc.).. we can better understand the full organization, including its synergetic effects.

LECTURE 2 – WHETTEN FRAMEWORK
What is “Organization” Organizations are..
 Social entities people come together (if you have an solo entity than it is not an organization)
 Goal directed they have goals (e.g. helping people)
 Are designed as deliberately structured and coordinated activity systems: There are structures
and are coordinated. Everyone know what to do
 Are linked to district external environments: Organizations are embedded in a specific
environment and have to communicate with the external environment (e.g. the government,
customers)

Types or organization: corporations, charities, political organizations, not-for-profit organizations,
non-governmental organizations, international organizations, schools, governments, criminal
organizations, secret societies, voluntary associations

1

,What is “theory”
A Theory…
 Consists of a set of concepts (what) and the relationships that tie them together (how) into an
explanation of the phenomenon of interest (why)
 Builds on a set of assumptions that form the foundation for a series of logically interrelated
claims

What, how and why
Core elements of “theory” according to Whetten (1989): “WHAT” (concepts), “HOW”
(relationships), “WHY” (argumentation)

Just the arrow of the how is not enough. You need to clarify is it
linear of or non-linear.
 explaining the why, why does the explanatory concept have
an effect on the phenomenon of interest?

 X is independent that explains the concept
 Y is the dependent variable
 The how is the relationship
 The why is argumentation

Who, where and when
Core elements of “theory” according to Whetten (1989): “WHO, WHERE, WHEN” (boundary
conditions)
 Conditions that place limitations on the propositions/hypotheses
 Temporal and contextual factors that set the boundaries of generalizability
 Determine the range of the theory

What is not theory
What theory is NOT:
 References are not theory
o Show on which literature authors build and to which field they contribute
 Data are not theory
o Describe empirical patterns observed, but not why these patterns emerged
 Lists of variables/concepts are not theory
o Important parts of theory (Whetten’s “WHAT”, but do not constitute theory)
 Diagrams are not theory
o Helpful to show causal relationships (Whetten’s “HOW”), but not sufficient for theory
 Only hypotheses are not theory
o Crucial bridges between theory and data, but do not contain logical arguments (Whetten’s
“WHY”)

Importance of organizati on theories
Why are organization theories (OTs) relevant and important?
 OTs open up your mind, and make you sensitive to ‘alternative’ ways of looking at certain
‘phenomena’, and integrate ‘partial truths’.
 OTs organize your thinking into ‘systematic thinking’ and ‘thinking twice’ before acting!
 Systematic thinking prevents people from confusion of tongue, and facilitate a systematic
debate and more informed intervention.

2

, HOWEVER: ANY OT will necessarily have to ignore some aspects of organizations and be overly
simplistic about some others!

Five big organizational questions
Questions that allow to generate a bigger picture of organizations:
 How do environmental pressures select in or out populations of organizations?
o OET (Macro theory)
 How do institutions, both formal and informal, influence organizational behavior and structure?
o NIT (Macro theory)
 How can organizations organize their interaction with their environment?
o TCT, RDT, BTF (Meso theories)
 TCT: How to manage transactions?
 RDT: How to manage resource dependence?
 BTF: How do individuals/groups within an organization make decisions and behave?
 When do (departments/teams within) organizations compete, and when do
(departments/teams within) organizations collaborate?
o TCT, RDT, BTF (Meso theories)
o SIT (Micro theory)
 How do organizations set goals?
o GST (Micro theory)

LECTURE 3 HOMOGENEITY AND HETEROGENEITY AMONG ORGANIZAITONS (OET&NIT)
Why does organizations differ or become similar to each other (homogeneity and heterogeneity)?
This lecture emphasizes that Population Ecology looks at survival of whole groups of organizations
in an environment, while Institutional Theory focuses on conformity within an organized
environment to gain legitimacy.

 Population Ecology Theory (heterogeneity)
o Environment selects out organizations misfitting the environment (multiple environments
exist) - Agency low (= Minimal control; outcomes are determined by the environment)
o Population ecology: population of organizations, you are in, you are out.
 Institutional Theory (homogeneity)
o There are coercive, mimetic, and normative forces pushing organizations to converge -
Agency constrained (= Limited control; organizations must conform to external norm).
o Institutional theory: factor is the field, pushing organization
 Strategic management approach to the legitimacy perspective
o Organizations monitor conformity to improve performance - Agency at play (= Significant
control; organizations actively balance conformity and differentiation to optimize
performance).
o Strategic management view on isomorphism: view of the manager.

POPULATION ECOLOGY (OET)
Key ideas to discuss
 Inertial pressures inhibit organizations to adapt “failing churches do not become retail stores;
nor do firms transform themselves into churches” (p. 957)
 Environmental stability selects out generalists (excess capacity as a liability)
o Cross-sectional analysis (time-invariant) portray specialists as superior
 While environmental instability selects out narrow specialists (excess capacity as an insurance)
o However, longitudinal analyses will usually demonstrate that generalists are superior

key points of the paper

3

, Key Idea: Organizations do not change easily because of structural inertia. They struggle to adapt
because of internal and external pressures, such as fixed costs, limited information and legal
barriers. Ecological theory holds that organizations do not change themselves; instead, the
environment selects which organizations survive.

Selection versus adaptation: Hannan & Freeman find that adaptation models are flawed and that
only selection models explain why some organizations persist.

Isomorphism: Organizations become homogeneous within a stable field because only certain
structures survive. In instability, specialist organizations become vulnerable, while generalists are
more resistant to change.

Structural inerti a
Why is the adaptive perspective rejected?  Because of structural inertia
2 ways internal and external pressures influencing (strategic) decision making in an organization:

Selecti on orientati on
Hannan and Freeman claim that the adaptation perspective needs to be supplemented with a
selection orientation (survival & reproduction):
 Unit of analysis: Population of ecology is about population of organizations (e.g. not Tilburg
University but university’s in the Netherlands or Europe). Types of organizations (organization
forms).
 Hawley model diversity of organizational forms is isomorphic to the diversity of environments
(=organizational forms are homogenous within each environment, but multiple heterogeneous
environments exist).

Unit of analysis
 “The situation faced by the organizations analyst is more complex. Instead of three levels of
analysis, he faces at least five: (1) members, (2) subunits, (3) individual organizations, (4)
populations of organizations, and (5) communities of (populations of) organizations.” (Page 933;
emphasis added)
 Focus on populations of organizations as analogous to the notion of species in biology.
Blueprint inferred from: (1) formal structure; (2) patterns of activity; (3) normative order
 Environment can be geographic, political, market considerations, product considerations, etc.
Populations of interest may change depending on the analyst’s concern.
 Populations of organizations are abstractions useful for theoretical purposes (e.g. start-ups with
no clear horizon for making profits fitting/misfitting the (financial) environment of low/high
interest rates; companies of winter clothes fitting/misfitting the (geographical) environment of
being cold or warm).

Hawley’s model (the principle of isomorphism)

4

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