DIVERSITY AND SIMILARITY OF ORGANIZATIONAL FORM IN NEW YORK CITY NEWSPAPERS You-Ta Chuang * Dean A. Hennessy.

Transcription

1 DIVERSITY AND SIMILARITY OF ORGANIZATIONAL FORM IN NEW YORK CITY NEWSPAPERS You-Ta Chuang * Dean A. Hennessy Rotman School of Management University of Toronto Toronto, Canada Kelly Thomson Schulich School of Business York University Toronto, Canada * Direct correspondence to You-Ta Chuang, Rotman School of Management, University of Toronto, 105 St. George Street, Toronto, Canada, M5S 3E6, phone: (416) , chuang@rotman.utoronto.ca. The authors are grateful to Joel Baum for his valuable support on this research project. The authors wish to thank Judith Blau for access to the New York City newspaper database. The authors also wish to thank Martin Evans, Hugh Gunz, Eytan Lasry, Rodrigo Madriz, Christine Oliver, Tim Rowley for their comments on the earlier development of this research project. The early drafts of this paper presented at the annual meeting of Academy of Management 2000, Toronto and at the ASAC-IFSAM 2000 Conference, Montreal.

2 DIVERSITY AND SIMILARITY OF ORGANIZATIONAL FORM IN NEW YORK CITY NEWSPAPERS Abstract The evolution of organizational forms is one of the central topics in organizational sociology. In this paper, we theoretically and empirically contrast competitive and institutional notions of organizational isomorphism by looking at New York City newspapers from 1801 to Our findings indicate that competitive isomorphism is both a disruptive and a stabilizing selection process, shaping the heterogeneity of newspapers in terms of their publication frequency and political affiliation. At the same time, institutional isomorphism promotes homogeneity among newspapers in terms of their publication frequency, political affiliation, and ethnic affiliation. However, institutional isomorphism also increases the diversity of ethnic groups who publish newspapers. These diversifying and converging processes brought about the rise and fall of organizational forms over time in New York City newspapers. 2

3 One of the most important questions organizational sociologists attempt to answer is what forces give rise and fall to organizational diversity? More generally, why are there so many, or so few, types of organizations in a given environment? Most organization theorists would agree that environmental forces shape the configuration of organizations in populations, but it is also possible that organizational forms evolve to tap into particular resource opportunities (McKelvey & Aldrich 1983). Thus, a highly diversified organizational form could emerge that would absorb all available resources and prevent the emergence of other kinds of organizational forms. Contrarily, highly specialized organizational forms might navigate in an organizational field to seek out particular resource opportunities. Organizational diversity then is a function of those resource opportunities and environmental constraints. Alternatively, organizational forms could become more homogeneous due to institutional pressures in the environment. Thus, it is not analytically clear why there are so many or so few types of organizations in an environment, and what forces predominate. Theoretical interest in explaining why organizations become so much alike has resulted in two competing explanations: competitive isomorphism (Hannan & Freeman 1977, 1989; Hawley 1950) and institutional isomorphism (DiMaggio & Powell 1983; Meyer & Rowan 1977). The former suggests that isomorphism is the result of competitive pressures that drive organizations facing the same environmental opportunities and constraints to adopt similar characteristics relative to one another. The latter, in contrast, proposes that isomorphism arises from the structuration of an organizational field in which interconnectedness and the norms of the institutional environment promote organizational homogeneity. Although the general themes of the ecological and institutional perspectives on isomorphism seem to be distinct, they share a common focus on the collective organization of environments. Recent studies of organizational theory have discussed and shown evidence of congruence between population ecology and 3

4 institutional theory (Baum 1996; Hannan & Carroll 1992; Hannan & Freeman 1989; Scott, 1995; Singh 1993). Nevertheless, the potential distinctions between competitive and institutional isomorphism have yet to be well explored. As Oliver (1988: 550) puts it, none of the literature on isomorphism identifies the specific organizational characteristics across which organizations will be predicted to exhibit isomorphism, but an expectation of similarity across all attributes is implied (emphasis added). To date, only two studies have examined both competitive and institutional isomorphism simultaneously (Baum 2001; Oliver 1988). While Oliver (1988) reported that neither of the two types of isomorphism has had a significant impact on the diversity of voluntary organizations, Baum (2001) provided evidence of the various effects of competitive and institutional isomorphism on the diversity of daycare centers. Thus, we still know little about the existence or coexistence of competitive and institutional isomorphism. To help close this gap, we simultaneously examine the population ecology and institutional explanations for the distribution of various organizational forms within a population. In addition, we explore how newly founded organizations affect the evolutionary process of organizational diversity within a population. Compared to organizational failure and change, the role of newly founded organizations in shaping organizational diversity has received less attention from mainstream ecological and institutional research. Thus, how newly founded organizations reinforce the configuration of organizational diversity is little understood. This approach also provides us with a better understanding of how competitive and institutional isomorphism shape the diversity of organizational forms. The theoretical arguments put forward here are tested using the population of 1,728 newspapers that operated in New York City between 1801 and The central assumption of this study is that organizational diversity is a function of competitive dynamics and institutional forces; specifically, organizations are subject to both competitive and institutional pressures to be 4

5 isomorphic to the configurations of the environmental resources. To assess the degree of organizational diversity, consistent with Hannan and Freeman s (1977, 1984) typology of core features of organizational forms, we examine the effects of competitive dynamics and two institutional forces coercive and mimetic on organizational technology and market strategy (the frequency of publication of newspapers) and on organizational goals and forms of authority (the political and ethnic affiliation of newspapers). Our examination suggests that competitive dynamics both increase and decrease the diversity of organizational forms via the disruptive and stabilizing selection processes and, at the same time, institutional forces promote the homogeneity of the population. The interaction between newly founded organizations and mimetic forces both increases and decreases organizational diversity, depending on organizational goals and forms of authority. We begin with a review of the literature on competitive and institutional isomorphism and then provide a background on New York City newspapers. From there, we generate hypotheses based on theoretical arguments regarding organizational diversity, describe our research design and present the results. A discussion of our findings and the limitations of our study follow the empirical analysis. THEORETICAL BACKGROUND Competitive Isomorphism Organizations exist in multiple forms, exhibiting various structures, goals, and breadth of specialized activities. Population ecology (Hannan & Freeman 1977, 1989; Hawley 1950) deals with the distribution of organizational characteristics and how the distribution changes over time as organizations enter, transform, and exit the population. The key questions raised by population ecology relate not to how individual organizations adapt successfully to a changing environment, 5

6 but rather to why there are so many types of organizations, what produces organizational change in populations of organizations, and what the distribution of organizational forms tells us about the competitive dynamics of a population. This population dynamic results from a process of variation, selection, and retention of organizational forms (Aldrich 1979, 1999). Historically, population ecology has focused on explaining how the selection process the changes in social, economic, and political conditions affects the evolutionary process of organizational characteristics and diversity (for reviews, see Baum 1996; Singh & Lumsden 1990). In terms of competitive isomorphism, population ecology (Hannan & Freeman 1977, 1989; Hawley 1950) proposes that organizations facing similar environmental conditions within a population tend to be isomorphic to one another due to the similar internal and external constraints imposed upon them. The members of an early population are similar to one another in terms of their organizational forms because they occupy the same macro niche. As competitive dynamics within a population evolve over time, competitive selection pushes less fit organizations out of the population; consequently, the resources freed up by less fit organizations migrate to new or existing organizations. Organizations facing competition also tend to differentiate themselves from one another to enhance their chances of survival. This process of competition therefore increases the heterogeneity of organizational forms (Hawley 1950). The emphasis of many empirical studies has been at the population level. Although founding, failure, and growth rates are of substantial importance in their own right, they do not bear directly on the ultimate goal of ecological research: explaining organizational diversity (Barron 1999). In addition, ecological studies on organizational diversity have been limited to a focus on the distribution of organizational size. Thus, little is known about how competitive dynamics shape the evolution of organizational forms (i.e., goals, forms of authority, technology, and market strategy) within a population over time. 6

7 Competitive selection is one of the central focuses of population ecology. Competitive selection favors organizations that continue to perform with reliability and accountability instead of with efficiency (Hannan & Freeman 1984, 1989). Competitive selection operating on a population may be simple or complex and may favor any one of a great variety of specific characteristics, depending on the environmental conditions favorable to growth of the organization (Hawley 1950). Although competitive selection can influence the variation of a population in radically different ways (Wilson & Bossert 1971), population ecologists seldom empirically distinguish between different types of competitive selection on organizational characteristics (see Alexander & Amburgey, 1987; Amburgey, Dacin, & Kelly 1994; Baum 2001 for exceptions). Three processes of competitive selection have been identified: stabilizing, directional, and disruptive (Wilson & Bossert 1971). A stabilizing selection process can involve a disproportionate elimination of extremes, with a consequent reduction in variability of an organizational characteristic within a population. For example, Alexander and Amburgey (1987) hypothesized a situation in which a stabilizing selection process may favor an optimal size for hospitals over a period of time. A directional selection process pushes a particular characteristic of members in the same direction. Directional selection favors organizations at one tail of the distribution of variation, while subjecting those at the other tail to negative selection pressures. For instance, Baum (2001) reported that competitive dynamics favored non-profit daycare centers from 1979 to Finally, a disruptive or diversifying selection increases organizational diversity by favoring organizations at the tail ends of the distribution of variation, while discriminating against those in the middle; consequently, it produces a multimodal distribution of variation. For example, new hotels tend to differentiate themselves from existing hotels in terms of location, size, and price due to localized competition (Baum & Haveman 1997). Ruef (1997) reported that competition increased market differentiation among hospitals in California. 7

8 In summary, competitive dynamics (competitive selection) does not consistently lead to either homogenous or heterogeneous organizations within a population. Institutional Isomorphism The central thrust of institutional theory is to explain the establishment of institutional norms and the isomorphism of organizational fields (DiMaggio & Powell 1983; Meyer & Rowan 1977; Scott 1995). In contrast to theories that focus on rational and self-interested actors, institutional perspectives focus on organizational behavior that is constrained by social norms or by constitutive expectations. The institutional framework is primarily concerned with an organization s relations with its institutional environment, the effects of institutional expectations and interconnectedness on an organization, and the reflection of those expectations and the extent of interconnectedness on organizational characteristics. The distinctive power of institutional arguments rests partly on the recognition of isomorphism as rooted in the taken-for-grantedness of the institutional environment. The institutional environment is broadly defined to include the rules, belief systems, and norms that originate in the broader social context (Meyer & Rowan 1977). These rules, belief systems, and norms influence the consequent perception, interpretation, and actions of social actors in a given institutional environment (DiMaggio 1997). Institutional isomorphism can be facilitated by coercive, normative, and mimetic mechanisms (DiMaggio & Powell, 1983) and compliance may be for pragmatic reasons or due to paradigm stasis (Oliver, 1991). These three mechanisms can reinforce one another to maintain the taken-for-granted institutional rules, belief systems, and norms (Baum 2001). In contrast to population ecology s focus on competitive dynamics, institutional theory focuses on the degree of interconnectedness and interdependence, and the extent to which organizations share the same rules, belief systems, and norms. Therefore, institutional 8

9 isomorphism is seen to be the product of powerful forces in the interorganizational context that lead organizations to conform to institutionalized patterns. While the early adoption of an organizational form may be motivated by economic or technical concerns, later adoption provides legitimacy rather than improving technical performance. This general proposition has been supported in early empirical studies of the adoption of civil service reforms (Tolbert & Zucker 1983), the proliferation of the multidivisional form (Fligstein 1985; Palmer, Jennings, & Zhou 1993), the participation in a multihospital system (Fennell & Alexander 1987) and the adoption of personnel administration practices (Baron, Dobbin, & Jennings 1986). More recent developments in institutional isomorphism have begun to examine the process of institutional transformation. For example, Haveman and Rao (1997) examined how shifts in a broader belief system linked to the Progressive ideology in the early twentieth century led to the emergence of new organizational forms in the early thrift industry. Thornton and Ocasio (1999) showed that changes in executive succession practices in higher education publishing organizations were a function of the transformation from an editorial logic to a market logic. Furthermore, Scott, Ruef, Mendel, and Caronna (2000) demonstrated how organizational legitimacy depended upon ownership characteristics that shifted in tandem with a transformation in logics since World War II. The implication of these studies is that the evolution of organizational practices keeps pace with the transformation of institutional rules, belief systems, and norms. In summary, population ecology and institutional theory provide different explanations of and different predictions for organizational diversity. While population ecology focuses on the process of competitive selection in which organizational diversity is a function of competitive dynamics, institutional theory predicts increasingly homogenous organizations driven by a common understanding of rules, values, and beliefs resulting from the structuration and degree of fragmentation of an organizational field. 9

10 RESEARCH SETTING An Overview of the New York City Newspapers New York has been an important city from early in the history of the United States. It was the capital of the federal government for a brief period ( ) and in 1789, George Washington was sworn in as president there. But the city was then, and has remained, the seat of commerce rather than of politics. By the 1830s, New York City had become the largest city in the U.S., and within the next century became the largest city in the world, a title that it retained until only recently. In 1898, the city was amalgamated into the present five-borough form, at which time its population was close to three and a half million. The history of New York is also closely associated with the history of immigration to the United States. There have been several distinct waves of immigration following the initial colonization. In the mid-nineteenth century came the Germans, French, Irish and Scandinavians; later came the Central and Eastern Europeans and Italians; later still came the Latin Americans and, once again, the Central and Eastern Europeans. Between 1725 and 1988, a total of 1,947 newspapers were founded. The first newspaper in New York City, the New York Gazette, was established in It was a small, two-page weekly paper, poorly printed, containing primarily foreign news from three to six months old, and a few advertisements (Mott, 1962). The second newspaper, The New-York Weekly Journal, was first published in The modern newspaper industry could only be said to have begun about a century later with the introduction of the first penny newspaper, the New York Sun in Until then, the six-penny class sheet was the standard (Turner, 1999). Over time, the more exclusive papers succumbed to the mass-produced, widely distributed papers. Others entered the market when they saw profits to be made. By the mid-1800s, the intense rivalries of the majors such as the Tribune, the Herald, the Evening Post began and came to dominate the news landscape well into the next century. Such competition and rivalry, however, was also tempered by co-operative 10

11 ventures such as the founding of the Associated Press, created by the major papers in 1848 to act as an independent news service to all papers. The number of newspapers and their circulation began to rise dramatically during this period, as reading newspapers became a part of everyday life. The format of New York City newspapers evolved over time. Some of the early papers had no more than eight pages and were typically in a short format. Later, advertising expanded, photos were added to replace illustrations, comics sections were added and the broadsheet format became standard. Many of these innovations in format were also copied by non-mainstream papers (Turner, 1999). Innovations in production techniques such as the use of ground-wood pulp first used in the New Yorker Staats-Zeitung in 1868 were also diffused widely and helped promote innovations in format. The nature and content of these papers changed with the changing composition of the population of New York City. Newspapers had long been the voice for different groups to express their values and heritage (Miller, 1987). In general, New York City newspapers can be categorized into four groups based on their audience: secular, political, ethnic, and religious. Secular newspapers targeted a general audience and correspond to what we think of today as mainstream newspapers. The latter three types of newspapers target particular audiences to help fulfill their social, political, and cultural needs. Ethnic papers were typically more interested in covering Old World or community news (Miller, 1987). Some of these papers became less relevant as successive generations became assimilated into American society and culture; others adapted to those changing circumstances by publishing split language papers or wholly English language papers. Political newspapers, interested in events in the New World, appeared primarily in English and appealed to audiences with particular political views. In sum, New York City newspapers served as a means for the public to express and communicate their concerns with the community. The various forms of newspapers also provided 11

12 a way for people with different interests to fulfill their social and political needs. HYPOTHESES The previous sections outlined theoretical arguments regarding competitive and institutional isomorphism and the research setting for this study. In this section we will develop hypotheses in the context of the theoretical arguments on organizational diversity previously discussed. In studying organizational diversity, a key issue is the selection of measurable taxonomic characteristics, which are observable and variable features of organizations (McKelvey 1982). Hannan and Freeman (1984) propose that there are four core features in terms of organizational forms: (1) stated goals, the basis on which legitimacy and other resources are mobilized; (2) forms of authority within the organization and the basis of exchange between members and the organization; (3) core technology, encoded in capital investment, infrastructure, and the skills and knowledge of employees; and (4) market strategy in a broad sense, the kind of customers to which the organization orients its production and the ways in which it attracts resources from the environment. With specific reference to the New York City newspapers examined here, the publication frequency of newspaper issues can represent the technology and market strategy which a newspaper employs (Amburgey, Kelly, & Barnett, 1993). The frequency of publication relies on specific technological requirements such as technical equipment and personnel. Newspapers that publish daily, for example, require more physical assets and larger technical staffs, compared to those that publish monthly. The content in daily newspapers also differs from that of monthly newspapers. Newspapers with different publication frequencies usually target different audiences with different interests and needs. Daily newspapers, for example, provide a service for people interested in current events. Daily newspapers tend to cover diverse political, ethnic, occupational, 12

13 and social daily events. In contrast, monthly newspapers target those interested in special reports of events meaningful to their constituency, where timeliness is less of a concern. The political and ethnic affiliation of newspapers represent the goals and forms of authority that a newspaper attempts to achieve and to promote. 1 Political and ethnic newspapers drew upon specific subpopulations for sustenance. Newspapers are a means for political parties and ethnic groups to maintain their specific identity and to meet sociocultural needs (Dacin 1997; Miller 1987). For example, the goals and forms of authority of a Republican newspaper may be to promote the ideology of the Republican Party. A Chinese newspaper may serve as a means of maintaining the cultural identity of that community. Therefore, in this study we use political and ethnic affiliation of newspapers to represent the goals and forms of authority of an organizational form, while the frequency of publication serves as a proxy for the marketing strategies and technical aspects of an organizational form. In sum, we contend that publication frequency, political affiliation, and ethnic affiliation of newspapers can represent various organizational forms in the population of New York City newspapers. These various organizational forms evolve over time to keep pace with the changes in competitive dynamics and institutional environments in addition to the demographic changes in the social environment. Competitive Isomorphism and Organizational Diversity Density dependent competition. As mentioned earlier, population ecology argues that the degree of similarity or isomorphism among organizations depends on the competitive dynamics they experience in addition to the degree of heterogeneity of the external environment (Hannan & Freeman 1977; 1989). Population ecologists have proposed and examined several models to explain population dynamics. Among these models, density dependence is used most frequently in empirical research. The density dependence model focuses on population density the number of 13

14 organizations within a population to explain the dynamics of organizational populations. This model is based on the assumption that processes of cognitive legitimation and competition shape rates of founding and failure (Hannan & Freeman 1989; Hannan & Carroll 1992). Density dependence predicts that when there are few organizations in an emerging population, increases in density enhance the legitimacy of the organizational form, leading to a higher founding rate and a lower failure rate. At high levels of density, competitive interactions become more likely as organizations crowd their niche, so that additional increases in density reduce the founding rate and increase the failure rate. Most research drawing upon the model of density dependence in rates of founding and failure provides consistent empirical support to the theoretical predictions across various populations (see Baum 1996 for an extensive review; Hannan & Carroll 1992). Following the logic of density dependent competition, we contend that organizational diversity can be a function of population density. At the outset, the increasing frequency of an organizational form increases the legitimacy of that organizational form, and as a consequence, the homogeneity of organizational forms within a population is enhanced. As the adoption of the same organizational form increases, it intensifies the competition among organizations. Competitive selection forces less fit organizations out of the population. Competition for finite resources among organizations situated in similar niches eventually leads to differentiation (Hawley 1950). Organizations that face intense competition will therefore become adept at acquiring differentiated resources and carving out distinct niches to reduce the intensity of competition they experience. As a result, competition leads to the heterogeneity of the population. Therefore, we hypothesize: Hypothesis 1 (H1): Density dependent competition will increase the diversity of newspapers. 14

15 Homogeneous competition. By homogeneous competition, we mean the competitive dynamics that operate within the same organizational form. Notably, although the density dependent model has received considerable empirical support in past research, it has been pointed out that the assumption that all members within a population generate and experience competition equally is unrealistic (Hannan, Ranger-Moore & Banaszak-Holl 1990). In other words, it overlooks the differential impact of competitive dynamics within a population. In order to capture the unequal effects of competitive dynamics, population ecologists have recently decomposed the model of density dependence into different dimensions such as geographic boundaries (e.g., Carroll & Wade 1991; Swaminathan & Wiedenmayer 1991), mass dependence (Barnett & Amburgey 1990), size-localized competition (Hannan et al., 1990), and niche competition (Baum & Singh 1994a; Carroll 1985). All of these models attempt to explain the microstructure of competitive dynamics within a population. In terms of homogeneous competition proposed here, we argue that organizations with the same organizational form are direct competitors because they vie for similar resources and share capability requirements (McKelvey 1982). Organizations with different organizational forms may not compete with one another at all because of different resource and capability requirements. For example, rural hospitals that are differentiated from one another in terms of their geographic location and basic services have lower risks of closure than other rural hospitals (Succi, Lee & Alexander 1997). The failure rate of Manhattan hotels is a function of localized competition in terms of size, and pricing (Baum & Mezias 1992). The growth and failure rates of daycare centers in Toronto are a function of the niche configuration among daycare centers (Baum & Mezias 1993; Baum & Singh 1994b). These studies provide indirect evidence that homogeneous competition may affect organizational survival and growth rates. When resources for organizational survival become scarce, the force of competitive selection favors those organizations with reliability and 15

16 accountability (Hannan & Freeman 1977). As a result, the force of competitive selection would operate as a stabilizing selection mechanism by pushing less fit organizational forms out of the population. Consequently, competitive selection maintains a limited number of organizational forms in the population. Therefore, Hypothesis 2 (H2): Homogeneous competition will decrease the diversity of newspapers. Hypothesis 2 suggests the main effect of homogeneous competition will decrease the organizational diversity of a population. It is possible that homogeneous competition may increase organizational diversity by forcing newly founded organizations to establish new organizational forms to avoid highly intense competition from the existing incumbents within a population under conditions of high homogeneous competition. Past research suggests that newly founded organizations may seek alternative routes to avoid direct competition by differentiating themselves from incumbents. For example, Baum and his colleagues (Baum & Oliver 1996; Baum & Singh 1994a) found that the founding rate of daycare centers in Toronto is a function of niche overlap and non-overlap. On one hand, when the degree of niche overlap is high, the number of newly founded daycare centers will decrease in those niches. On the other hand, when the degree of niche non-overlap is high, the number of newly founded daycare centers in those niches will increase. Moreover, Baum and Haveman (1997) reported that new hotels in Manhattan tend to differentiate themselves from extant hotels in terms of size and location to avoid head-to-head competition. In terms of the organizational diversity, we argue that newly founded organizations will increase the degree of organizational diversity when homogeneous competition is high. As the above studies demonstrate, entrepreneurs usually position themselves in different ways in order to reduce competition from incumbents when competition is high. In joining the crowd (i.e., selecting the 16

17 organizational form of incumbents), new organizations would be faced with highly intense competition and experience high rates of failure. New organizations will therefore attempt to establish a new organizational form to avoid competition and thus increase their survival chances. The interaction between newly founded organizations and homogeneous competition therefore increases the degree of organizational diversity within a population. Therefore, we hypothesize: Hypothesis 3 (H3): The interaction between homogeneous competition and newly founded organizations will increase the diversity of newspapers. Institutional Isomorphism and Organizational Diversity The institutional environment contains a number of exogenous pressures that influence the structure and behavior of organizations (Meyer & Rowan 1977; Scott 1995). These include institutional pressures arising from broadly based sociocultural norms as well as pressures arising from connections among organizations, such as dependency and political pressures (Scott 1995). Most of the prior research on institutional isomorphism focuses on the effect of interconnectedness in an organizational field on organizational isomorphism. This structuration of an organizational field produces homogenous organizations. However, most of the prior research on institutional isomorphism examines the effect on a particular organizational practice rather than organizational forms. In this paper, we explore the effects of coercive and mimetic mechanisms on organizational diversity. 2 Coercive mechanism. Organizations are subject to both formal and informal pressures imposed by other organizations upon which they depend and to the cultural expectations of the society in which the organizations function (DiMaggio & Powell 1983). Coercive forces may be derived from regulatory agents or large dominant organizations whose power extends across an organizational field, depending on the degree of fragmentation and federalization of an 17

18 organizational field. These coercive forces may motivate subordinate organizations to conform to the rules and regulations without questioning their rationality in order to stabilize the flow of resources (Meyer & Rowan 1977). While conformity may not increase a subordinate organization s efficiency, it will at least ensure its legitimacy (DiMaggio & Powell 1983; Meyer & Rowan 1977; Scott 1995). Recent studies supporting the notion of coercive isomorphism include the adoption of investor relations departments (Rao & Sivakumar 1999), the proliferation of the multidivisional forms (Palmer, et al 1993), and the implementation of common personnel practices (Edelman 1992; Sutton, Dobbin, Meyer, & Scott 1994). Taking these studies as a background, we propose that the coercive mechanism will decrease the diversity of organizations in an organizational field. By conforming to the rules and expectations of the institutional environment, organizations can benefit from maintaining their resource stability and organizational visibility to enhance their survival chances. As a result, this process promotes the homogeneity of organizations in an organizational field. Therefore, Hypothesis 4 (H4): Coercive mechanisms will decrease the diversity of newspapers. Mimetic mechanism. Mimicry is motivated by uncertainty, which includes poorly understood technology, ambiguous goals, and environmental symbolic uncertainty. (DiMaggio & Powell 1983). In order to reduce uncertainty, organizations tend to model their practices after those which are frequently used by others similar to themselves, and which produce favored outcomes (DiMaggio & Powell, 1983; Haunschild & Miner, 1997). In their recent study on acquisition behavior, Haunschild and Miner (1997) report that interactions between transaction cost uncertainty and various modes of imitation (i.e., frequency-, trait-, outcome-based imitation) have positive effects on the choice of investment banks. Other studies supporting mimetic isomorphism 18

19 include the adoption of boundary-spanning structures (Rao & Sivahumar 1999), the adoption and abandonment of the matrix structure (Burns & Wholey 1993), corporate name changes (Glynn & Abzug 1998), the adoption of the multidivisional form (Palmer et al., 1993), and the decision to enter new markets (Greve 1995; Haveman 1993). With specific attention to organizational diversity as examined here, we argue that the mimetic mechanism will increase the degree of homogeneity of organizations in an organizational field. By imitating an existing organizational form, an organization can reduce environmental uncertainty and technology ambiguity. While the process of coercive isomorphism leads to convergence on a normal variant for a given organizational form, the mimetic mechanism reinforces the dominant variant, hastening the reduction in organizational diversity (Baum 2001). Therefore, Hypothesis 5 (H5): Mimetic mechanisms will decrease the diversity of newspapers. Hypothesis 5 predicts the main effect of the mimetic mechanism on organizational diversity. It is possible that the effect of the mimetic mechanism will depend on the structure of the institutional environment. Past research suggests that the strength of institutional mechanisms depends on the fragmentation and federation of the institutional environment (Scott, 1987, 1995). Institutional theory, concerned with the fragmentation of the institutional environment, suggests that the effects of institutional mechanisms on organizational diversity depend not only on institutional agents but on the structure of the institutional environments as well. In addition, DiMaggio and Powell (1983) argue that the rate of proliferation of an organizational practice in an organizational field depends on the number of visible alternative organizational models and the degree of technological ambiguity and uncertainty. Where few widely-accepted models exist, the institutional mechanisms tend to speed up the predominance of the models and thus reduce 19

20 organizational diversity (DiMaggio & Powell 1983). Consequently, we expect that the mimetic process will be more salient when the degree of organizational diversity is low, compared to when the degree of organizational diversity is high, especially for newly founded organizations. Specifically, when there are few models (organizational forms) in an organizational field, a new organization will imitate the existing model in order to reduce environmental uncertainty and increase its survival chances. Therefore, we predict that Hypothesis 6 (H6): The interaction between newly founded organizations and the degree of organizational diversity in the prior year will decrease the diversity of newspapers. The sixth hypothesis suggests that when few models exist in an organizational field, the institutional mechanisms will increase the homogeneity of a population insofar as organizations will imitate the existing models to reduce uncertainty and to increase their legitimacy. However, it is possible that the effects of this imitation on organizational diversity may operate on the broad institutional environment instead of the immediate interconnectedness of an organizational field (Dacin, 1997; Scott, 1987), especially for the goals that organizations pursue. The shared common rules, belief systems, and norms in one subpopulation may diffuse to other subpopulations via the mimetic mechanisms. In the case of New York City newspapers, we contend that the prediction of institutional mechanisms generated from the broad level of institutional environments may be opposite to H6. The organizational form of a newspaper can serve as a means to fulfill the sociocultural needs of a particular population (Blau 1998; Dacin 1997; Miller 1987). Therefore, when this organizational form becomes legitimated in the institutional environment, it encourages other subpopulations to use the same practices. Consequently, this process increases the heterogeneity of an organizational field. Therefore, the above reasoning provides the following 20

21 alternative prediction: Hypothesis 7 (H7): The interaction between newly founded organizations and the degree of organizational diversity in the prior year will increase the diversity of newspapers. METHOD Data Description The data for this study includes information on newspapers in New York City operating during the period from 1725 to The main source of the data is the United States Newspaper Program National Union List (1989). From 1725 to 1988, there were 1,947 newspapers operating in New York City, which included 379 ethnic newspapers and 321 political newspapers. To obtain reliable information on environmental variables (i.e., census data regarding the ethnic population in New York City and bond rates), we have limited our observation window to the period between 1801 and In 1801, there were 76 newspapers operating in New York City, comprised of 1 political newspaper and 75 general audience newspapers. At the end of 1988, there were 61 newspapers, made up of 26 general audience newspapers, 29 ethnic newspapers, and 6 political newspapers. During the period between 1801 and 1988, 1,728 newspapers were founded, including 1,028 general audience newspapers, 379 ethnic newspapers, and 321 political newspapers. Figure 1 shows the trajectory of the New York City newspaper population density between 1725 and Figure 1 about Dependent Variables The dependent variables in this study are the diversity of three core features: publication frequency, political affiliation, and ethnic affiliation. To measure the degree of diversity of each 21

22 core-feature, we use the Herfindahl Index to capture the degree of homogeneity for each core features. The Herfindahl Index is defined as: H = N 2 C i i= 1 where C i is the proportion of organizations with a particular variant of a core feature i and N is the total number of organizations. The higher the value of the index, the more homogenous the core feature is. In our sample drawn from the period between 1801 and 1988, there were eighteen different categories of publication frequency, fourteen categories for political affiliation (thirteen distinct political affiliations plus one neutral category), as well as thirty-eight categories for ethnic affiliation (thirty-seven immigrant categories plus native American). Thus, we calculate the Herfindahl index of each core feature based on above categories. Figure 2 shows how the Herfindahl indices for all three-core features evolve over time. (1) Figure 2 about Independent Variables Population density. Population density was measured as the total number of newspapers operating in the prior year. To allow for the curvilinear effect predicted by the density dependent model, density was modeled as a quadratic function by including both density (divided by 100 for rescaling) and density squared ((Density/100) 2 ) in the analysis. Density dependent competition (H1) implies a negative effect of the population density squared on the Herfindahl index of each core feature. Homogeneous competition. We operationalize homogeneous competition as H it-1 x (Density/100) 2 to represent the average homogeneous competition an organization experiences. 22

23 The higher this measure is, the more intense homogeneous competition is. Positive coefficient estimates will be evidence supporting H2, which predicts homogeneous competition will decrease organizational diversity. As H3 predicts that there will be an interaction effect between homogeneous competition and newly founded organizations on organizational diversity, we examine the interaction between H it-1 x (Density/100) 2 and the number of newly founded organizations (H it-1 x (Density/100) 2 x Founding) to test H3. Negative coefficient estimates will provide evidence to support H3. Coercive mechanism. Coercive forces refer to the rules and expectations generated by powerful actors in an institutional environment (DiMaggio & Powell 1983; Scott 1995). Past empirical research has tended to use the state body that initiates regulatory changes as the primary, powerful actors. This kind of coercive force is exogenous to a population of organizations. In this paper, we adopt a different perspective, that the coercive forces that are generated from within a population of organizations. Specifically, we operationalize the coercive mechanism as the proportion of chain units existing in the prior year (Chain Proportion). Chains can serve as powerful actors in a population by using a standard strategy to enhance their economies of scale and market power. A newspaper affiliated with a chain may be required to conform to the chain s rules and expectations. Consequently, such chains act as a coercive force reducing the diversity of organizations in an organizational field. Positive coefficient estimates will provide evidence to support H4. During the period between 1801 and 1988, the number of chain units (individual newspapers belonging to a chain) ranged from 15 in 1801 up to a peak of 82 and declining to 8 in Mimetic mechanism. Consistent with prior research (Baum 2001), we operationalize the mimetic mechanism as H it-1 to capture the effect of mimicry on organizational diversity. Positive coefficient estimates will provide evidence to support H5. H6 suggests that when there are few 23

24 models in an organizational field, the speed of proliferation of those models will be faster than in a situation where there are many models. We use the interaction between H it-1 and the number of newly founded organizations to test H6. Positive coefficient estimates will provide evidence to support H6. However, negative coefficient estimates will support H7. Table 1 provides a summary of hypotheses and the prediction of coefficient estimates for all hypotheses. Table 1 about here Control Variables Industry age. As discussed earlier, the first newspaper in New York City was founded in 1725; consequently, we set industry age (divided by 100 for rescaling) equal to the number of years since Past research suggests that industry age may buffer the intensity of competition among organizations within a population (Baum 1995; Hannan 1997). Therefore, we control for the effect of industry age on organizational diversity. In addition, as is evident from Figure 1, the New York City newspaper industry is well past its peak density. This complicates the legitimacy interpretation of the coefficient for the linear density term because late low density has no role in the density dependent model (Baum 1995). Although the density dependent model is commonly tested in populations that have evolved beyond their peak density (Hannan & Carroll 1992), past research rarely attempts to separate the effect of early low density from that of later low density. We attempt to explore the effects of early and late low density on organizational diversity by including the interaction terms, (Age/100) x (Density/100) and (Age/100) 2 x (Density/100). Failure. The number of failures in the prior year would have an impact on organizational diversity. Failed organizations free up resources for existing organizations thereby decreasing organizational diversity. However, it is possible that the number of failures would be a signal for newly founded organizations that there is intense competition within particular organizational forms. New organizations may avoid intense competition by establishing a new organizational 24

25 form. As a result, the process may increase organizational diversity. Thus, we include the number of failures in the prior year to control for its effect on organizational diversity. Environmental characteristics. We also control for several factors influencing the environmental carrying capacity of newspapers in New York City. The first control variable is the bond rate (Bond Rate) in the prior year, which captures the effect of the general economic environment on the operation of the newspaper industry. The second control variable is the total census population of New York City (Ln(Population), using the natural log for rescaling). The third control variable is the degree of ethnic heterogeneity in the population. We use the Herfindahl index to capture the degree of ethnic heterogeneity in the New York City population (Hpopulation). The final control variable is the political environment. We use the Herfindahl index of the political affiliation of New York State senators (Hsenators) in the prior year to capture the influence of the general political environment on newspaper operation. Table 2 shows the descriptive statistics for all dependent variables, independent variables, and control variables. Table 2 about here Model Specification As the three core features of newspapers are endogenous to the population of New York City newspapers, and consistent with past research (Baum 2001; Baum & Haveman 1997), we have constructed the model as a group of nonhierarchical simultaneous equations. Frequency Diversity t =α 1 +β 21 Political Diversity t-1 +β 31 Ethnic Diversity t-1 +γ 1 X t-1 +ε 1 (2) Political Diversity t =α 2 +β 12 Frequency Diversity t-1 +β 32 Ethnic Diversity t-1 +γ 2 X t-1 +ε 2 (3) Ethnic Diversity t =α 3 +β 13 Frequency diversity t-1 +β 23 Political Diversity t-1 +γ 3 X t-1 +ε 3 (4) where β is the set of direct effects of the endogenous variables on each other and X is a vector of 25

26 independent and control variables. All endogenous and exogenous variables were lagged by one year to ensure exogeneity. The error terms in these three equations may not be independent; consequently, an ordinary least squares (OLS) estimation will not produce efficient estimates (Greene 1998). This problem can be solved by employing three-stage least-squares (3SLS). Past research suggests that there would be another potential problem in this type of analysis serial correlation of error terms. Therefore, it is necessary to use autoregressive moving average techniques to solve this problem. We used LIMDEP 6.0 to estimate the coefficients in each model. Our preliminary analysis suggested that a first-order process was most appropriate. Therefore, we presented the results by using a 3SLS-AR(1) model to estimate the effects of independent and control variables on the dependent variables. Results Table 3 reports 3SLS-AR(1) coefficient estimates for the effects of the ecological, coercive, mimetic, and control measures on the diversity of New York City newspaper core features. Model 1, Model 2, and Model 3 represent the effects of independent and control variables on the diversity of publication frequency, political affiliation, and ethnic affiliation respectively. Table 3 about here Competitive isomorphism. For publication frequency (Model 1), the significant negative coefficient estimate for the density squared indicates that competition decreased the homogeneity of newspaper publication frequency in our data period, supporting H1. The significant positive coefficient estimate for homogeneous competition (H it-1 x (Density/100) 2 ) suggests that homogeneous competition served as a stabilizing selection mechanism that increased the homogeneity of newspaper publication frequency, supporting H2. The insignificant coefficient estimate for (H it-1 x (Density/100) 2 x Founding) fails to support H3 although it was in the predicted 26