COMPLEX ORGANIZATIONSbetween regulative, normative, and cognitive-cul-
tural understandings of institutions. Regulative
institutions are external systems of rules, often
established by states, to which organizations must
conform. External rules may be prescriptive, such
as when a law requires that publicly traded corpo-
rations have boards of directors with at least three
members. Rules may also be proscriptive, such as
when regulatory bodies or courts prohibit particu-
lar trade practices and ownership patterns.
Normative institutions are sets of beliefs and
values shared by organizations and their partici-
pants about the morally appropriate way in which
to organize activities. Professional associations are
common sources of normative prescriptions, en-
forced through processes such as certification.
Cognitive institutions are cultural frames or scripts
that constitute the social forms seen as natural and
taken for granted in a given society. In contempo-
rary society, the idea of organizations itself is
institutionalized; legitimate pursuit of an activity
often requires the formation of an organization
because of the widespread belief that this is an
efficient, effective, and fair manner in which to
proceed (Meyer and Rowan 1977).
ORGANIZATIONAL DEMOGRAPHICSThe number of organizations in industrial socie-
ties is very large. Over five million businesses with
at least one employee existed in the United States
in 1998, and there were thousands of governmen-
tal agencies, nonprofit organizations, and volun-
tary associations (Aldrich 1999). Social scientists
have developed various schemes to describe the
diversity of organizations. For example, the North
American Industry Classification System (Office
of Management and the Budget 1997) classifies
establishments by their products and the process-
es used to make them. Organizations can also be
classified according to their goals or the social
functions they serve (Parsons 1960), or on the
basis of the prime beneficiaries of organizational
actions: owners, members, clients, or the general
public (Blau and Scott 1962). Another classifica-
tion contrasts generalist and specialist organiza-
tions and hypothesizes that each type thrives in a
different kind of environment (Hannan and Free-
man 1989).
Industrial societies contain a large number of
organizations, with three characteristics of special
note. First, the size distribution of businesses and
nonprofit organizations is highly skewed, with a
large number of very small organizations. In 1990,
approximately 90 percent of the five million firms
in the United States with employees employed
fewer than twenty people. Over 98 percent em-
ployed fewer than one hundred workers (Small
Business Administration 1994). Employment sta-
tistics were very similar in the European Union
(ENSR 1993), with about 93 percent of firms em-
ploying fewer than ten workers, although the fig-
ure varied by nation. In 1994, most of the 4.3
million corporations in the United States had few-
er than $one hundred,000 in assets, and they
accounted for less than 0.3 percent of all corporate
assets. Thus, most organizations are fairly vulner-
able to environmental forces and must adapt to
them or disband.Second, although the number of large organi-
zations is small, they have achieved a dominant
share of revenues and assets. Business organiza-
tions are highly stratified by size, and large firms
have more resources with which to resist and
counter environmental pressures. In 1994, the top
0.002 percent of corporations, each with a quarter-
billion or more in assets, held about 83 percent of
all corporate assets. In 1992, the fifty largest manu-
facturing firms in the United States accounted for
about 24 percent of value added and about 13
percent of employment, and the two hundred
largest firms accounted for 42 percent of value
added and around 25 percent of employment
(U.S. Bureau of the Census 1996).Third, smaller organizations still employ a
relatively large share of all workers. In the United
States, about 39 percent of all employees work in
firms that employ fewer than one hundred work-
ers. In particular industries, such as agriculture
and construction, substantially more than half the
work force is employed in organizations with few-
er than one hundred workers. In the European
Union, firms with fewer than one hundred work-
ers employ about 55 percent of the labor force,
although variation across nations is substantial.
For example, in Germany and the United King-
dom, firms larger than one hundred employ more
than half the labor force, whereas in Greece and
Italy, such firms employ only about 20 percent of
the labor force (ESNR 1993).