COMPLEX ORGANIZATIONSPopulations of organizations in modern socie-
ties are constantly undergoing processes of expan-
sion, contraction, and change. Some organiza-
tions are founded in a flash of creative energy and
then disband almost immediately, whereas others
emerge slowly and then last for decades. Some
organizations adapt readily to every environmen-
tal challenge, whereas others succumb to the first
traumatic event they face. Sociologists have turned
their attention to these vital events surrounding
the reproduction and renewal of organizational
populations, focusing on three processes: foundings,
transformations, and disbandings (Aldrich 1999;
Hannan and Freeman 1989).
New organizations are established fairly fre-
quently, although systematic data on founding
rates are available only for businesses. Studies in
the United States and other Western industrial-
ized nations show that about ten businesses are
founded per year for every one hundred business-
es active at the start of the year. In the United
States, approximately 4 to 6 percent of the adult
population in the mid-1990s has engaged in some
activities with an intent to start a business, and
about half of them actually succeeded in their
initial efforts (Reynolds and White 1997). Explana-
tions for variations in rates of organizational
foundings have stressed the characteristics of op-
portunity structures, the organizing capacities of
groups, and strategies adopted by entrepreneurs
as they take account of opportunities and resourc-
es available to them (Aldrich and Wiedenmayer 1991).
Societal demands for special-purpose organi-
zations increased with urbanization and with eco-
nomic, political, and social differentiation, while
the resources required to construct organizations
grew more abundant with the development of a
money economy and the spread of literacy
(Stinchcombe 1965). The spread of facilitative
legal, political, and other institutions also played a
major role, by creating a stable, predictable con-
text within which entrepreneurs could look for-
ward to appropriating the gains from organiza-
tional foundings. Occasional periods of political
upheaval and revolution stimulate foundings by
freeing resources from previous uses, and thus
massive changes occurred in the organizational
populations of Eastern Europe in the 1990s. For
example, centralized health care systems were dis-
banded with the demise of state socialist regimes,
and there is a good deal of flux in the organizations
within this sector (Mechanic and Rochefort 1996).Transformations occur when existing organi-
zations adapt their structures to changing condi-
tions. The issue of how frequently and under what
conditions organizations change has provoked
some of the most spirited debates in organization-
al sociology. Strategic choice-theorists have ar-
gued for managerial autonomy and adaptability,
whereas ecological and institutional theorists have
tended to stress organizational inertia and de-
pendence. Research has moved away from polariz-
ing debates and reframed the question of transfor-
mation, asking about the conditions under which
organizations change and whether changes occur
more frequently in core or peripheral features
(Singh and Lumsden 1990).In the 1980s and 1990s, growing awareness of
techniques for performing dynamic analyses have
produced some useful studies of transformation,
such as those on diversification, top executive
changes, and changes in corporate form (Fligstein
1991). These studies tell us that changes do occur,
although they do not report whether rates of
change go up or down over an organization’s life
cycle. Most of these studies are of the very largest
business firms, for which data are publicly avail-
able, and not for representative samples.If all newly founded organizations lived forev-
er, the study of organizational change would be
confined to issues of founding, adaptation, and
inertia. Research has shown that organizations
disband at a fairly high rate, however, and a sizable
literature has grown up on organizational mortali-
ty (Baum 1996; Singh 1990). Organizations can
cease to exist as separate entities in two ways: by
completely dissolving—the process by which the
vast majority of organizations disband—or by be-
coming part of a different entity through merger
or acquisition. Throughout the 1990s, between
two and six thousand mergers and acquisitions a
year took place, amounting to less than 1 percent
of the incorporated firm population in any given
year (Aldrich 1999). For example, in 1994, merg-
ers and acquisitions involved about one-tenth of
one percent of all corporate assets. By contrast,
between 1976 and 1984, the annual rate of dissolu-
tion in the business population of the United
States was about 10 percent (Small Business Ad-
ministration 1994).