Organizational Identities and the Hazard of Change

Posted: 29 Feb 2008

See all articles by Michael Hannan

Michael Hannan

Stanford Graduate School of Business

James Baron

Independent

Greta Hsu

University of California, Davis - Graduate School of Management

Özgecan Koçak

affiliation not provided to SSRN

Abstract

We examine how the life chances and financial performance of nascent high-technology firms were affected by two kinds of organizational changes: altering founders' blueprints for the employment relation and replacing a founder-chief executive officer (CEO) by an outsider. We argue that both events destabilize organizations but that changes in employment blueprints are tied more tightly to the organization's identity and thus are more destabilizing. We analyze three dimensions of organizational performance among a sample of young high-technology companies in California's Silicon Valley: survival versus failure, launching an initial public offering (IPO), and changes in financial valuations among organizations that underwent an IPO. As predicted, changing the employment blueprint increased the hazard of failure and diminished growth in market value. Appointing an outsider as CEO did not affect the hazard of failure appreciably but did depress the rate of growth in market capitalization. The implications of these results for ecological and institutional perspectives on organizations are discussed.

Suggested Citation

Hannan, Michael and Baron, James N. and Hsu, Greta and Koçak, Özgecan, Organizational Identities and the Hazard of Change. Industrial and Corporate Change, Vol. 15, Issue 5, pp. 755-784, 2006, Available at SSRN: https://ssrn.com/abstract=1097925 or http://dx.doi.org/10.1093/icc/dtl020

Michael Hannan (Contact Author)

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States
650-723-1511 (Phone)
650-725-7692 (Fax)

James N. Baron

Independent

Greta Hsu

University of California, Davis - Graduate School of Management ( email )

One Shields Avenue
Davis, CA 95616
United States

Özgecan Koçak

affiliation not provided to SSRN

No Address Available

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