University of Southern California
Beyond Numbers:
When Prevalence Does Not Indicate Legitimacy, ANd Why
Abstract
Organizational studies link growing counts of different kinds of organizations to their legitimacy, but studies in social movements show the opposite: getting counted can also lead to censure. This suggests looking beyond numbers to understand how the fates of different kinds of organizations relate to the valence of community reactions to what they do and stand for and, more fundamentally, to cognitive, cultural and political aspects of the meaning construction processes that shape these reactions.
(75 words)
Keywords:
organization, community, variety, legitimacy, meaning construction, counts
You no longer see articles that attempt to demonstrate the legitimacy of the Web by stating how many Web pages there are. But blogs are still in the process of entering mainstream consciousness, so numerical credibility is important; bloggers themselves cite the statistics a lot. Wall Street Journal
$9 billion in profits are generated worldwide from trafficking in human beings. Data and statistics on the sex trade are very limited because the crime is largely invisible and under-reported. The Realities of Human Trafficking in Cook County
The goal of the Protection Project is to research and document the global scope of the problem of trafficking in persons and, through the dissemination of relevant and timely information, to influence policy and practice in the war against trafficking.
The Protection Project
Prevailing theories in organization studies relate the emergence and persistence of different kinds of organizations and practices to the legitimating effect of growing counts of them, but taking the systematically under-counted into account calls that relationship into question. As the quotes above illustrate, not everything that gets counted will become legitimate, and not everything that is legitimate will get counted. While numbers make new things seem real by lending them objectivity (Porter, 1995), there is still subjectivity in what gets counted. Since reliable counts of organizations and practices are most available in empirical settings where diffusion or emergence clearly occurred, researchers tend to select and study those sites (Aldrich & Ruef, 2006; Rogers, 2003). Using simulations, Denrell and Kovács (2008) show that this subjectivity probably biases the widely replicated findings that have made a “stylized fact” out of the theorized relationship between counts, legitimacy, and the fates of different kinds of organizations[1] and practices (for reviews, see Carroll & Hannan, 2000; Núñez-Nickel & Fuentes, 2004).
As the quotes above illustrate, however, studying the systematically under-counted could well reveal a contradictory relationship between counts and legitimacy. Recent research in ecology argues that the legitimacy of a new type of organization is driven by visibility, not just its size as a population (Khessina & Romanelli, 2007; McKendrick, Carroll, Jaffee, & Khessina, 2003; Romanelli & Khessina, 2005). In the social movements literature, however, studies suggest that the spotlight can sometimes be unflattering. In the movement against sexual harassment in the workplace, for example, advocates for new laws and human resources (HR) practices succeeded in gaining public support for their cause by raising public awareness of the previously overlooked prevalence and cost of sexual advances from bosses and co-workers, and as that awareness has diffused around the world, so have new laws and HR practices designed to criminalize unwanted sexual advances from co-workers and bosses (Baker, 2008; Weeks, Boles, Garbin, & Blount, 1986; Zippel, 2006). In a study of stock market reaction to activists’ protests against U.S. corporations, results show that stock prices fall when protests are covered by the media (King & Soule, 2007). Moreover, protestors’ boycotts do not affect stock price directly, but corporations are more likely to concede to protestor demands if protests receive media coverage (King, 2008).
Business history provides further reason to question the link between the prevalence and legitimacy of different kinds of organizations. In particular, consider the Trust Movement and the “trust” form of organization from which the contemporary word antitrust is derived. The movement owes its name to a mode of organization conceived by John D. Rockefeller and the eight other original trustees of the Standard Oil Trust, forerunner of today’s ExxonMobil Corporation. Though officially formed in 1882, the Standard Oil Trust organization benefited from Rockefeller’s years of experimentation with various practices for managing and eliminating competition (for a contemporary history see Tarbell, 1904). In essence, the trust was a vehicle for controlling competition in an industry through both horizontal consolidation and vertical “combinations” with complementary lines of business. As smaller companies that “joined” a trust (often under threat) by trusting their assets to trustees in exchange for certificates granting them dividends from the trust’s profits, some were shut down to manage capacity so that prices remained high. Only two years before the passage of the Sherman Antitrust Act of 1890, a concerned attorney described this “mode” of organization as “a monument to American genius and a symbol of American rapacity” (Cook, 1888: 4). The Sherman Act officially outlawed trusts, but Standard Oil and the many trusts it inspired quickly found ways around the new regulations.[2] Despite opposition, the Trust Movement gathered momentum up until President Theodore Roosevelt made trust-busting a theme of his administration. By that time, Moody’s classified statistics of trusts (1904: see pp. 453-477) list 318 trusts in a wide variety of industries—almost three quarters of which were incorporated after 1897. Of the 92 “important” trusts listed by Moody, 85% controlled at least half of the market for their product, and almost a third controlled 80% or more (Moody, 1904: 487). Thus, when Roosevelt began dismantling trusts, they were carefully counted and extremely prevalent, but in the new ethos that was emerging, the idea of a trust was in the process of becoming thoroughly illegitimate, if not illicit.
Even if only as a concession to the challenges of measuring a complex construct like legitimacy[3], study designs that use numbers a proxy for legitimacy compound the statistical problems reported by Denrell and Kovacs by diverting attention from cases that are likely to yield disconfirming evidence. Theoretically, this approach ignores the motivations for counting things and likely reactions to them. Without understanding these factors, it is hard to explain cases in which growing counts lead to censure, not legitimacy.
Our aim in this paper is to explain the variety of different kinds of organizations in a way that looks beyond counts. Specifically, we look beyond numbers by asking whether and how counts get constructed and relating that to the development of different kinds of organizations and practices. We refer to this approach as a valence theory of variety because it features both positive and negative reactions that communities have to different kinds of organizations, and we believe it can extend organization theory by treating counts not just as independent variables, but as products of meaning construction processes.
We begin by relating the variety of organizations a community supports to the valence of its reactions to what they do and stand for. Next, we unfold this argument into propositions that relate cognitive, cultural and political factors to the likelihood that any given type of organization will get recognized, be permitted or disallowed, and either secure support or face opposition. Next, we discuss the implications for organization theory and empirical research by highlighting the distinguishing themes of a valence theory of variety, the new questions it poses, and the methods that are well suited to the empirical work it implies. Finally, we conclude by noting that our theory urges organizational scholars to study phenomena in which numbers matter not just as scalar counts, but also for their sign and strength, so to speak. Such an approach is necessary for explaining why similar trends earn both respect and derision, and why sometimes a single instance of one thing can matter more than a thousand of another.
Valence and Variety
The central thesis of this paper is that the variety of organizations that flourish in a given community is affected by ongoing meaning construction processes that determine the valence of community reaction to what different kinds of organizations do and stand for. By “community reaction”, we mean the general consensus of opinion among people that recognize themselves as a community. By valence, we mean simply the positivity or negativity of community reaction. This argument fits the idea that perceived beliefs of the collective shape social change by their influence on individual reactions (Moscovici, 1976). Of course, contestation undermines complete consensus; we address that explicitly later.
While this thesis clearly builds on the traditional notion that environmental fitness affects the growth and decline of various kinds of organizations (Aldrich & Pfeffer, 1976; Aldrich & Ruef, 2006; DiMaggio & Powell, 1983; Freeman & Audia, 2006; Hannan & Freeman, 1977; Nelson & Winter, 1982; Scott, 1987), it goes beyond fitness by suggesting that community reaction is an important determinant of what types of organizations and practices are considered legitimate or not. This conceptualization significantly enlarges the range and types of organizations that are likely to be counted and the consequences of those counts.
Theoretically, the concept of environmental fitness implies a matter of degree typically measured over a discrete range of positive numbers signifying amount of fit–usually from 0 to 1. For example, consider Zuckerman’s (1999) analysis of how stock price is adversely affected by the misfit between corporate portfolios and the institutional environment created by analyst coverage patterns. Reversing the conventional scale, he measured “mismatch” as a quantity ranging from 0 to 1, with 1 representing a total mismatch and 0 representing something like a perfect match. Community reaction to what organizations do and stand for, on the other hand, can be either positive or negative, ranging from the extremely positive down to the total absence of merit and, significantly, all the way to the opposite of an extremely negative view. This range is open-ended because we can neither define the ultimate positive and negative values nor rule out the possibility that the maxima seen so far could be eclipsed. That is, there is always the possibility that a community will view a new type of organization more positively or more negatively than anything else that has come before.
To explain the significance of community reaction, consider again the Zuckerman (1999) study of the value of publicly traded stocks. All else equal, he found that firms were covered less and discounted when their corporate portfolios were mismatched with what financial analysts expected to see in a firm associated with a given market or industry category. That is, firms whose corporate portfolios represent a “deviation” from institutionalized expectations suffer an “illegitimacy discount” set by analysts and levied by investors. It is perfectly reasonable to see these firms as “illegitimate”, but only in the sense that misfits are. Unfortunately, the limited language of organization theory counts these illegitimate misfits with the likes of scam artists, drug cartels, and human traffickers, which seems less reasonable. A stronger word is needed to describe organizations that do and stand for things many would say deserve much stiffer sanctions—even up to the point of shutting down such businesses down if caught, confiscated all their assets, liquidating them, trying the organizers for crimes, and sending them to prison if convicted. For this more extreme sort of illegitimacy, we use the word “illicit.” Drawing on the common definition of this word, illicit organizations and practices are ones that are forbidden by law or custom for reasons that are more ethical or moral than purely practical.
Figure 1 situates the range of organizations typically featured in organization studies against the entire spectrum of community reactions to what different kinds of organizations do and stand for[4]. At the extreme negative end of this continuum are organizations that are widely regarded as illicit, as defined above. Organizations widely viewed as legitimate are at the opposite end, the positive side of the reaction spectrum. In the middle are organizations that are either illegitimate but not really illicit, or misfits that could be legitimate but are not yet.
Since findings that relate increasing counts of a thing lead to its legitimation are based on studies that almost exclusively focus on activities and organizations on the positive end of a wider spectrum of community reaction, support for these findings is thus subject to unobserved heterogeneity. If strategies for raising public awareness of new developments lead to either legitimacy or censure, then factors that matter are missing from both theory and empirical work.
(Insert Figures 1 and 2 about here)
Reducing community reaction to a simple negative-to-positive spectrum oversimplifies the possibilities, but we do this intentionally for the purposes of trying to explain variety. Figure 2 relates this simple range of community reactions to the prospects of getting counted. At the extreme positive end of the reaction spectrum, organizations are so legitimate that they are taken for granted and therefore unlikely to be counted. These would be organizations such as “mom and pop” donut shops common to U.S. cities. Apart from basic health inspections that must be passed, these shops require no special licenses or registration, and no industry association performs a census of them. Just a little in from this positive extreme, organizations are legitimate but more likely to be counted by analysts, industry associations, or government agencies. These would include, for example, biotech companies, semiconductor manufacturers, or newspapers, to name a few. Moving toward the middle, the spectrum’s more neutral range corresponds to organizations that are either illegitimate or not-yet-legitimate. While the illegitimate can be tolerated if not so visible, not-yet-legitimate organizations like Zuckerman’s (1999) overlooked misfits can benefit from the attention that comes with getting counted. The further we move into the negative range of community reactions, the more illicit an organization is, and the less likely it is to get counted, but only up until the point where reaction is so negative for the vast majority of community that counts become a viable strategy for reining in illicit organizations.
There relationship depicted in Figure 2 omits two important factors for simplicity. First, it shows theorized main effects of community reaction, but we expect these effects interact with population growth rates. For example, even organizations widely viewed as quite illicit may be tolerated if kept underground if they are not becoming more prevalent, but if they are, their growth makes reactionary counts more likely as a tactic for resisting and reversing that growth. Second, community reactions is sometimes so divided that consensus remains elusive. In that case, the prospects of seeing a new type of organization emerge depend on cognitive, cultural and political factors that shape community reaction, as we will explain below.
Our argument has important implications for whether new varieties of organizations and practices will get counted and how counts will affect their development. Community reaction to activities that organizations might be defined around creates more or less hospitable conditions for fostering the development of new types of organizations. When community reaction to an activity is neutral or better, the community will be more ready to recognize, accept and support new types of organizations defined around it. Conversely, when community reaction generally views an activity as illicit, we expect much less willingness to recognize, accept and support new types of organizations or related markets identities.
For example, separatist communities like the Pennsylvania Amish lead them to regard new technologies with suspicion, so not surprisingly, they are not friendly environments for hosting a rich variety of technology-based organizations. In contrast, they feature a more limited range of approaches to organizing that feature reciprocity and social exchange. Thus, the elaboration of variety and the capacity for specialization reflects the valence community reactions to the ideas and techniques that define new organizational fields.
Getting Counted
Earlier, we argued that understanding the variety of organizations requires looking beyond numbers, not ignoring them. Returning to that point, getting counted can lead to either legitimacy as a new type or organization (Carroll & Hannan, 1989; Hannan & Freeman, 1986) or censure as one that ought to banned, as was the case with trusts. This suggests that getting counted is not the cause of legitimation so much as the outcome of a prior process of meaning construction featuring both sensemaking (Weick, 1995) and sensegiving (Gioia & Chittipeddi, 1991). Before a new type of organization can be counted, it is necessary to sort out whether its exemplars are different enough to be worth naming and, if so, to produce a coherent enough shared understanding of what the name means that people can reliably say what belongs in the count and what does not.
Increasingly, scholars theorize distinct types of organizations as the result of meaning construction processes that produce shared interpretations of categories (Hsu, 2006; Lounsbury & Rao, 2004; Porac, Thomas, & Baden-Fuller, 1989) or identities (Jensen, 2008; Pólos, Carroll, & Hannan, 2007; Pólos, Hannan, & Carroll, 2002; Zuckerman, Kim, Ukanwa, & von Rittman, 2003). Following this line of thinking, getting counted requires a threshold level of collective agreement about what a category or identity means, and the prospects for reaching that agreement are affected by cognitive, cultural and political factors that determine a community’s tendency to recognize, accept and either support or oppose new types of organizations and practices. We now turn to relating the likelihood of getting counted to these factors.
Cognitive Factors
Because reliable counts are possible only after a community develops a shared cognitive scheme for categorizing what is to be counted, getting counted depends on the sociocognitive process of categorizing organizations widely seen as related (Porac & Thomas, 1990). While stable patterns of rivalry are an important factor in recognizing a nascent group as constituting a new type of organization (Porac, Thomas, Wilson, Paton, & Kanfer, 1995), organizational types can also be defined around common causes (Lounsbury, Ventresca, & Hirsch, 2003; Sine & Lee, Forthcoming; Weber, Heinze, & DeSoucey, 2008), or a common organizational structure (Chandler, 1962).
No matter what a community sees as defining a particular type of organization or practice, the social process of defining a type depends on developing shared recognition of a pattern of similarities that unifies a set of observations into a nascent group—this is a more social version of what the pragmatist philosopher Peirce referred to as “abductive” inference or “hypothesis” (Peirce, 1992). To elaborate, Peirce proposed abduction as its own kind of inference because conclusions about when a repeated pattern is worth naming follow neither the rules of deduction nor the rules induction. Once a hypothesis is made, deductive and inductive analyses can be applied to test it, but the initial step of formulating is something else. Karl Weick’s idea of sensemaking is similar in spirit to abduction, but more social. For Weick, sensemaking is the result of publicized speculation that increasingly makes the unexpected or unfamiliar more plausible (Weick, 1995: 3). Without an initial hypothesis that a group shares a unifying pattern, there can be no type, category or identity. This leads to our first proposition:
1. Counting the members of a particular type of organization requires an hypothesis that a pattern of co-occurring elements defines a new identity worth naming.
It takes more than an individual hypothesis for a new type of organization to be understood or recognized as real. Specifically, it requires the institutionalization of meaning, which is an inherently social process (Phillips & Hardy, 2004). As discourse theory suggests (Phillips & Hardy, 2002), meaning is rooted in an ongoing process of discursive social interaction. As members of a language community increasingly use a word in consistent ways, its meaning becomes institutionalized enough to support coordinated action and similar sensemaking about it (Phillips & Hardy, 2004).
Even when institutionalized, however, the ongoing social interactions that define meaning are never completely remove all ambiguity (Phillips & Hardy, 2002). Instead, meaning is subject to at least two sources of ambiguity that make institutionalization difficult. First, understanding what a particular type refers to requires getting past the pervasive difficulties of accurately “translating” an intended meaning from one speaker to the next; Quine (1960) referred to this as the “indeterminacy of translation.” When members of a community increasingly use a word to consistently refer to essentially the same set of things, however, it is a good bet that they have a pretty good shared understanding of what they collectively mean by it. Second, competition creates ambiguity. Because being closely associated with a category can be source of durable inequality (Tilly, 1998) and its close cousin competitive advantage (Carpenter & Nakamoto, 1989; Lieberman & Montgomery, 1988), firms attempt to put their own spin on shared conceptions of emerging types of organizations and markets (Fligstein, 1996).
In the computer industry, for example, Kennedy (2008) analyzed the case of producers of computers that were neither mainframes nor departmental minicomputers nor personal computers, but instead something in between. As makers of this new type of computer were increasingly mentioned together in various increasingly similar groups in conjunction with a label for their new collective enterprise, they became known as entrants in market based on what they were all doing in common—that is, making products that became known as “computer workstations.” As these patterns were stabilizing, firms did better when their publicity materials suggested a few but not too many connections to their rivals. As the meaning of new market category became clear enough to be institutionalized, firms most often mentioned with their rivals did better, but the benefits of suggesting connectedness to rivals reversed as the market definition became clear.
No matter how ambiguities are overcome, resolving them is necessary for reducing uncertainties that otherwise forestall the recognition and growth of a new type of organization or market (Rosa, Porac, Runser-Spanjol, & Saxon, 1999). This leads to the following proposition:
2. Counting the members of a particular type of organization depends on shared agreement about what its defining identity or category means, especially as evident in usage of a name increasingly associated with a stable set of features or instances.
Cultural Factors
Once something new becomes recognizable, its chances of getting counted are also affected by culture. Following Kroeber and Kluckhorn (1952: 357), we define culture as explicit and implicit patterns of historically derived and selected ideas and their embodiment in artifacts, practice, institutions and codes, both legal and religious. As products of past action, these patterns condition the actions seen as appropriate or even conceivable in any given context, but culture is less like a cage that constrains action than it is like a toolkit that enables the construction of particular kinds of realities (Swidler, 1986). Drawing on cognitive science, DiMaggio (1997) argues that culture both constrains and enables what people do.
Culture affects the valence of community reaction to new types of organization by shaping what is likely to be viewed as legitimate versus illicit and by establishing the status of groups whose views are therefore weighed differently in the process of coming to consensus. In turn, this affects the likelihood of getting counted and the variety of organizations and practices.
Legitimacy. Although culture defines and shapes beliefs about what is what ought to be considered legitimate, it is not a fixed, uniform concept. Instead, it is fragmented and subject to change (DiMaggio, 1997; Swidler, 1986). As a result, so is legitimacy. As Friedland and Alford (Friedland & Alford, 1991) argue, societies are made of multiple overlapping social spheres that each have their own logic for elaborating what is appropriate. The logic for what is right in a family context, for example, is different than in government, a corporation, a business, or a religious service. When building new types of organizations, therefore, entrepreneurs can go to multiple drawers in their cultural toolkits, so to speak, and use different kinds of tools to produce designs that improvise by recombining recognizable elements or organizations (Clemens, 1997).
This view of culture fits with recent work in institutional theory that links the legitimation of new types of organizations to the strategic use of persuasive language—or rhetoric (Suddaby & Greenwood, 2005). Through the strategic use of rhetoric, entrepreneurs promote the legitimacy of new types of organizations by developing arguments that link the defining elements of their organizations with legitimating principles and ideas. Through arguments that link between elements of their organizations to sequences of words, phrases and ideas associated with legitimating institutional logics, entrepreneurs simultaneously manipulate the logics and embed their organizations into the collectively maintained semantic web of relations among symbols people use to make sense of the world. The job of making connections is sometimes referred to as “symbolic action” because it acts on the relations among symbols. Through this symbolic action, market audiences construct new identities or reconstruct existing ones through a process of sensemaking and sensegiving (Gioia & Chittipeddi, 1991; Weick, 1977) in which they disassemble and reassemble the ‘codes’ that define identities (Weber, 2005).
Of course, there is no guarantee that the designs resulting from this technique will be viewed as legitimate. Recall, for example, Zuckerman’s misfits were publicly traded companies, but investors discounted them because their strangely assembled collections of businesses did not fit the categories analysts use to allocate coverage duties. While these misfit firms were traded and tracked by exchange systems, analysts did not count them as belonging to a recognized category. On the other hand, the idea of what a proper liberal arts college is changed with the adoption of professional training programs that were widely viewed as illegitimate when first introduced (Kraatz & Zajac, 1996). This suggests hope for Zuckerman’s misfits: with enough good performance, others may follow and create or redefine categories. In other words, reactions shape further action in a loop that can lead to changes in legitimacy.
From the perspective of a valence theory of organizational variety, therefore, we expect the types of organizations that get counted to be those that combine elements of already legitimate organizations to make an argument that they are doing or standing for something that should get a generally positive community reaction. Our emphasis on community reaction is consistent with recent research that the effects of culture are subject to people’s beliefs about what others in the culture see as appropriate, not just their own personal beliefs (Tam, Morris, Lee, Lau, Chiu, & Zou, 2009). This leads to the following proposition:
3. Getting counted is more likely when new types of organizations or practices combine elements widely viewed as legitimate.
As mentioned above, however, when a particular type of organization or practice becomes so widely accepted as legitimate that it is taken for granted, the need to justify it declines. In the spread of the practice for total quality management (TQM), Green et al. (2009) found that the benefits of TQM were initially justified with all three elements of a syllogistic argument about its value, but the elements of the argument were gradually dropped from discussion as the practice was widely adopted. A similar phenomenon should occur with count-based justifications of organizations and practices: the more taken-for-granted a type is, the less it needs to be counted. This leads to another proposition:
4. As a community increasingly takes the legitimacy of a particular type of organization or practice for granted, counting the type eventually seems pointless enough that it is discontinued.
Illicitness. At the same time, however, cultures also prescribe what is counter-normative and therefore shape whether a community sees something new as illicit. In other words, cultures prescribe what is taboo. When the valence of community reaction relegates banishes activities or relegates them to society’s extreme margins, getting counted becomes less desirable for organizations defined around such activities, and therefore less likely.
Take organized crime as an example. While the term is used with various meanings by scholars and prosecutors in different countries, it generally refers to a collection of illegal activities performed by a given stable set of agents or organizations (Garoupa, 2000). Illicit economic activity is not counted by systems designed to monitor conventional economic activity (Naylor, 2004; Waring, 1988). As a result, GNP and GDP numbers are padded with estimates of unrecorded activity, but these are still thought to be low (Feige, 1990; Naylor, 2004; Tanzi, 1999; Waring, 1988).Though organized crime syndicates wield considerable power, states find it hard to count the size and number of member organizations (Shelley, 1999). Criminology scholars argue that the extent of organized crime may far exceed official and unofficial estimates because they tend to overlook local businesses that (voluntarily or involuntarily) support criminal organizations through, for example, “fencing” goods that are contraband or stolen (Tilley & Hopkins, 2008). The low profile of these organizations is consistent with the terms used to describe these organizations and their activities: off-book, unrecorded, unreported, underground, hidden, and illegal.
Culture affects what gets counted by defining that which makes people feel shame, the ultimate “social emotion” (Cooley, 1922; Scheff, 1997). Public exposure of activities widely regarded as shameful invokes powerful emotional reactions and a desire to flee from the situation—to “sink into the floor and disappear” (Tangney, 1995). Since even daring to discuss embarrassing subjects risks being viewed as socially or culturally dangerous (Goffman, 1959 [2001]), people tend to hide things that are widely regarded as shameful (Reekie, 1998; Scharping, 2001; Tangney, 1995). These reactions evince shame as a “social emotion”. Building on Goffman’s work on embarrassment (Goffman, 1956), Scheff (1997: 12) argues that shame is the “master emotion” because it regulates action by anticipating its social consequences.
Fundamentally, the shame that comes with being identified with the illicit leads people to hide out of a fear of social disconnection (Lewis, 1971). In her famous analysis of expressions of shame in psychotherapy context Helen Lewis documents numerous visible cues of shame emotions. These include hiding or masking behaviors such as covering the face, lowering the head, averting the eyes, speaking softly, or giving a false smile. Consistent with these individual responses, we suggest organizations defined around illicit activities will neither get counted nor want to, which leads to the following proposition:
5. Getting counted is less likely for organizations defined around activities that are culturally taboo.
Status. Since community reaction is rarely univocal, cultures also affect what gets counted by establishing status orders that determine the influence of a groups’ opinion. While status is correlated with legitimacy, the two are analytically distinct. Status is a relative position within the social structure of a community (Podolny, 1993; Winship & Mandel, 1983), and it is an important determinant of the visibility of a particular group (Daniels, 1987; Gutek, 1985).
Because getting counted confers a measure of status, the history of census-taking is replete with examples where the status groups have systematically undercounted group of lower status (Anderson & Fienberg, 1999). When women were widely viewed as second-class citizens, for example, they were not allowed to vote. When black slaves were considered less than human, not only were they excluded from politics, they were not even counted in early U.S. census. After the Three-Fifths Compromise, slaves were not counted as full persons in census; they were only 3/5ths of a person. At that time, American Indians remained uncounted. Even today, many smaller ethnic or caste groups are lumped together in the “other” census category. In a study of the development and diffusion of national census-taking practices, Ventresca (1995) finds that those set up counting systems shape not only who gets counted, but also who counts. This pervasive feature of counts leads to the following proposition:
6. Getting counted is more likely for a type of organization when the groups that stand to could benefit from it are high in status.
Political Factors
Once a community recognized and either accepts or rejects a particular type of organization or practice, especially if only partially, political factors are important to determining whether it will remain so or change. Consistent with the view that culture contains implicit, internal contradictions (Friedland & Alford, 1991; Swidler, 1986), we take the view that community reactions to what organizations do and stand for are best conceived less as permanent states of affairs and more as truces reached by the relevant parties. We conceptualize the community as containing multiple parties (or subgroups), each with their own self-interests. When these interests clash, resolving the resulting tensions can lead to gains for some parties at the expense of losses to others. Consistent with Fligstein’s (1996) conception of markets as politics and Rao, Morrill, and Zald’s (2000) view of new types of organizations as products of collective action, getting counted or not is also a matter of politics—that is, of processes for maintaining or altering a particular counting scheme.
In our view, therefore, getting counted in time 1 makes getting counted in time 2 more likely than not, but certainly not inevitable. Rather than being assured, continued acceptance of a particular type of organization or practice depends on the outcome of potential contests between those that stand to gain or lose based on whether a given type of organization is legitimated or censured, coalitions and the framing of the issues at stake affect the outcomes of these contests. We turn now to explaining how getting counted is affected by parties’ perceived prospects for gains and losses, shifting coalitions, and the framing of issues.
Prospects for gains or losses. Since, as argued earlier, counts do not always legitimate, counting a particular type of organization can be useful not only for mobilizing support for what it does and stands for, but also for mobilizing opposition. When counting a particular type of organization or practice generally threatens losses to members of a related constituency, we expect them to resist it. Conversely, when counting a particular type of organization or practice offers prospects of significant gains to members of a related constituency, we expect them to embrace it, if not demand it. Similarly, when counts have implications for distributive resource allocations, parties that are pleased with the allocation they receive will generally support the continuation of counts that support the status quo allocations.
In The Data Game, Mark Maier (1999) provides two useful illustrations. First, consider the Federal Trade Commission’s abortive attempt to require line-of-business level financial reporting from large corporations. During the 1970s, the U.S. government sought to institute new regulations required a “line-of-business report”, a practice that would have required businesses to disclose financial information for all of a corporation’s different product lines. The U.S. Federal Trade Commission (FTC) initiated this proposal as part of its antitrust enforcement because it would help the FTC assess corporate control in different markets. Under the status quo, corporations reported financial data in consolidated form, thereby hiding the extent of their involvement and profits in various industries and markets. Larger U.S. corporations generally opposed the FTC’s proposal on the grounds that it would breach financial confidentiality, and 108 corporations actually filed lawsuits against the FTC. The Supreme Court ruled in favor of the commission in 1978, but the program was halted until the FTC could prove that the benefits of the additional data exceeded the cost of collecting it (Maier, 1999:205-207). In this case, valuable statistics on business practice and corporate diversification information were not counted because large corporations perceived the resulting exposure as a threat.
Second, in the field of cancer research, the U. S. National Cancer Institute (NCI) launched the “Cancer Prevention Awareness Program” with the aim of halving the mortality rate by 2000. In 1998, the NCI and American Cancer Society (ACS) announced that the first reversal in an almost 20-year trend of increasing cancer cases, and deaths. While many would regard this as good news, the Cancer Prevention Coalition (CPC) insisted that NCI’s reports were misleading and accused it of manipulating the numbers. Specifically, the CPC wanted to make it clear that the decrease in death rates and new cancer cases was largely due to the declines in smoking habits and a resultant reduction in lung cancer case, not to effective cancer treatments. While there is merit to this argument, Maier has argued that beneficiaries of federal funding for cancer research were willing to use over-simplified analyses to make their case in lobbying for funding of cancer treatment research at the expense of funding for research on cancer prevention.
In the case of line-of-business reporting, corporations fought the proposed practice because it was against their interest. In the case of cancer research, competitors for research funding took different views about which cases to count when determining survival rates because what got counted could affect public perceptions about the benefits and legitimacy of continuing existing funding. In both cases, actors sought to count or suppress numbers because of potential prospects for gains or losses. This leads lead to the following proposition:
7. Counting the members of a particular type of organization depends on prospects for gains or losses to groups affected by giving them public visibility.
Coalitions. Examining perceived gains or losses helps explain when groups will want to count or hide things, but it says little about how to do that. The studies on social movements and institutional change offer rich insight here. Activists or entrepreneurs often ally with other social groups to reach a broader base of support in pursuit of change (McCarthy & Zald, 1977; Rao, 1998; Van Dyke, 2003), and studies show that building coalitions has contributed to successful mobilizations (Jenkins-Smith, St. Clair, & Woods, 1991; Sabatier & Jenkins-Smith, 1993). In the context of markets, Fligstein (1996) noted that market emergence and reorganization both resemble social movements because challengers often partner with existing firms, sometimes even at the cost of compromising their proposals. From a resource dependence perspective, inter-organizational relations and institutional endorsements are important for organizations to get recognized, to survive, and to prosper (Pfeffer & Salancik, 1978; Pfeffer & Salancik, 2003).
In a study of the emergence of a new market consisting of small power producers, or “qualifying facilities” (QFs), Russo (2001) found that statewide trade associations representing QFs acted a bridge between member organizations and policy makers by intervening in regulatory hearings and lobbying legislators. In this way, the trade associations significantly advanced the interests of independent power producers. In a study of the rise of strategic management as a new scholarly field, Hambrick and Chen (2008) note that the affirmation of the American Assembly of Collegiate Schools of Business (AACSB) and the opportunities for collaboration with the corporate world were crucial to the acceptance of studies of business policy and strategy as a recognizable field of research and teaching. That is, these links were crucial to getting counted in business schools. This leads to the following proposition:
8. Counting the members of a particular type of organization depends on coalitions among groups who see themselves as potentially affected by its public visibility.
Framing. Although coalitions can increase the leverage of groups seeking change, challenging the status quo typically requires more than leverage—it requires a compelling argument. Thus, activists strive to frame their ideas in ways that resonate with their constituencies’ concerns (Benford & Snow, 2000; Carroll & Swaminathan, 2000; Creed, Scully, & Austin, 2002; Lounsbury & Glynn, 2001b; Snow, Rochford, Worden, & Benford, 1986). As a process, framing involves classifying (Goffman, 1974), selecting, and accentuating (Entman, 1993:52). To frame something is to select desired aspects of a situation and present them in pre-defined boxes to highlight factors that promote a particular definition, interpretation, and evaluation that combine to advance a particular aim or point of view. In the realm of social movements, frames justify the very existence of movements (Klandermans, 1997), inspire supporters, and legitimate movement activities (Benford & Snow, 2000). Framing strategies are central to movement success (Snow et al., 1986).
In organizational studies, successful entrepreneurs using framing to motivate supporters, secure resources, and cultivate new markets (Davis & Zald, 2005; Hwang & Powell, 2005; Schneiberg & Clemens, 2006; Schneiberg & Lounsbury, 2007). In the case of microbreweries, for example, Carroll and Swaminathan (2000) found that success hinged on brewers’ ability to deliver a desirable, “genuine” cultural frame boasting the best of small-scale craft production. Drawing on data about the nouvelle cuisine movement in France, Rao and colleagues (2003) show that discourses among chefs and critics helped to construct a new cultural identity for by tapping into larger themes in French anti-authoritarian movements. Weber, Heinze and DeSoucey’s (2008) case study of the market for grass-fed meat and dairy products offers another example of how movement participants use framing to legitimate organizations and practics. By exploiting cultural codes of authenticity, sustainability, and naturalness, the grassroots coalition created a new market for grass-fed meat products and reshaped existing production technologies. In these examples, entrepreneurs got their innovations recognized, counted and accepted by using framing that fit them into larger cultural contexts. This leads the following proposition:
9. For the members of a particular type of organization, getting counted depends on the framing of what they do and stand for—i.e., linguistic strategies for linking what they do to things already seen as legitimate.
Implications for organization Studies
We believe a valence theory of organizational variety integrates the strengths of social movements studies with the strengths of mainstream organization theory. Our approach benefits from the growing body of organizational scholarship that borrows ideas from the social movements literature to explore institutional change and the emergence and decline of various types of organizations and practices (Davis, Morrill, Rao, & Soule, 2008; Davis, 1991; Davis, Diekmann, & Tinsley, 1994; Davis & Zald, 2005; Fiss & Zajac, 2004; Hwang & Powell, 2005; Lounsbury & Glynn, 2001a; Lounsbury & Rao, 2004; Lounsbury et al., 2003; Schneiberg & Clemens, 2006; Schneiberg & Lounsbury, 2007; Weber et al., 2008). Whereas social movements scholars treat values as a site for political and cultural struggles, values as values are largely left out of mainstream organization theory. Instead of studying values, scholars study correlates such environments, institutions, cognitive frameworks or cultural systems (Scott, 1995).
A valence theory of organizational variety brings values back into organizational theory, but it does so in a way that fully embraces the major theoretical and methodological moves of the last generation. While building on extant theory, a valence theory suggests new themes, new research questions, and new research methods—though familiar ones apply, too. We explain each in turn.
Themes
The first of two distinctive themes to our theory is the return of values to organizational scholarship. Since Berger and Luckmann (1966) urged attention to the sociology of knowledge and its effects on shared views about what is real[5], organizational scholars have stressed cognitive frameworks over normative systems (Scott, 1995: 16), and this shift has been crucial in distinguishing the new institutional approach to organizations from the “old” institutional approach of Selznick (1957, 1966) and Stinchcombe (1964, 1965, 2001). In our view, however, cognitive frameworks and cultural systems underlie normative systems. As we have argued, the variety of organizations found in a community reflects its reactions to what organizations do and stand for, and this is clearly the province of values. Building on contemporary organization theory, however, changing values can be seen by exploring the cognitive, cultural and political factors that shape community reactions to different kinds of organizations and practices.
Second, we endogenize organizational environments by viewing community reaction as a product of ongoing meaning construction. Following Kennedy (2008: 272-273), we treat cognitive frameworks, cultural systems, political regimes, and the values systems they support as products of a process of meaning construction that iterates on itself recursively. As hypotheses about new types of organizations and practices are translated from person to person and collectively evaluated for their coherence and practical usefulness, the conclusion of this cycle becomes the starting point for new hypotheses about what is real. Thus, the strategic sensegiving of entrepreneurial action (Fiss & Zajac, 2006; Gioia & Chittipeddi, 1991; Weick, 1977) is an input to the collective sensemaking of community reaction (Anand & Peterson, 2000; Rosa & Spanjol, 2005), and vice versa.
Ultimately, it is meaning construction that furnishes a community’s shared ideas about what counts, what should be counted, and how a community will react to counts. Whereas extant theory mostly explains the emergence of particular types of organization (and the decline of others) as a function of fitness with a theorized organizational or institutional environment, a valence theory of organizations theorizes these environments as outcomes of meaning construction. What makes a community fertile or barren ground for any particular type of organization, therefore, is the cycle of meaning construction that enables recognition of the new type, affects whether it will be accepted or rejected, and determines the level of support or resistance it will find.
Questions
To illustrate how these themes translate into a different kind of organizational analysis, consider how they would suggest studying what is happening to newspaper organizations. , the subject of a classic and important study in the organizational ecology literature by Carroll and Hannan (1989). Combining both institutional and ecological perspectives, they theorized the population dynamics of 19th and 20th century newspaper organizations—their emergence, growth and contraction—as the product of environmental conditions. More specifically, these conditions select organizational populations for growth or decline by determining both their legitimacy as types of organizations and the intensity of rivalry among them. As Carroll and Hannan observe, however, these selection forces are “partly shaped by larger political changes” (Carroll & Hannan, 1989: 535). Lately, however, newspaper organizations are dying and changing due to changes in technology as well. From an ecological perspective, they no longer fit the environment, presumably because it has changed to select for something else. From an institutional perspective, newspapers are losing legitimacy, presumably because the institutional environment is changing.
Focusing on the valence of community reaction offers a way to explain newspaper organizations seem like they no longer fit environments they once did. As mentioned, their environments are partly shaped by political change and the spread of profoundly important new technologies for “online publishing” and broadcasting. As these combine to furnish the elements of new “dominant designs” (Anderson & Tushman, 1990) for organizing, entrepreneurs respond to perceived political opportunity to do something new (Gamson & Meyer, 1996). Specifically, “online newspaper” organizations emerge around new roles, norms and relationships that challenge two constitutive features of more journalistic newspaper organizations: norms of reporter objectivity and the separation of editorial and business functions (see Schudson, 1978, 2001). Because these new organizations are not-yet-legitimate rather than illicit, entrepreneurs actively publicize their moves using framing that borrows legitimating ideas from the worlds of the market and the state. Specifically, new media entrepreneurs frame their organizations as incorporating ideas of participation and openness from the world of the democratic state and as incorporating the ideas of transparency and efficiency from the world of the market.
Even as entrepreneurs began to develop alternative models of reporting, journalists at conventional media outlets were overlooking the illicit payola schemes that became common practice among their close professional cousins, financial analysts at top investment banks (Beunza & Garud, 2006). Writing later about journalists who did dare to cover this story, journalist Charles Layton observed that “their insights were lost in a cacophony of naïve coverage” (2003). To make this point, Layton notes that BusinessWeek devoted its cover to questions about Wall Street credibility in 1998. In that issue, one reporter discussed the “gnawing sense” that “analysts are too enmeshed with their investment-banking brethren to provide objective advice.” Two years later, the Dow Jones Industrial Average lost nearly 30% of its value as the extent of the problem came to light. In 2002, 9 investment banks paid over $1.4 billion in fines and agreed to change their business practices, and high-profile analyst Henry Blodget of CBIC Oppenheimer and later Merrill Lynch settled a lawsuit with the State of New York without admitting any guilt. Clearly, however, the legitimate organizations involved in these illicit activities were eager to avoid the exposure of getting these practices counted.
In situations like these, a valence theory of organizational variety asks not only who gets counted, but who does not. It calls for greater attention to organizations and practices that are either uncounted or undercounted relative to similarly prevalent entities, either because they are so legitimate as to be taken-for-granted, or because they are illicit. Also, it asks when getting counted leads to opposition and censure, not just acceptance and legitimation. This implies broadening the range of economic activity studied to include illicit organizations, not just the narrower range from legitimate to the illegitimate or not-yet-legitimate. Furthermore, it also asks how community reaction shapes counts and how counts change community reaction over time. This implies detailed longitudinal study of meaning construction and its effects on widespread perceptions of the activities around which new types of organizations could be defined.
In the context of media organizations, these general questions translate into specific studies of the causes and effects of growing counts of blog and listservs. As blogs grow and newspapers decline, do these offsetting trends in counts suggest community rejection of organizational blueprints based on journalistic principles? As new technologies enable counting of outlets without regard to the appropriateness of their content, will these less discriminating counts lead to the legitimation of, for example, human trafficking of children for the sexual gratification of adults? If not, why not? Will we see an underground online world emerge?
Methods
The variety and fates of different kinds of organizations can be studied using the valence of community reaction to what organizations do and mechanisms that enable the visibility that comes with getting counted. We have emphasized mechanisms of meaning construction, a topic often studied qualitatively, but methods for quantitative analyses of meaning construction represent a new development that we believe holds promise for future research. Community reaction and its effects can thus be studied both through familiar and emerging methods.
Familiar methods. A valence theory of variety suggests relating community reactions to particular types of organizations and practices through widely used qualitative and quantitative research methods. A variety of familiar qualitative research methods are natural tools for exploring community reaction and its foundations (see Miles & Huberman, 1994). For the work of relating the fates of organizational types and practices to changing community reactions, statistical techniques for the longitudinal analysis of quantitative data are excellent tools (for references, see Blossfeld & Rohwer, 1995; Singer & Willett, 2003; Tuma & Hannan, 1984).
To understand what makes something illicit and how it can survive despite sanctions, researchers need to get a sense of historical perspective and develop insights into things people are reluctant to talk about openly. Oral history and ethnography are excellent tools for this job. Oral histories are especially well-suited to the job of understanding why practices or organizations are widely perceived as illicit or shameful (Mercier & Buckendorf, 1992; Ritchie, 2003; Thompson & Thompson, 1978). The immersion and familiarity that come with participant observation offer a path to understanding things people are generally reluctant to talk about openly (Burawoy, 2003; Van Maanen, 1988). In addition, in-depth cases studies (Yin, 2008) and content analyses (Krippendorf, 2004; Neuendorf, 2002) are appropriate tools for investigating the process of meaning construction and its impact on community reaction.
Statistical analyses of organization that get counted provide a familiar strategy for testing hypotheses about the relationships between community reaction, organizational variety, and the fates of different kinds of organizations and practices, but these techniques require data that are not available for organizations do not get counted. In that case, well-crafted survey instruments offer an excellent approach to capturing systematic patterns in answers to questions about activities usually kept out of plain sight. That said, care must be taken to minimize the effects of self-report bias, and it is expensive and time-consuming to do the panel surveys necessary for longitudinal analysis (see Alreck & Stettle, 2003).
Finally, macro-organizational researchers seldom use experimental study designs, but Morris and colleagues have used experiments in a program of psychological research to explore how culture affects decision-making and behavior (Hong, Morris, Chiu, & Benet-Martínez, 2000; Morris, Leung, Ames, & Lickel, 1999). Their work demonstrates the promise of using experiments to test relationships such as the proposed link between increasing counts and the valence of individual reactions and individual perceptions about what community is likely to be. Specifically, an experimental study design would be well suited to exploring how increasing counts of an illicit activity— such as human trafficking or drug smuggling— affect people’s views about the legitimacy of the activity or its lack thereof.
New methods. With the advent of the Internet and so-called social media, new data sources and techniques for extracting and analyzing dynamic networks are developing hand-in-hand with theory that links network dynamics with the evolution of fields, communities and specific types of organizations (Powell, Koput, & Smith-Doerr, 1996; Powell, White, Koput, & Owen-Smith, 2005; White, Owen-Smith, Moody, & Powell, 2004; White, 2002). With the advent of the Internet, tools for searching its current and archived content are opening a new world of data to social scientists. Two developments hold particular promise for stimulating research that relates organizational variety to community reaction, counts and the meaning construction that underlies both.
First, the adaptation of search engine technology will make it possible to study the dynamics of social networks based on a previously unimaginably comprehensive range of human interests, relationships, and activities. Before the Internet, organizations defined around illegitimate or illicit activities generally kept a low profile and were therefore relatively unknown and inaccessible in many, if not most, communities. With the Internet, access to previously inaccessible worlds has opened up to broader audiences. As previously largely hidden worlds open up to broader audiences, people feel freer to indulge their curiosities behind what they believe to be a veil of anonymity, but research shows that anonymity is not enough to mask true identities (Backstrom, Dwork, & Kleinberg, 2007). As the mathematics of graph theory are being adapted to the modeling of knowledge networks, semantic networks, and social networks, researchers working in this tradition have developed theory and empirical strategies for extracting and studying the formation of social networks (Backstrom, Huttenlocher, Kleinberg, & Lan, 2006), on-line communities (Tantipathananandh, Berger-Wolf, & Kempe, 2007), and high-technology product markets (Kennedy, 2008).
Second, and perhaps more fundamentally, these techniques are suitable for studying ongoing meaning construction processes and their role in shaping, maintaining and changing community reaction to what organizations do and stand for. In the spirit of techniques for extracting team mental models of concepts from transcripts of conversations among teams as they work (Carley, 1993, 1994, 1997), new data and knowledge extraction techniques can be scaled up to the community level. Increasing the cognitive availability of something makes it seem more common or likely (Tversky & Kahneman, 1973), so as public discourse—particularly media coverage—about organizations or practices makes them more available to a community, it has the potential to shape community reaction in a number of ways: the overall reputation of an organization (Rindova, Petkova, & Kotha, 2007), its popular appeal (Rindova, 2006), its legitimacy (Pollock & Rindova, 2003), and its ability to secure financial capital needed to grow and thrive (Pollock, Rindova, & Maggitt, 2008). Overall, availability tends to make ideas more compelling to community (Kuran, 1987; Kuran & Sunstein, 1999).
The workstation study mentioned cited (Kennedy, 2008) develops and illustrates steps toward a workable methodology for developing and analyzing models of meaning to outcomes for organizations and changes in the status of the population. That method uses text processing to extract similarity relations among organizations and build networks that approximate cognitive models likely to be widely “available” to market audiences. Extending this method to assess the positive or negative reactions to different kinds of organizations should yield an approach for producing data useful for relating changes in community reaction to organizational variety.
Conclusion
We believe our theory holds the promise of solving a major problem in organization studies. Specifically, as numbers are widely used as proxies for legitimacy, researchers have overlooked the fact that getting counted can lead to censure, too—the exact opposite of legitimacy. By looking beyond numbers to meaning construction processes that make counts possible, we see a way to resolve this problem. To be clear, the problem is not so much with using numbers as it is with not yet having thought enough about how they are produced. Our approach to looking beyond numbers is thus to look into them more deeply.
Looking more deeply into counts reveals not only how profoundly they affect the variety of organizations and practices that grow and flourish in any particular environment, but also how squarely both counts and variety rest on non-numeric foundations. We believe understanding the meaning construction that underlies the construction and interpretation of counts and trends—numbers that measure the quantity and rates of change of particular kinds of things—holds the potential to bring values back into organizational studies in a way that is badly needed. In the last generation or so, management scholars have gotten away from talking about values in favor of talking about cognition and culture instead, but values have remained a centrally important feature of the contents of cognition and cultural systems. Perhaps coincidentally, the scholarly retreat from discussing values has coincided with a sad string of scandals that have shaken public confidence in managers and raised justifiable questions about the value of management research and education. We believe our theory provides a way for management scholars to build on the advances of the last generation of management research while re-connecting to an older argument that strikes as a refreshingly contemporary and compelling guide for a new generation of management scholars. Specifically, we hold with Philip Selznick (1996:271) that “values do have a central place in the theory of institutions” and of organizations, we would add, and that it is therefore very proper for scholars to apply insights from studies of cognition, culture and politics to explore “which values matter in the context at hand; how to build them into the organization’s culture and social structure; and in what ways they are weakened or subverted.”
Figure 1
Spectrum of Community Reaction to Organizations and What they Do and Stand For
Figure 2
Relations between Spectrum of Community Reaction to what Organizations Do and Stand for and the Likelihood of Getting Counted
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[1] Although “kinds of organizations” (or types) is more awkward than the familiar term “organizational form”, we do not use avoid that more familiar phrase in this paper because we want to allow different types of organizations to be defined not just by unique approaches to the form or structure of organization. This is consistent with recent work that links the diffusion of administrative practices and the growth and decline of different kinds of organizations and markets The more to general idea of a type of organization can apply to categories, codes or and identities based on recognition of patterns of things such as of common rivalry, membership in a value chain, or shared routines or recognized varieties of specialization based on particular operational capabilities or routines in either operations or administration. Consistent with this new theorizing, In this sense, our view of approach to variety is more inclusive than it would be if we focused more narrowly on organizational form.
[2] Trust opponents got no help from the U.S. Supreme Court when it 1895 it ruled in U.S. vs. E.C. Knight Company that the American Sugar Trust’s 98% monopoly control of sugar refining was not a restraint of interstate trade. Later cases reversed this precedent, but the logic of antitrust regulation has remained fluid and controversial, shifting with changes in American political and economic ideology. Former Federal Reserve Chairman Alan Greenspan referred to the Sherman Antitrust Act as “utter nonsense in the context of today’s economic knowledge” (Greenspan, 1966).
[3] The idea that there is more to legitimacy than numbers is not new (Baum & Powell, 1995), but numbers do make a practical proxy for measuring an otherwise complex construct (Carroll & Hannan, 1995).
[4] For a notable exception, Michael Jensen has a working paper that develops an approach to “legitimating illegitimacy” and tests it in the context of the growth and decline of a 1970s Danish film genre that could be translated as “comic pornography.”
[5] Berger and Luckmann defined reality as that which is generally recognized as existing without any help from human interest or agreement; thus, when things are real, we cannot “wish them away” (1966: 1).
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