Networks, Resources and the Evolution of Organizational Size Distributions

The observed tendency toward concentration in a number of economic and institutional sectors ultimately rests on differences in the growth rates of individual organizations. What determines these differences? In this study we seek possible answers to this question by developing and testing models for organizational growth rates according to which organizational growth is driven by factors within two main sets of processes. The first is related to internal organizational characteristics such as, for example, age and size. This aspect of the model specification builds on the extensive literature available on organizational growth and the evolution of organizational size distributions. This literature has conceptualized growth as driven by internal process of asset stock accumulation deriving from an organization´s own investments in capacity and resources.The second set of process driving organizational growth is related to the opportunities and constraints embedded in networks of inter-corporate relations. This aspect of the model specification builds on the similarly extensive literature that has demonstrated how the points of contact between an organizations and their environment affect a wide variety of fundamental outcomes ranging from innovation, to performance, competitiveness, technological change and, ultimately - survival. In our study we select the network of inter-corporate connections defined by relations of mergers and acquisitions as defining the relevant context within which organizational growth should be understood.To forward our conception of organizational growth as driven simultaneously by internal resources accumulation strategies and external relations, we collected detailed information on Swiss banking organizations during the period 1936-2002. The main empirical contribution that we expect from our study is the definition of an empirically validated model of organizational growth consistent with the aggregate organizational size distributions that are actually observed in the Swiss banking industry. The main theoretical contribution that our study offers is the possibility of reconciling firm-centred conceptions of organizational growth based on assumption of resource accumulation with more distinctly relational theories based on role and position that companies occupy in networks of interorganizational relations.