Organizational Differentiation in Urban Communities: A Study in Organizational Ecology*

Abstract

Ecological theory suggests that growth in the density of a population of organizations should give rise, through the mechanism of competition, to functional differentiation and within functions, size differentiation. Such theory also predicts that size differentiation will increase as a consequence of functional differentiation. Tests of these hypotheses based on measurements for 206 SMSAs support these propositions with the exception that no direct effect of organizational density on size differentiation is observed. Secondary hypo-theses about the influences of community age, urbanization, and economic function are also advanced and empirically evaluated. This study is conceived as an exploration in the ecology of organizations and confronts issues identified as important by other recent writers on these topics. The concept of an aggregate or population of organizations has caught the interest of sociologists pursuing various problems. Thinking of the urban community in such terms has led a number of writers to formulate proposi-tions linking structural properties of the local organizational field to pat-terns of community integration and collective action (Aiken and Alford; Coleman; Turk). These efforts treat such properties as independent vari-ables, however; hence are less helpful in explaining the composition of urban places in terms of them. One approach having this explanatory potential, as two recent papers suggest, is ecology. Hannan and Freeman and Aldrich and Pfeffer treat populations of organizations as an approach to the broad problem of organization-environment relations; and conclude that ecological models are best suited to a population-level analysis. Curi-ously, neither article gives more than passing attention to communities as systems supporting organizational populations, although human ecological theory addressing these topics has developed mainly in the course of a treatment of community structure (Hawley, a, Ch. 7). The present investi-gation, however, uses the urban community as the unit of analysis an