On Organizations and Oligarchies: Michels in the Twenty-First Century

[Excerpt] A central problem for those interested in studying and explaining the actions of organizations is how to conceptualize these social phenomena. In particular, because organizations are constituted by individuals, each of whom may seek to achieve his or her interests through the organization, questions of how decisions are made in organizations and whose preferences drive those decisions are critical to explaining organizational actions. Although early organizational scholars spent much time wrestling with these questions (e.g. Barnard 1938; Simon 1947; Parsons 1956; March and Simon 1958), more recent work in organizational studies has tended to elide them, adopting an implicit view of organizations as unitary actors, much like individuals, and in particular, like individuals who operate with a coherent utility function that they seek to maximize (e.g. Porter 1985; Baum et al. 2005; Casciaro and Piskorski 2005; Mezias and Boyle 2005; Jensen 2006). Thus, organizational behavior is seen as reflecting efforts to achieve a specific goal, which is, presumably, that of enhancing the organizations interests. While this may be the dominant conceptualization underlying much contemporary research, other work sharply questions the validity and usefulness of this approach to organizational analysis (March and Simon 1958; Cohen, March, and Olsen 1972; Jackall 1988). Studies in this tradition suggest that it is more appropriate in most instances to conceive of organizations as battlefields, constituted by shifting factions with differing interests that vie for control of the organization; hence, organizational actions should be viewed as reflecting the preferences of a victorious coalition at a given point in time. We suspect that, although most people’s experience in organizations may make them sympathetic to the coalitional view and skeptical of the unitary actor view, the continuing predilection for the latter stems at least in part from problems of deriving systematic predictions of organizational behavior from a more chaotic, coalitional kaleidoscope perspective. A different model of organizations is represented in the work of Robert Michels (1876-1936), who, nearly a century ago, offered his now-famous, pithy summary of the fundamental nature of organizations ([1911] 1962: 365): ‘Who says organization, says oligarchy.’ Drawing on his own experiences with early twentieth-century German political party organizations, Michels presented the drift to oligarchy as an ‘iron law’, inevitably resulting in the division of even the most expressly democratic organizations into two parts: a small stable set of elites and all the other members. His analysis offered a catalog of the processes and forces that produced such a division, and he postulated that the directives of the elite, while nominally reflecting the set of interests shared by all members, in actuality are driven by their own personal interests in the organization. His provocative (and very pessimistic) arguments have served as the basis for many studies over the years, particularly of organizations specifically formed to represent the interests of groups seeking to promote change in political arenas. Much of this work has been focused on assessing the purported inevitability of the emergence of oligarchies and defining the conditions of the iron law—i.e. those that affect the realization (or suppression) of oligarchic tendencies. In this chapter, we argue that Michels’s core arguments about the nature of oligarchies in organizations, and research generated in response to his work, are not only relevant to understanding the dynamics of political organizations but can be extended as a useful framework for thinking about important aspects of contemporary economic corporations as well. In making this argument, we highlight the parallels between Berle and Means’s analysis (1932) of modern, publicly held corporations and that of Michels. Both analyses address the general organizational problem of ensuring representation of members’ interests. In political organizations, it is the rank-and-file members’ interests that leaders are charged with representing; in publicly held organizations, leaders are primarily responsible for representing the interests of stockholders, as the nominal owners’ of the firm. In this context, we consider evidence and research on problematic corporate behavior to show how Michels’s work provides a useful framework for understanding these problems and for formulating ways of addressing them

The Shape of Things to Come: Institutions, Entrepreneurs, and the Case of Hedge Funds

Foundational work on institutional theory as a framework for studying organizations underscored its relevance to analyses of entrepreneurship, but entrepreneurship research has often ignored the insights provided by this theoretic approach. In this chapter, we illustrate the utility of institutional theory as a central framework for explaining entrepreneurial phenomena by discussing three primary questions for entrepreneurship researchers: Under what conditions are individuals likely to found new organizations? What are key influences on the kinds of organizations they found? And what factors determine the likelihood of the survival of new organizations? We describe the kinds of answers that an institutional perspective provides to these questions, illustrate some of our arguments by drawing on a recent field of entrepreneurial endeavor, hedge funds, and discuss the implications of our analysis for further work by entrepreneurship researchers.Tolbert49_The_Shape_of_Things_To_Come.pdf: 1410 downloads, before Oct. 1, 2020

From Pabst to Pepsi: The Deinstitutionalization of Social Practices and the Creation of Entrepreneurial Opportunities

In this paper, we examine the dual role that social movement organizations can play in altering organizational landscapes by undermining existing organizations and creating opportunities for the growth of new types of organizations. Empirically, we investigate the impact of a variety of tactics employed by the Woman’s Christian Temperance Union (WCTU), the leading organizational representative of the American temperance movement, on two sets of organizations: breweries and soft drink producers. By delegitimating alcohol consumption, altering attitudes and beliefs about drinking, and promoting temperance legislation, the WCTU contributed to brewery failures. These social changes, in turn, created opportunities for entrepreneurs to found organizations producing new kinds of beverages by creating demand for alternative beverages, providing rationales for entrepreneurial action, and increasing the availability of necessary resources.Tolbert13_From_Pabst_to_Pepsi.pdf: 3878 downloads, before Oct. 1, 2020

THE VALUE OF NETWORKS IN ENTERPRISE DEVELOPMENT: CASE STUDIES IN EASTERN EUROPE AND SOUTHEAST ASIA

This study proposes that cooperative efforts in microlending aid economic development and poverty alleviation in transitioning and developing countries by creating networking systems in which people can expand their businesses through working capital and community cooperation. Two field studies are used to validate the authors' claims. The first examines a microfinance cooperative structure in Bulgaria as a means to secure credit, savings, technical support and networking opportunities for cooperative members. The second looks at a cooperative microfinance institution in the Philippines that appears to create greater socio-economic growth for poor entrepreneurs as well as NGO financial viability. Both studies suggest that cooperative microlending leads to high survival rates and success of self-employed entrepreneurs by facilitating social capital through their organizational processes.Micro and small enterprise, cooperative, self-employment, social capital, Eastern Europe, Southeast Asia