A genealogical approach to organizational life chances: the parent-progeny transfer among Silicon Valley law firms, 1946-1996

Administrative Science Quarterly, Sept, 2002 by Damon J. Phillips

Data on Silicon Valley law firms over a 50-year period were used to study the genealogy of organizational populations and its consequences for organizational life chances when a member of an existing firm leaves to found a new firm. Hypotheses and subsequent analysis suggest that the transfer of resources and routines between a parent organization and its progeny decreases life chances for the parent firm and increases life chances for the progeny. The results are contingent on the founder's previous position in the parent firm and time since the parenting event. In addition, I find that progeny have lower life chances when the parent is a failing firm, when there are multiple parents, and when the founder is a former senior partner of a large law firm. *

Organizational sociologists have long considered the effects of the transfer of resources and routines from old to new organizations. The 1980s featured a relatively brief but active line of research that attempted to establish a framework for understanding new organizations as the progeny of parent organizations. Brittain and Freeman (1980) examined factors that lead organizational members to leave and start new organizations. Other scholars, such as McKelvey (1982), Carroll (1984a), Astley (1985), Freeman (1986), Hannan and Freeman (1986), and Romanelli (1989), have continued research in this vein. Each of these studies posited that some amount of a parent organization's "blueprint" would carry over to the new organization through the career experiences of the offspring's founders. Yet, despite this past work, at least two areas remain underdeveloped. First, there has been little formalization linking a genealogical framework with many of the key outcome variables of organizational sociology, such as an org anization's structure, ability to adapt, likelihood of success (e.g., survival, profitability), innovativeness, or the attainment of organizational members. Consequently, scholars have overlooked another possible answer to one of the key questions raised in the past twenty-five years of organizational sociology, "Why do so many organizations look alike?" (Meyer and Rowan, 1977; Hannan and Freeman, 1977). Second, while past efforts have emphasized the source of progeny, there have been few attempts to assess empirically the consequences of transferring resources and routines from parent organizations to their progeny. As a result, there are studies of the types of firms that parent new firms (Brittain and Freeman, 1980) and of the effect of founders' previous affiliations and experiences on new firms' success (e.g., Bruderl, Preisendorfer, and Ziegler, 1992; Burton, Sorensen, and Beckman, 2002) but no bridge between the two.

This paper addresses each of these unexplored areas by developing and testing a framework to understand organizational life chances, one of the key outcomes in organizational sociology. Often associated with population ecology, organizational failure (or, more accurately, survival) lies at the core of many other perspectives, such as the contingency (Lawrence and Lorsch, 1967) and neoinstitutional perspectives (Meyer and Rowan, 1977). Unlike past research on the source of new organizations, this paper constructs a framework for understanding the fate of both parent and progeny organizations by looking at the personnel that leave the parent to found a new firm. I used data on Silicon Valley law firms from 1946 to 1996 to examine how organizational genealogy affects the likelihood of organizational failure. This context enabled me to trace the previous organizational affiliations of a law firm's founders, in order to examine the effects of resource expropriation from firms as they are transferred, through the f ounder, to the new firms they found.

THE PARENT-PROGENY TRANSFER

Organizations often emerge from other organizations (Stinch-combe, 1965a), and a number of studies have focused on the relationship between organizations and their members who leave to found new organizations (Brittain and Freeman, 1986; Freeman, 1986; Hannan and Freeman, 1986; Hannan and Freeman, 1989; see also Romanelli, 1991). This genealogy is significant: organizational founders, as Freeman (1986) emphasized, are constrained by their organizational experiences, and, consequently, the new organizational forms are constrained by the characteristics of the founders' previous organization, population, and employment (Astley, 1985; Hannan and Freeman, 1989; Romanelli, 1989). Thus, progeny are more likely to replicate organizations of a previous generation than are other newly founded organizations. But conceptual and empirical work to test and advance these insights into the parenting event and its consequences is still underdeveloped (see Barnett, 1997, for a partial treatment). The work that has been done f alls into three veins of research: organizational speciation, the interorganizational transfer of routines and resources, and the role of social capital in the success of progeny.