Density Dependence Versus Population Dynamics: An Ecological Study of Failings in the California Wine Industry

Abstract

In this ecological study we show that the particular curvilinear formulation of the relationship between density and the failing rate of organizations proposed by Hannan and Freeman does not hold for the California wine industry between 1940 and 1985. We demonstrate instead that an alternative model focusing on prior foundings and prior failings gives a superior account of the failing rate in this population. We argue that Hannan and Freeman's density-dependent model of organizational mortality systematically overstates the negative effects of illegitimacy on business organizations. We argue further that their model underestimates business organizations' ability to avoid elimination by migrating to neighboring niches and by enlarging their initial niche.