DEVELOPMENT AND SOCIETY

Volume 39 | Number 2 | December 2010, 233-255

A Typology of Organizational Behavior:

At the Crossroad of Risk and Uncertainty*

Kang Jeong-han | Yonsei University

Han Sang Won | Korea University

Four modes of organizational behavior are proposed by crossing two behavioral

dimensions adopted from organizational ecolog y (iner tia vs. change) and
neoinstitutionalism (normative vs. deviant). Those four modes are innovative (deviant
change), reformative (normative change), conservative (normative inertia), and
reactionary (deviant inertia) modes in the life-cycle of organizational behavior. Also
identified are two distributional characteristics underlying each behavioral dimension: low
risk vs. high risk underlying inertia vs. change, and certainty vs. uncertainty underlying
normative vs. deviant. Through the integration of inertia-conformity and risk-uncertainty
dimensions, hypotheses are generated on how transition to the next mode can be either
promoted or hindered by sociopolitical resources at the organizational level and by
intervention of the state and the civil society at the societal level. The typology and
hypotheses outlined in this paper aim to further theoretical articulation and empirical tests
on the evolutionary dynamics of organizational forms and institutions in the market.

Keywords: Inertia, Conformity, Risk, Uncertainty, Organizational Behavior,

Institutions, Organizational Forms

*We thank Edward O. Laumann for providing valuable comments and two anonymous reviewers
of Development and Society for their constructive criticism. Direct correspondence to Kang
Jeong-han, Department of Sociology, Yonsei University, 134 Sinchon-dong, Seodaemun-gu,
Seoul 120-749, Republic of Korea (Phone: +82-2-2123-5421; Email: jhk55@yonsei.ac.kr)
234 DEVELOPMENT AND SOCIETY, Vol. 39 No. 2, December 2010

Introduction
Population ecology and neoinstitutionalism lead organizational theories
that incorporate organizational environments and view organizational
dynamics at the macro-level. Organizations are either selected by their
environments, according to population ecology (Hannan and Freeman,
1977), or adapted to institutional legitimacy, according to neoinstitutionalism
(DiMaggio and Powell, 1983). Their emphasis on the interdependence
between organizations and institutional environments identifies
organizational form in population ecology or organizational field in
neoinstitutionalism as the primary element in organizational evolution, but
there has not been much research on how organizational forms or fields
change (Meyer, Gaba, and Colwell, 2005). This lack of research concerning
dynamism at the macro-level can be found in each theory.
First, population ecology is largely lacking in empirical research on
population dynamics in spite of its theoretical interest in it. Carroll and
Hannan (2000) theoretically articulated the concept of organizational form,
but most empirical studies focus on the dynamics of individual organizations
within a given industry, population, and form, which is likely in a stable,
rather than in a dynamic environment. In a word, the dynamics of
organizational form is understudied in the literature of population dynamics
(Chiles, Meyer, and Hench, 2004; Singh, 2006: 179). Population ecology did
not theorize the dynamic nature of environments as much as it did for
organizational structures. According to population ecology, the environment
of a particular form is the density of other forms, while those other forms
need to be explained by their own environment. Political factors are hardly
implemented in such environments (Ingram and Simons, 2000), and
population ecology is not able to provide standard research guidelines for
form-dynamics as much as it did for individual dynamics.1 Organizational
environments are theorized in terms of risk and uncertainty, and
sociopolitical factors that can affect risk and uncertainty are explored in this
paper.
Second, neoinstitutionalism theoretically tells a convincing story of how
strong a dominant institution is, as captured by the image of institutional
1
Without doubt, population ecology is correct in arguing that legitimacy is a crucial determinant
for the success of a new organizational form (Hannan and Carroll, 1992; Ruef, 2000). However, the
issue of legitimacy, which is essentially cognitive and symbolic, is much better theorized and
studied in the literature of neoinstitutionalism.
 A Typology of Organizational Behavior 235

iron cage (DiMaggio and Powell, 1983) which is named after Webers
bureaucratic iron cage (Weber, 1970), but it does not provide a comparable
story of how the self-enforcing cycle of an institution can be eventually
broken (Greif and Laitin, 2004). Driving forces for institutional changes of
each case are examined (Haveman, 2000). Empirically, neoinstitutionalism
has been accumulating diverse, interesting case studies but their general
hypotheses have hardly been tested. Explanations tend to be ad-hoc,
depending on the cases, and neoinstitutionalism explains nothing when
trying to explain everything (Haveman, 2000: 478). This paper provides four
evolutionary stages of an institutionalized organizational behavior and infers
how the state and civil society can generally affect transitions between stages.
This paper is also in line with Simons and Ingrams (2003: 613) recommenda-
tion that organizational theorists reengage with theories of the state.
In summary, research on organizational dynamics at the form-level has
been viewed as a fundamental, theoretical, but certainly under-developed,
topic (Chiles, Meyer, and Hench, 2004; Singh, 2006: 179), and the goal of this
paper is to contribute to this topic by proposing a typology on evolutionary
stages of an organizational form. It will become clear that the typology is built
on integrating population ecology and neoinstitutionalism. Subsequently, this
proposed typology is intended to apply to both organizational forms, which
emerge and are sustained through selection processes, and organizational
practices, which emerge and become isomorphic to institutional environ-
ments through adaptive processes. In this regard, this paper is in line with the
weak selection perspective (Singh, 2006: 188-189), where selection and
adaptation are complementary rather than competing forces in evolution
(Ruef, 2004). This typology is applicable to any systematic organizational
behavior that is either imprinted as organizational forms or routinized as
normative practices in organizations. In this sense, the terms behavior,
form, and practice can be commonly referred to as the object of this
typology, behavior. Another reason for using the term behavior for this
typology is because this typology borrows insights from organizational
behavior theories which have been paying great attention to risk and
uncertainty entailed in organizational behavior. This will be discussed later in
detail after clarifying two key organizational behaviors observed by
population ecology and neoinstitutionalism, i.e., inertia and conformity,
respectively.
236 DEVELOPMENT AND SOCIETY, Vol. 39 No. 2, December 2010

Confounding Concepts in Organizational Behavior and

Decision-Making
Inertia and Conformity

In the field of contemporary organizational studies, two similar

organizational behaviors have been studies under two different theories:
inertia (vs. change) in population ecology (e.g., Hannan and Freeman, 1989;
Miller and Chen, 1994) and conformity (vs. deviance) in neoinstitutionalism
(e.g., Meyer and Rowan, 1977; Phillips and Zuckerman, 2001).
Organizational inertia is acquired through a selection process in an
organizational population (Hannan and Freeman, 1989: 67-77). It is
analogous to biological inertia imprinted in an organic body, which hinders
adaptation to environmental changes, resulting in the failure of adaptive
survival and ultimately of evolving into a new population (Hannan and
Freeman, 1977).
In comparison, conformity is an adaptive behavior in pursuit of
legitimacy, which is often ritually settled (Meyer and Rowan, 1977) and
achieves institutional isomorphism among different organizations (DiMaggio
and Powell, 1983). In other words, conformity assumes certain social norms
in an organizational field that presume most organizations in the field to
observe (see Scott, 2008). Observing norms brings legitimacy, which is a key
resource for organizational success. When an organizational form is
examined, whether the form is an outcome of selection and inertia or that of
adaptation and conformity actually depends considerably on the researchers
theoretical perspectives.
Figure 1 shows four possible combinations of organizational behavior
derived from a cross-table of the two theoretical approaches under discussion
here. As the cross-tabulation shows, both inertia and change can be either
normative or deviant. However, inertia often associates with conformity and
change with deviance both theoretically and empirically. Hannan and
Freeman (1989), in their theoretical elaboration of why selection favors
inertia, provide legitimacy pressure as an important cause for inertia
(Hannan and Freeman, 1989: 67-77), which clearly implies that inertia
theoretically intersects with conformity. In addition, some empirical studies
often combine organizational ecology and neoinstitutionalism to explain
organizational behavior at the intersection (e.g., Dobrev, 2005; Haveman,
1993; Lune and Martinez, 1999). Those intersecting behaviors will fall in the
 A Typology of Organizational Behavior 237

Population ecology
Inertia Change
Normative (1) (3)
Neoinstitutionalism
Deviant (4) (2)
Figure 1. Four Modes of Organizational Behavior.

shaded diagonal positions in Figure 1 (i.e., normative inertia or deviant

change).
Then, how much attention have researchers been paying to the non-
intersecting or off-diagonal positions such as deviant inertia and normative
change? In fact, normative change has been a central research topic among
neoinstitutionalistic studies: any study about institutionalization or about
later adopters driven by legitimacy pressure, by definition, examines
normative change (e.g., Davis and Greve, 1997; Haveman, 1993; Hirsch, 1986;
Tolbert and Zucker, 1983). In comparison to normative change, deviant
inertia has not been studied much. In fact, deviant inertia is the other side of
normative change because inertia is deviant when change is a norm. Further
elaboration will be made later on deviant inertia most likely being observed
in a disappearing population or in the process of deinstitutionalization.
In sum, most forms of organizational behavior in Figure 1 have been
actively studied but not theoretically clarified with respect to their
differences, similarities, and relations. Inertia and conformity are often
viewed indiscriminately. Provided below is a theoretical typology of four
forms of organizational behavior derived from a combination of
organizational ecology and neoinstitutionalism. In order to develop this
typology, two concepts, risk and uncertainty, that are mutually related to
organizational decision-making as much as inertia and conformity.

Risk and Uncertainty

Discussion on risk and uncertainty is restricted to the outcome

distribution of goal-oriented behavior. The relation between risk and
uncertainty is well noticed by Knight (1921) and best summarized by March
and his colleagues from an organizational perspective: High-risk behavior
implies high variance in the distribution of its outcome (March, 1988; March
and Shapira, 1987) and, consequently, high probability of failure. Without
238 DEVELOPMENT AND SOCIETY, Vol. 39 No. 2, December 2010

doubt, the level of risk entailed in one particular behavior is also affected by
the mean of its outcome distribution as well as by its variance. However, if
that behavior is risky because its expected outcome is close to failure, the
behavior automatically has low probability of success, and there is no reason
to take this type of risk in decision-making. Risks are worth taking only when
the probability of success is reasonably high. Therefore, risks caused by the
average expected outcome that is close to failures will be ignored in this
study, and the focus will be limited to risks caused by the large variance of
outcome distribution.
In comparison to high risk, high uncertainty implies unknown distribu-
tion of outcome (March and Simon, 1970: 93), i.e., the mean, variance, and
other key parameters of an outcome distribution are not known. Therefore,
the risk of a certain behavior under high uncertainty cannot be properly
assessed because variance of distribution cannot be calculated if the
distribution itself is not known. While risk-taking is a rational behavior given
correct information on alternative outcomes, uncertainty or incorrect
information enforces a search for satisficing rather than optimal behavior
(March and Simon, 1970: 93-102).
In sum, certainty is a prerequisite to the choice between risk-taking and
risk-averse behavior. Discussing behavioral risk under uncertainty does not
make sense. But, if the scope of uncertainty is limited to an unknown mean
of an outcome in combination with its known variance, different levels of
risks are conceivable under uncertainty. Under this limited scope of
uncertainty, a decision-maker knows that the outcome of a risk-averse
behavior will be close to the mean outcome regardless of whether the mean
outcome is close to success or failure. In sum, there are four possible
combinations of behavior with different levels of risk under different levels of
uncertainty as can be seen in Figure 2.
Like in Figure 1, the two diagonally shaded combinations in Figure 2 are
likely to be viewed indiscriminately. For example, do entrepreneurs bet on
uncertainty or take risks? They do not take risks but essentially bet on

(1) (3) Low

Uncertainty
(4) (2) High
Low High
Risk
Figure 2. Four Conditions in Decision-Making.
 A Typology of Organizational Behavior 239

uncertainty, according to a classic specification by Knight (1921).

Entrepreneurs explore unknown territories. In comparison, contemporary
venture capitalists, who are often considered to be exploring uncertain
territories, actually avoid uncertainty and take risks at best (Zider, 1998). It
may be summarized that venture investments have evolved from taking
uncertain entrepreneurial behavior to risk-taking financial strategies.
Then, what about off-diagonal forms, risk-aversion under highly
uncertain mean outcome, and risk-taking under low uncertainty? In fact,
risk-taking under low uncertainty should be expected in rational decision-
making but is actually hindered by human tendency for loss aversion, the
implications of which have been actively studied (Benartzi and Thaler, 1995;
Gneezy and Potters, 1997; Thaler et al., 1997). By contrast, we know little
about risk-aversion under high uncertainty. As deviant inertia is less
observed and understood than normative change, risk-aversion under high
uncertainty is paid much less attention than risk-taking under low
uncertainty. Is there any link between deviant inertia and risk-aversion under
high uncertainty? The typology of organizational behavior hypothesized in
this paper provides an answer to this question. Before viewing this typology, a
mathematical expression of risk and uncertainty is briefly introduced.

A Mathematical Formalization of Risk and Uncertainty

Mathematical definitions of risk and uncertainty are specified here

because this paper aims to provide not only a rigorous, but also a practical,
typology which can guide empirical research. For this mathematical
formalization, assume the outcome of an organizational behavior as a
random variable X with its distribution function f. For convenience, it can be
further assumed that larger values of X represent more successful outcomes.
Then, E(X), or the expected value of X, measures how successful the behavior
is on average. However, E(X) does not reveal anything about the variability of
the outcome. Does the behavior yield consistent outcome around E(X) or
show oscillating patterns between large successes and large failures? Var(X),
or the variance of X, captures how much the outcome distribution spreads
(Ross, 2002). In this way, the very concept of the variance is associated with
the level of risk. In finance, variance or a rooted variance (i.e., standard
deviation) is used to represent the risk associated with a given security or the
risk of a portfolio of securities (Ross, Westerfield, and Jaffe, 2005: 261-265).
The basic idea is that the variance is a measure of risk or volatility associated
with the outcome of a strategic choice. And this idea can be extended to
240 DEVELOPMENT AND SOCIETY, Vol. 39 No. 2, December 2010

performance-related outcomes of any organizational forms, routines, and

practices. That is, the more a forms outcomes vary from the average
outcome, the more risky and volatile an organizational form.
In general, the operational concept of risk requires true and
unchangeable or at least robust objective distribution, say, N(, 2) where =
E(X) and 2 = Var(X)2. In other words, firms know the distribution that yields
outcomes (Alvarez and Parker, 2009). Unlike risk, firms may be unable to
assign probabilities under uncertainty and also be unable to assess the full
range of possible outcomes. When a firms environment is uncertain, few
decisions yield fully predictable outcome (Lieberman and Asaba, 2006). In a
statistical manner, firms are not certain about = E(X) and 2 = Var(X), let
alone its distribution function f. Even in case of a limited scope of
uncertainty, as shown above, firms are often ignorant of possible future
outcome (Shackle, 1972; 1979). Under this situation, firms will try to estimate
the expected outcome with data x = (x1, x2, ..., xn) available to them. The
n
best-known estimate of , for example, is X = i=1(xi/n), where the variance of

the sample mean Var(X) is given by 2/n by the central limit theorem (CLT)
(Casella and Berger, 2002: 236-238). The CLT, in crude terms, states that the
sum of a large number of independent and identical random variables has
normal distribution, whose mean has the decreasing variance as the sample
size increases. This decreasing variance with a larger sample size implies
decreasing uncertainty and more information. Generally denoting an

estimate of by ^, this example of X is when ^ = X, and thus, Var(^) = Var(X).
The level of uncertainty can be generally formulated by Var(^).

In summary, when an outcome X of organizational behavior is a random

variable with E(X) = , the risk of the behavior is Var(X) while its
uncertainty is Var(^).

Suppose that this mathematical definition is applied to estimating the

effect of having a research and development (R&D) department on a firms
revenue. In this case, organizational behavior of interest is having a R&D
department, and its outcome X is the firms revenue. Collecting revenue
statistics x = (x1, x2, ..., xn) for firms with a R&D department and estimating
its variance 2 = Var(X) will yield the degree of risk involved in those firms
having a R&D department.
n
At the same time, calculating its mean X = i=1(xi/n) shows the average

2
Normal distribution is assumed for the sake of expositional clarity.
 A Typology of Organizational Behavior 241

revenue of the surveyed firms with an R&D department. By comparing this

mean to the mean revenue of comparable firms without an R&D department,
an answer can be provided as to whether having an R&D department at a
firm improves revenue or not. Suppose that there are other studies that could
explain how an R&D department improves a firms revenue. If those studies,
including this one, do not show agreement but yield contradictory findings,
this implies a high variance in the estimated effect of R&D, or high value on

Var(X). This means high uncertainty involved in having an R&D department.
Alternatively, suppose that senior managers in various firms are surveyed and
asked if they think R&D improves a firms revenue. If their answers do not
agree but reveal high variability, it can be inferred that an R&D department as
an organizational form or practice entails high uncertainty.
For example, academic studies on total quality management (TQM) did
not show consistent findings on performance (Powell, 1995). TQM advocates
claim that TQM is widely acknowledged to be one of the most important
organizational innovations in that it enhances the quality of products and
services, reduces costs, and satisfies both customers and employees, leading
to improved organizational effectiveness (Easton and Jarrell, 1998; Hackman
and Wageman, 1995; Walton, 1986). On the contrary, its opponents suggest
that a considerable number of firms tried to implement TQM, but actual
performance increase did not materialize (Schaffer and Thompson, 1992).
Inferring from divergent research results between these two lines of research,
risk-uncertainty function for TQM adoption can be specified. For instance,
the relationship between the decline in TQMs popularity measured by the
yearly counts of TQM articles and inconclusive evidence for its effectiveness
can be interpreted in terms of high uncertainty involved in adopting TQM
practices (Jung, 2008). On the other hand, risk mitigation of TQM practices
for a given firm is undertaken by allowing trial-and-error for customizing
quality practices to the unique problems and opportunities faced by that
particular organization, which leads to lower levels of risk or, namely, smaller
values for 2 = Var(X) (Westphal, Gulati, and Shortell, 1997).

Typology: Conservative, Innovative, Reformative, and

Reactionary Behavior
Four modes of organizational behavior are proposed by overlapping two
tabulations: inertia-conformity tabulation (i.e., Figure 1) and risk-uncertainty
tabulation (Figure 2). This overlap is based on (1) match between normative
242 DEVELOPMENT AND SOCIETY, Vol. 39 No. 2, December 2010

Matter of Experience
Inertia Change
Low
Information

Normative Conservative Reformative

Matter of

Uncertainty
Deviant Reactionary Innovative High

Low High
Risk
Figure 3. A Typology of Organizational Behavior.

versus deviant behavior and low versus high uncertainty, and (2) match
between inertia versus change and low versus high risk.
First, by definition, normative behavior implies statistically modal (i.e.,
frequent) behavior because norms are observed or followed by the majority
of society. Therefore, the outcome distribution of a normative behavior is
much better known than that of deviant behavior due to its larger number of
observations, regardless of large or small variance in the distribution. By
contrast, there are fewer cases of deviant behavior, with unknown possible
outcomes or the likelihood of respective outcomes. Therefore, deviant
behavior is characterized by uncertainty. It is, in other words, a matter
concerning outcomes and their likelihoods of a specific behavior. There is
high uncertainty in deviant behavior (i.e., lack of information on the
behavior) while reduced levels of uncertainty is implied in normative
behavior (i.e., more information on the outcome distributions).
Second, inertia vs. change corresponds to low vs. high risk. Doing what
has been done repeatedly (inertia) increases accountability of processes and
reliability of an outcome (Hannan and Freeman, 1989: 72-73). Reliability
means low variance by definition: inertia guarantees smaller variance in
outcome or lower levels of risk than does change. In addition, accountability
of inertia means that the decision-maker has a better sense of why a specific
behavior results in a specific outcome in repeated trials.3 This accountability,
in combination with reliability, requires that organizational structures be
highly reproducible (Hannan and Freeman, 1989: 75). Inertia fine-tunes
organizational forms and routines through the cycle of variation-selection-
retention (Miner, 1994). In summary, inertia vs. change is a matter of
3
Such an account does not necessarily reveal a true causal relationship.
 A Typology of Organizational Behavior 243

experience, whereas normative vs. deviant behavior is a matter of information.

Becoming inert implies increased reliability and accountability, whereas
becoming normative implies reduced uncertainty.
Informed by these matches between conformity and certainty and
between inertia and low risk, we can name four forms of organizational
behavior in the market. First, when an organization changes its behavior to
follow others popular behavior, it cannot predict its own outcome if the
organization has never experienced it before or its been too long since the
event. This behavior represents normative change or reformative behavior
in Figure 3. It is reformative because it tries something new but is not truly
innovative because it follows known paths whose outcome is reasonably
predictable with minor variances. Deviant change can be truly called
innovative behavior whose outcome is, with few precedents, truly
unknown. At the diagonal opposite to innovative behavior, normative inertia,
or conservative behavior, represents constant agreement with the majority,
whose outcome becomes most certain with least variability through repeated
trials. Deviant inertia, or reactionary behavior, is positioned at diagonal
opposite to reformative behavior.
In order to understand reactionary behavior better, imagine an example
of market value of a product as an outcome of the product market. In
addition, suppose that many producers are leaving the market because the
market is no longer seen as lucrative. A producer sticking to its production is
now uncertain of a new expected market value of his/her product due to
increased environmental uncertainty (e.g., scarcer but less popular product
now). Its realized market value, however, will be close to the new average
value, whatever the average value is, because the firm has been routinely
producing a reliable product with quality. In this sense, the producer is risk-
averse and involuntarily taking uncertain risks on a new expected market
value for the product.
Deviant inertia is reactionary because behavior adheres to an ongoing
trend or repeated pattern when most others choose to change. Inertia is no
longer normative, but rather, change is a norm. Such a normative change is
reformative in our typology. In sum, when one behavior is reactionary and
de-institutionalized, it necessitates the emergence of another behavior as
reformative and institutionalized. A once-dominant organizational form or
strategy is replaced by another.
244 DEVELOPMENT AND SOCIETY, Vol. 39 No. 2, December 2010

The Dynamics of Organizational Forms and Institutions

In this paper, four modes of organizational behavior are proposed based
on integrating organizational ecology and neoinstitutionalism. The major
driving motivation of the typology is, as stated earlier in this paper, the
guiding macro-level research on organizational dynamics based on
integrating two leading sociological organization theories. In other words,
typology is designed to apply to both the evolution of organizational forms,
which has been the major theoretical topic without successful empirical
results in organizational ecology, and the rise and fall of organizational
practices and institutions resulting in the accumulation of diverse empirical
case studies without testable hypotheses in neoinstitutionalism. Broadly
speaking, the goal of this paper is to propose four dynamic stages of
organizational behavior without regard to whether those behaviors are
identified as organizational forms or institutionalized practices.
A form or practice starts as an innovative behavior. Once the innovative
behavior is regarded as successful, its uncertainty is lowered, and the behavior
is diffused to and implanted in other organizations. The behavior is now at its
reformative stage. When the implantation is finely tuned and routinized by
repeated trials to obtain a reliable outcome, the behavior is established as a
conservative organizational form. If the forms effectiveness declines due to
increased environmental uncertainty, the form will remain or die as
reactionary inertia. The birth of an organizational form as an innovative
behavior, its growth to a reformative stage, mature peak at a conservative
stage, and final decline to a reactionary status resembles a lifecycle of a
biological individual. In Figure 3, the lifecycle starts at innovative, rotates
counterclockwise to reformative and then to conservative, and finally ends at
reactionary stage.
Various studies in organizational literature then can be classified
according to typology, and holes can be found in the literature. For example,
studies on founding and disbanding rates within a given population seem to
be limited to the equilibrium or conservative stage of a population. Those
studies examine the dynamics of individual organizations and not the
dynamics of populations. This is contrary to Hannan and Freemans early
ambition for population dynamics (see Hannan and Freeman, 1989: preface).
The determinants of founding and disbanding rates at earlier or later stages
may be worth examining. More importantly, more research should be
conducted on transition from one stage to the next stage and evolution from
 A Typology of Organizational Behavior 245

one form to another at the macro-level. Recent efforts to examine inter-form

relationships are notable in this regard (Ingram and Simons, 2000;
Schneiberg, 2007).
If research on organizational ecology tends to be concentrated on the
conservative stage of an organizational form, then institutional studies on
diffusion will most likely be limited to the reformative stage when legitimacy
pressure is at its peak. It is important to know why some innovations fail
while others settle as institutions (Abrahamson, 1991) and how institutions
finally lose their legitimacy and fall into the reactionary stage (Davis,
Diekmann, and Tinsley, 1994). The next step is generating research
propositions concerning those transition mechanisms from one mode of
form or institution to the next mode in this typology.

Market Conditions and Transitions

What kinds of organizations drive transitions of organizational forms

and practices can be inferred by reviewing various organizational theories. In
Figure 3, transition from the innovative stage to the reformative stage is
enabled by the reduction of uncertainty or gathering of information. Network
scholars have shown that social relationships evolving from transactions play
significant roles in reducing uncertainty in the pursuit of profits (Podolny,
2001; Sorenson and Stuart, 2001; Uzzi, 1996, 1997). At the same time,
institutional economists observe that the most important function of
institutions in a market system is reduction of uncertainty in the exchange
(North, 1991a) or transaction cost (Williamson, 1981). Organizational
scholars from neoinstitutionalism further argue that the process of being
institutionalized is the process of gaining legitimacy (Meyer and Rowan,
1977), which is enabled by political efforts of institutional entrepreneurs
(Haveman and Rao, 1997) and social activists efforts to build the social
identity of an innovation (Carroll and Swaminathan, 2000; Greve, Pozner,
and Rao, 2006; Rao, Monin, and Durand, 2003). Generally speaking,
reducing uncertainty and gaining legitimacy requires sociopolitical efforts by
organizations with rich social capital that can assess the outcome of an
innovation without much cost and by organizations with rich political capital
that can influence others to adopt the same innovation and actively
institutionalize the innovation as a legitimate practice.
If a transition to the reformative stage is mainly driven by sociopolitical
efforts of institutionalization, the next transition to the conservative stage will
be mainly driven by market competition. This is because reducing risks by
246 DEVELOPMENT AND SOCIETY, Vol. 39 No. 2, December 2010

reliable and accountable production is achieved by a selection mechanism

under competitive pressure (Hannan and Freeman, 1989). A form or practice
will be fine-tuned through repeated cycles of variation-selection-retention in
pursuit of optimal production (Miner, 1994) and may arrive at the fittest
form during the conservative stage. In short, transition to the conservative
stage is mainly driven by efficiency-driven organizations under high
competitive pressure.
Transition to the reactionary stage, either by the demise of an
organizational form or by deinstitutionalization, is studied less than other
transitions. A few exceptional efforts (e.g., Ruef, 2004; Scott et al., 2000),
however, suggest that both the external emergence of competing
organizational forms and internal organizational decision-making affect the
decline of organizational forms. Although more research and evidence need
to be collected, it is roughly predicted that organizations with information
disadvantage are less likely to detect increased environmental uncertainty,
less likely to have resources for organizational changes, and eventually more
likely to be inert while other organizations make reformative changes toward
emerging, competitive strategies. Recalling social and political capitals as the
source of information advantages, those reactionary organizations are likely
lacking in political power and social networks necessary for information and
influence due to information disadvantage. Summarizing sequential
transitions from innovative to reformative, to conservative, and finally to
reactionary stages, the first proposition is reached as follows.

Proposition 1: Transition to the reformative stage is mainly attributable to

organizations with high political and social capitals which enable
information advantages and legitimacy; transition to the conservative stage
is attributable to organizations under high competitive pressure which
accelerates selection processes; and finally, transition to the reactionary
stage is attributable to organizations with low political and social capitals
lacking information advantage and influence.

Larger Society and Transition

Due to the fact that the market is embedded in the larger society
(Polanyi, 1944), societal factors that can affect the dynamics of organizational
forms in the market must be taken into consideration, with particular focus
on the state and the civil society that interact with the market. North (1981,
1991b) points out that the state shapes the actors incentive structure in the
 A Typology of Organizational Behavior 247

market by setting regulatory market institutions. This is one major way in

which the state lowers market uncertainty. On the other hand, economic
actors in the market pursue not only competitive advantages but also political
rent as the source of economic revenue (Baumol, 1990). When the state
establishes new rules of the game in the market and some innovative
organizational forms actively respond to the new rules through political rent-
seeking, market uncertainty will be lowered in favor of those organizational
forms (Fligstein, 1990, 2002). In short, strong market interventions by the
state help some organizational forms develop to the reformative stage by
political rent-seeking.
While a strong state may help reduce market uncertainty in ways that
favor certain organizational forms to develop to the reformative stage, it is
likely to hinder transition to the following stage. When an organizational
form survives mainly through political advantages, not by competitive
advantages, it is unlikely to develop into a fine-tuned form that produces
highly reliable outcomes. The form will survive anyhow without optimal
productions with politically supported by the state. The state may have
incentives to favor one organizational form over another. In short, a strong
state weakens the selection processes in the market and allows the survival of
less reliable forms.
Through similar means, a strong state may hinder transition from the
conservative to the reactionary stage. When a state has a strong interest in
keeping dominant organizations at the conservative stage, it will protect them
from environmental shocks and uncertainty while discouraging the
emergence of alternative forms. Dominant organizations will lobby the state
to modify legal institutions in order to shield their cores and routines from
environmental changes. These mutual interactions will hinder the emergence
of alternative forms and extend the conservative stage of dominant forms,
even if the dominant forms are no longer effective in changing the
environment. In sum, a strong state either helps or hinders transitions,
depending on the stages.

Proposition 2. The stronger the state, the faster the transition to the
reformative stage, but the slower the transition to the conservative and
reactionary stages.

The role of civil society concerns information costs in the market. There
have been numerous studies showing how civil society enhances information
democracy and economic justice in the market (see Hague and Loader,
248 DEVELOPMENT AND SOCIETY, Vol. 39 No. 2, December 2010

1999). Information democracy lowers information costs by making market

information readily available to decision-makers. When decision-makers are
producers, lowered information costs will enable them to collect information
on success and failure of various strategies, adopt effective innovations, and
throw away ineffective inertia (Scott and Davis, 2007: 293; Zuboff, 1988: 9).
In short, the strong civil society helps transitions to the reformative, and later
to the reactionary, stage. When decision-makers are consumers, the civil
society provides consumers with better information on which producers are
more reliable and dependable. Less reliable forms and practices will be
consequently selected out of the market by consumers choices. In short, the
strong civil society helps a transition to the conservative stage. Therefore, the
strong civil society helps all the transitions and will eventually shorten the
lifespan of an organizational form.

Proposition 3. The stronger the civil society, the stronger the information-
democracy and the shorter the lifecycle of organizational forms and
practices.

Applications and Limitations

The typology discussed in this paper is not designed to describe perfect
organizational forms. Rather, the typology mentioned is intended to play
paradigmatic roles for identifying a gap in research and for pursuing studies
on the evolutionary dynamics of organizational forms and institutions. The
dynamism at the macro-level has been announced as top priority by
organizational theories but rarely met the expectation both in organizational
ecology and in neoinstitutionalism. To achieve this goal, four modes of
organizational behavior are proposed here by crossing two behavioral
dimensions adopted from organizational ecology (inertia vs. change) and
neoinstitutionalism (normative vs. deviant) in the order of the lifecycle of an
organizational form: innovative (deviant change), reformative (normative
change), conservative (normative inertia), and reactionary (deviant inertia).
In other words, the four modes do not imply four distinctive organizational
behaviors, but rather, four dynamic stages of one behavior or form.
This paper also identified two distinctive characteristics of the outcome
distributions underlying the two dimensions of behavior: low-risk vs. high-
risk underlying inertia vs. change, and low-uncertainty vs. high-uncertainty
underlying normative vs. deviant. These distributional characteristics
 A Typology of Organizational Behavior 249

clarified that transition from the innovative to the reformative stage is

associated with decreasing uncertainty, transition to the conservative stage
with decreasing risks, and transition to the reactionary stage with increased
uncertainty.
It is important to note that increases and decreases in uncertainty and
risk entailed in organizational forms are not simply a technical matter but
determined considerably by sociopolitical factors, and the sociopolitical
factors that can affect information costs and competitive pressure in the
market have been explored and several propositions proposed on the
transitional mechanisms from one mode to the next mode of organizational
behavior. Specified in those propositions are how each transition can be
either promoted or hindered by sociopolitical resources at the organizational
level and by the state and the civil society at the societal level. Those
propositions are neither exhaustive nor empirically true yet. Further
theoretical explorations and empirical tests are required to clarify the
evolutionary dynamics of organizational forms and institutions in the
market.
Although the typology described in this paper does not aim to cover all
possible modes of organizational behavior, one important missing mode
could be ritual behavior. Merton (1957) identified ritualism as a major mode
of adaptation in his typology of individual adaptation. As is presented in
Figure 4, ritualistic behavior observes institutionalized procedures but the
behavior does not necessarily have a goal. It was specified at the beginning of
this paper that this paper is interested in goal-oriented organizational
behaviors and, therefore, may not be bothered by ritualistic behaviors in
Mertons typology for human adaptation. Long ago, however, neoinstitu-
tionalism noticed the ritualistic characteristic of many organizational
practices in an aimless pursuit of legitimacy (Meyer, 1977; Meyer and Rowan,
1977). This ritualism is often suggested as the cause of perpetuating an
institution in spite of its questionable effectiveness. In sum, ritual organiza-
tional behaviors could be a significant stage during the lifecycle of an

Cultural Goals
+

Institutionalized + Ritualism Conformity

Means Retreatism Innovation
Figure 4. Mertons Modes of Individual Adaptation.
250 DEVELOPMENT AND SOCIETY, Vol. 39 No. 2, December 2010

organizational form but is currently ignored in the above typology. A ritual

stage might be positioned between the reformative and the conservative
stages or between the conservative and the reactionary stages.
It should also be clarified that not all organizational forms pass the four
stages in sequential order during their lifecycles. It is needless to say that most
organizational experiments die at the innovative stage without progressing
further. Some business fads and fashions (Strang and Macy, 2001) could skip
the reformative stage, suddenly dominate a market at the conservative stage
for a short period of time, and rapidly disappear without the reactionary
period. These trajectories, marginalized in the typology here, might be better
examined by other typologies (see Abrahamson 1991, for an example). It is
also informative that the selective attention of decision-makers play an
important role in diffusing not necessarily superior innovations (Denrell,
2005; Denrell and Kovcs, 2008; Denrell and March, 2001; Strang and Macy,
2001). Roughly speaking, accelerating and skipping transitions between
stages may be affected by how decision-makers correctly or erroneously
estimate the risks and uncertainties entailed in strategic choices. Due to the
fact that this paper provided a measurable formalization of risk and
uncertainty, it could be a promising approach to examining implications
between objective levels of risk and uncertainty and subjective estimations of
them.

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KANG JEONG-HAN is Assistant Professor of Sociology at Yonsei University. His

research areas cover organizations and institutions, mathematical sociology, health
and aging, and information sociology. His recent publications appeared in
Administrative Science Quarterly, Sociological Methods and Research, and Journal of
Gerontology: Social Sciences. Address: Department of Sociology, Yonsei University,
134 Shinchon-dong, Seodaemun-gu, Seoul, 120-749, Korea [Email: jkan9130@gmail.
com]

HAN SANG WON is an M.A. candidate in sociology at Korea University. His

research interests include organizational theory, economic sociology, collective action
and social movements, and Bayesian methods. Address: Department of Sociology,
Korea University, Anam-Dong, Seongbuk-Gu, Seoul, 136-701, Korea [Email:
ajagajaigija@hanmail.net]
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