Information Storage Industry Center

When and where will a new organizational form emerge? Recent theory says that as the number of organizations using a particular external identity code first increases beyond a critical minimal level, the code becomes an organizational form. But how is an external identity code established? We assume that the identity code derives from the aggregated identities of individual organizations. Our core argument holds that when the identities of individual organizations are perceptually focused, they will more readily cohere into a distinct collective identity. We develop ideas about how two observable aspects of organizations might generate perceptually focused identities in a common market: (1) de novo entry and (2) agglomeration in a geographic place with a related identity. Using comprehensive data from the market for disk drive arrays, we analyze these ideas and an alternative by estimating effects of different specifications of organizational and product densities on rates of entry and exit for array producers. The findings show that the density of de novo firms affects all (de alio as well as de novo) disk array producers in form-establishing ways: de novo density significantly increases all firm entry and significantly reduces all firm exit. Analyzing densities of certain geographic areas, we also find evidence of faster form development in a place with a related identity and a geographic agglomeration of disk array producers. Finally, we find that joint operation of the two processes, geographic agglomeration of de novo producers in a place with a related identity, serves to enhance form emergence even faster. Overall, the analysis supports the notion that firms with perceptually focused identities aid in establishing an organizational form. It does not show empirical support for a common sense alternative interpretation based on product proliferation.