Properties of Emerging OrganizationsAuthor(s): Jerome Katz and William B. GartnerReviewed work(s):Source: The Academy of Management Review, Vol. 13, No. 3 (Jul., 1988), pp. 429-441Published by: Academy of ManagementStable URL: http://www.jstor.org/stable/258090 .Accessed: 18/01/2012 13:14

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0 Academy of Management Review, 1988, Vol. 13, No. 3, 429-441.

Properties of Emerging Organizations JEROME KATZ

Saint Louis University WILLIAM B. GARTNER Georgetown University

This article explores the characteristics of emerging organizations and suggests that emerging organizations can be identified by four properties: intentionality, resources, boundary, and exchange. These properties are defined and discussed. Suggestions are made for se- lecting samples for research on emerging organizations. Implications for research and theory on new and emerging organizations are discussed.

Two important concerns regarding research on new organizations have not been adequately addressed: how and why samples of new orga- nizations are identified and selected. Studies of new organizations confront the researcher with the difficult problem of identifying the essential properties by which organizations make them- selves known. The irony is that when we turn to the literature for guidance on how to identify new organizations, our theories and definitions about organizations assume that they already exist; that is, the starting point for our theories begins at the place where the emerging organi- zation ends. Our goal is to probe the interaction between entrepreneurship and organization the- ory to generate an understanding of the proper- ties of emerging organizations and to offer possi- ble avenues for further research.

The challenge of research on new organiza- tions is to move toward studying organizations- in-creation, not just retrospectively studying organizations that exist (Aldrich, Rosen, & Woodward, 1986, 1987). Identifying the proper- ties of emerging organizations gives researchers a framework for distinguishing the different ways in which the organization creation process might occur as well as a way of organizing the search for organizations-in-creation.

The focus on properties of emerging organiza- tions permits us to study emerging organizations as a natural extension, linked by common vari- ables, to studies of existing organizations. Through such efforts, we hope that research on entrepreneurship can be better linked to organi- zation theory, particularly work on new organi- zations, organizational stages, and innovation.

This article seeks to answer the questions: What is an organization and what properties does it possess as it comes into existence? Emerging or- ganizations are organizations-in-creation, that is, organizations at the stage in which all proper- ties necessary to be an organization come to- gether. Studying the emerging organization, therefore, explores the territory between the preorganization and the new organization.

Samples of convenience are used for most re- search on new organizations. This may be due to the difficulty of finding new organizations, but it also may reflect a lack of theory to guide re- searchers to a starting point for developing sam- pling frames. It is questionable whether these samples of convenience (which often include spin-offs of divisions from existing organizations, mergers and consolidations, and organizations that move to new locations) can be defined as representative of the population of new organi-

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zations. For example, samples based on new incorporations are unlikely to be representative of the population of new organizations because these include organizations founded as sole pro- prietorships and partnerships many years be- fore incorporation (Birch & MacCracken, 1981). We contend that population ecology- and entre- preneurship-based studies of new organizations could be dramatically altered if sampling frames were developed that identified "newer" new organizations. Because we recognize the inextri- cable link between theory and method (Kuhn, 1970), the remainder of this article provides the- ory about emerging organizations as well as strategies for identifying them.

Properties of Emerging Organizations

Definitions of organizations pose serious prob- lems for researchers who attempt to identify the characteristics of emerging organizations. Many theories include complex properties that occur only after organizations achieve some particular size (Etzioni, 1964; March & Simon, 1958; Miles, 1980; Scott, 1964; Udy, 1958). Definitions based on bureaucracy (such as Blau, Heydebrand, & Stauffer's [1966] small bureaucracies, Mintz- berg's [1979] simple structure, and Jaques' [1976] stratum-2 and stratum-3 bureaucracies) include organizations with more than one person, levels of hierarchy, and a division of labor. Simi- larly, definitions based on social organizations (Barnard, 1938; Blau & Scott, 1962; Bonjean, 1966; Nelson, 1968) include organizations with two or more people, thereby excluding smaller entities such as one-person or psuedo-organizations (Star, 1979).

Definitions of organizations tend to focus on the characteristics of organizations from either a structural or a process viewpoint (Hall, 1977). Structuralists, such as Weber (1947) and Blau et al. (1966), focus on the structural attributes (span of control, hierarchy, etc.) of the organiza- tion, whereas process theorists, such as Weick (1979), Sarason (1972), and Aldefer (1977), focus on the processes (often cognitive) used by indi- viduals or groups to define the existence of the

organization. Also, there are other viewpoints that combine both structural and process ideas (Brittain & Freeman, 1980; Carroll & Mayer, 1985; Georgopoulus, 1972; Hall, 1977; Hunt, 1972; Katz & Kahn, 1978; Kimberly, 1980; March & Simon, 1958; McKelvey, 1980; Miller, 1978; Mintzberg, 1979; Thompson, 1967; Van de Ven, 1980a).

Most traditional researchers of entrepreneur- ship (Collins & Moore, 1964; Cooper & Dunkel- burg, 1981; Mayer & Goldstein, 1961; McCelland & Winter, 1969; Vesper, 1980) do not define orga- nizations in organization theory terms. Instead, these researchers are likely to identify types of organizations, such as manufacturing, retailing, and so forth.

We contend that midrange definitions that en- compass both process and structural viewpoints are the most useful for identifying the character- istics of emerging organizations. In particular, we find McKelvey's definition very useful for identifying emerging organization properties: An organization is a "myopically purposeful [boundary-maintaining] activity system contain- ing one or more conditionally autonomous myo- pically purposeful subsystems having input- output resource ratios fostering survival in environments imposing particular constraints" (1980, p. 115).

This definition was chosen for a number of reasons. First, it is well grounded in theory: McKelvey elegantly assimilates both process and structural characteristics from many previous theories. Second, this definition considers the dy- namism of organizations as an essential focus of study. Third, the ecological perspective on which this definition is based has led to significant research on new organizations (Delacroix & Carroll, 1983; Hannan & Freeman, 1987; Singh, Tucker, & House, 1986). Finally, McKelvey's fo- cus on organizational form (particularly varia- tion in organizational forms) and his search for taxonomic characteristics of organizations fits our interest in identifying the properties of emerging organizations.

Organizations emerge from the interaction of agents (individuals, partners, groups, parent organizations, etc.) and the environment. This

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particular type of interaction is unusual because it reflects a synergy (Lewin, 1936; Maier, 1963) of agent and environmental connections. In more recent form, the outcome of the synergy has been called emergent properties by Katz and Kahn (1978). This concept inspired the identification of properties of emerging organizations outlined below.

McKelvey's definition illustrates four major properties of organizations (including those orga- nizations in the process of creation): intentionality, resources, boundaries, and exchange. These properties, which have both structural (resources and boundaries) and process (intentionality and exchange) characteristics, are the minimum nec- essary for identifying the existence of an organi- zation. Also, these properties are reflected across organization theories, especially across systems- oriented theories. The following sections relate each of these properties to corresponding ideas in the entrepreneurship and organization theory literature and offer suggestions for how these properties might be studied further.

Intentionality

In the organization theory literature, the word intention is derived from the works of process and cognitively oriented theorists (Aldefer, 1977; Sarason, 1972; Shapero, 1975; Weick, 1979) who focus on intentional factors, such as sense mak- ing, organizing, and enacting realities. Their ideas are the least restrictive examples of inten- tion because they use post hoc intention as well as prior intention and focus on goals directly re- lated to individual or group cognitive homeo- stasis, rather than higher order and more exter- nalized goals.

We see organizational intentioncality as a la- bel describing an agent's seeking information that can be applied toward achieving the goal of creating a new organization; McKelvey said it another way: organizations are "myopically purposeful" (1980, p. 115). Organizational inten- tionality at the time of creation reflects the goals of the agents or founding entrepreneurs (e.g., Dooley, 1972; Van de Ven, 1980a) and the goals

of the various environmental sectors, for ex- ample, capital and industrial (Maidique, 1980; Yip, 1982), technological (Cole, 1965), govern- ment-legal (Vesper, 1983), and community (Bease, 1981; Birley, 1985; Pennings, 1982). At the very beginning of the organization, intention- ality may be no more than these cross-level goals, but as the organization continues to exist as a separate entity, it will possess goals that are increasingly distinct from those of the agents and the environment. This separate intentionality can be indirectly evidenced through common belief structures regarding the goals, purposes, history, traditions, and methods that emerge within the organization, such as studies of organizational culture (Deal & Kennedy, 1982; Martin & Powers, 1983; Sarason, 1972), studies of the symbolic as- pects of organizations (Salancik & Pfeffer, 1977), studies of family business (Beckhard & Dyer, 1983; Savage, 1979), and studies of innovative organizations (Hackman, 1984; Kanter, 1984).

Resources

The importance of resources has seen its most recent emergence in the works of the resource dependence theorists (Pfeffer, 1978; Salancik & Pfeffer, 1977), the strategic planners (MacMillan, 1983; Yip, 1982), and the ecological theorists (Aldrich, 1979; Hannan & Freeman, 1978; McKelvey, 1980).

In organization creation, resources refer to the physical components (versus informational or ideational components inherent in intention) that combine to form an organization. Human and financial capital, property (real estate, equip- ment, raw materials), and credit form the build- ing blocks of most organizations (Cole, 1965; Kilby, 1971; Vesper, 1980). As the organization and strategic theorists cited in the preceding paragraph indicate, the ease of obtaining these resources determines the strategic direction and geographic distribution of new organizations (Hannan & Freeman, 1978; Liebenstein, 1968).

Boundary

In organization theory, boundary plays an im- portant but underemphasized role; often it is de-

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scribed in terms no more detailed than semiper- meable boundary (Katz & Kahn, 1978; Tannen- baum, 1968) or boundary-maintaining activity systems (McKelvey, 1980), or it is used as the pre- cursor for describing other interests, such as boundary-spanning activities (Adams, 1976). In organization creation, however, boundary is of major importance.

Boundary is defined as barrier conditions be- tween the organization and its environment (Katz & Kahn, 1978). That is, the organization itself ex- erts control over some of the resources in its en- vironment (Schumpeter, 1934), namely, those within the boundary, and establishes the physi- cal and legal basis for exchange across its bound- ary (Cole, 1965; Kilby, 1971). In establishing a boundary, the entrepreneur, parent organiza- tion, or environment establishes the organiza- tion's identity beyond that of the creating agent. The creation of a boundary as one of the proper- ties of the organization also implies the establish- ment of subsystems of maintenance (Cole, 1965; Georgopoulus, 1972; Katz & Kahn, 1978). Before committing to establishing an organizational boundary, the agent can easily stop collecting resources and cease stating entrepreneurial intentions. With the boundary in place, and with the environment reacting to the bounded organi- zation as well as to the agent of its creation, the creating agent is required to attend to organiza- tional maintenance and must moderate some ac- tivities through the new entity.

At a practical level, the establishment of boundaries, such as incorporations, tax number requests, and phone listings, offers the first con- crete and somewhat cleanly defined sampling frames for observing organizations early in their creation.

Boundary also distinguishes the individual-as- organization from the individual-as-worker. Re- searchers as disparate as system theorists (Katz & Kahn, 1978) and dramaturgial sociologists (Goffman, 1959) have used the idea of individu- als conducting particular types of activity, such as role behavior within a boundary, as a way of defining the presence of an organization. Given

an individual's intention to start an organization and the resources earmarked for it, boundary serves to isolate these elements from the other aspects of the individual's life. This is readily seen when an individual establishes organiza- tional boundary-identifying conditions such as obtaining identifying symbols (organization name, mailing address, post office box, tele- phone- number, and tax identification or tax- exemption number) that distinguish work done as an organization member (i.e., inside the boundary conditions) from work done as an indi- vidual (i.e., work done outside the boundary conditions).

Exchange

Exchange in organization theory and entrepre- neurial theory refers to cycles of transactions. These transactions can be across the borders of subsystems (Georgopoulus, 1972; Katz & Kahn, 1978; Miller, 1978), within an organization, as in the example of managing human relations (Kilby, 1971), or across the organizational bound- ary with individuals, the environment, or other organizations (Singh, Tucker, & House, 1986).

Common to most of these theories are two notions: the repetitiveness or cyclic nature of the exchange process and the need for the exchange to benefit the organization. Once established, exchange cannot stop without the organization facing eventual dissolution. Unlike boundary, there is an implicit normative element in ex- change, making it easier to say that one ex- change is more efficient or effective than another.

This poses a particular problem in newly cre- ated organizations, especially autonomous ones. Over a given period of time, the exchanges in these organizations may be inefficient, such as selling products below cost in order to establish a market share. Because of this, exchange is viewed as the most dynamic and volatile of the four properties. Also, researchers who focus solely on studying profitable exchanges may un- duly restrict the identification and selection of newly created organizations in their early stages. Unlike McKelvey (1980), whose concern was for

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effective organizations in the long run, we are concerned with the existence of any exchange process, not merely those that are advantageous to the organization.

Because extraorganizational exchanges take place in an established environment, identify- ing firms engaged in exchange is relatively easy. The other three properties must be in place for exchange to occur in an ongoing manner. The environment's demands for records indicating exchange in the legal, financial, and organiza- tional sectors offer additional evidence of the firm's existence (i. e., financial reports, credit ratings, transaction records, such as sales slips, etc.).

These four properties of emerging organiza- tions are necessary for an organization to exist. Unfortunately, because the properties do not be- come visible simultaneously, the opportunity to find newly created organizations, especially or- ganizations that die during creation, is differ- entially affected by the choice of any of the four properties as a sampling variable.

Identifying the Emerging Organization Ironically, despite our attempts to define what

an organization is and what its creation looks like, we still must be prepared to conceptually define and deal with the organization-in-crea- tion. The four properties characterize a complete organization. Yet we need to know more about the process by which an organization evolves from nothing to something; that is, we need to explore that period of time in which the pre- organization becomes the new organization. In effect, to study organization creation, we must use one, two, or three properties as sampling frames to probe when preorganizations might eventually become organizations.

The entrepreneurship literature is filled with examples of different agents: new ventures (MacMillan, 1983; Timmons, 1973), new units (Perkins, Nieva, & Lawler, 1978; Van de Ven, 1980a; Walton, 1980), corporate entrepreneurship programs (Kanter, 1984; Kimberly & Quinn, 1984; Schon, 1967), ecological perspectives (Aldrich,

1979; Hannan & Freeman, 1978), and government policies (Vesper, 1983). The problem with most research on organization creation is that the re- searcher studies the organization only after it has come into existence, although there are exceptions, such as the study of the founding of People Express (Hackman, 1984) or studies of the formation of new units in existing firms (Kimberly, 1979; Kimberly & Quinn, 1984; Sarason, 1972; Van de Ven, 1980).

Identifying the types of firms used in studies of new organizations takes on particular importance because of three influences. First, interpretation disputes arising from the use of standardized databases by Birch and MacCracken (1981), Reynolds, West, and Finch (1985), and Armington and Olde (1982) produced a new wave of con- cern for what is being measured when claims are made that an organization has come into existence. Similarly, Birley (1984) showed that significant differences in the identification of new firms result from the selection of the database. Second, Star (1979) and Katz (1981) sought to ac- count for nascent or precursor states of conven- tional organizations by describing the charac- teristics of one-person firms. Third, McKelvey (1980) sought to develop taxonomies of organiza- tional characteristics for use in the analysis of organizational life datasets. Taken together, these events suggest a new approach to defining the organization, one based on describing existing entities, rather than one based on theoretical models. Such description has a tradition in bi- ology, largely in taxonomic work, and reflects what McKelvey calls an asymptotic model.

For all three types of studies, using a particu- lar database was dependent largely on practi- cal reasons (e.g., Which database has the larg- est number of entries? Which database can I obtain access to?), rather than theoretical rea- sons (e.g., Does the database cover the popula- tion I am interested in?). The selection and as- sessment of the database was not guided by organization theory. However, definitions do make a difference in identifying the type of orga- nization and its stage of creation.

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For example, Birley's (1985) idea of the emerg- ing organization assumes that an entrepreneur goes through the sequence of generating an idea, setting up the firm, hiring employees, and trading products. Identifying organizations as they seek to trade products catches firms at a later stage than identifying them when they are hiring employees. For this reason, Birley used unemployment insurance and Dun and Brad- street databases in order to sample firms at an earlier stage.

By using the four properties of emerging or- ganizations described, researchers can build a framework for analyzing potential sources of new organizations in a way that permits the identifi- cation of organizations early in their creation process. Sources of new organizations used by a variety of researchers are categorized in Table 1.

Although the four properties define an organi- zation, they may not appear simultaneously. This preorganizational period (called gestation by Van de Ven, 1980a, and prehistory by Perkins, Nieva, & Lawler, 1978) in the organization's life is vital because many fundamental decisions about industry, location, size, market, and administra- tive intensity may be made during this time. As a result, it is worth considering the usefulness of the four properties as sampling frames for dis- covering emerging organizations at the earliest possible moment.

Because the issues of identifying firms using boundary and exchange processes have been considered in great detail by Birley (1985), Reynolds, West, and Finch (1985), Birch and Mac- Cracken (1981), and Armington and Olde (1982), we will focus on the properties of intention and resources as alternative means of identifying new organizations.

Using Intention to Identify Emerging Organizations

If intention is described as individuals indicat- ing their interest in organization creation, sev- eral sources of information may be of value for identifying emerging organizations.

Table 1 Studies Using the Four Properties of Emerging Organizations

Properties Example (Source)

Intention Newspaper ads for potential restauranteurs (Katz, 1984)

Networks for aspiring and active entrepreneurs (Alrich, Rosen, & Woodward, 1986)

Resources Informal investor networks (Neiswander, 1985)

Venture capitalists' files (Sandberg & Hofer, 1986)

Bank files (Churchill & Lewis, 1985)

Boundary Tax numbers (Mayer & Goldstein, 1961)

Licenses/permits (Hannan & Freeman, 1978; Katz, 1983)

Exchange Directories (phone, Chamber of Commerce, etc.) (Birley, 1984)

Unemployment insurance forms (Birley, 1985)

Credit reports (Birch & MacCracken, 1981; Reynolds, West, & Finch, 1985)

1. Subscription lists to entrepreneurial maga- zines such as Entrepreneur, In Business, Venture, and Inc. (especially the first two), which are oriented toward individuals who are interested in starting their own busines- ses;

2. Membership lists of entrepreneurial organiza- tions, such as Women Working at Home. This approach was used by Aldrich, Rosen, and Woodward (1986);

3. Directories of students or recent graduates, or directories of members of professional societies for professions or occupations that tend to have a high percentage of self- employed individuals. Star's (1979) list of oc- cupations is helpful for identifying those occu- pations of individuals who are more likely to be involved in organization creation;

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4. Client lists of specialized organizations (e.g., the Small Business Development Centers) and entrepreneurial training companies, which help individuals develop business plans;

5. Participant lists from corporate entrepreneur- ship and redesign programs to identify firms considering new ventures;

6. Participant lists from conferences on entre- preneurship, such as the Association of Colle- giate Entrepreneurs conference, university entrepreneurship conferences, new business fairs, franchise fairs, and inventors and inno- vation fairs;

7. Participant lists from conferences on new society-wide problems, such as conferences on AIDS, day care, home health care, and public-private partnerships, that would iden- tify individuals who might start both profit and nonprofit organizations to deal with these issues.

These are examples of places where a re- searcher might locate potential entrepreneurs who are seeking information about aspects of organization creation. By seeking information, individuals may indicate an intention to start an organization. Identifying categories of informa- tion demanders, such as self-employed profes- sions, comes in part from a model of self- employed career choice developed by Katz (1981). As mentioned earlier, the selection of any of these lists will influence the types of emerging organization one is likely to study.

Using Resources to Identify Emerging Organizations

Previous conventions for categorizing re- sources (money, plant, equipment, employees, etc.) are adequate as a starting point. If informa- tion is considered a resource, the previous list of sources also could be included here.

1. Applications for loans from banks, savings and loans, finance companies, and the Small Business Administration;

2. Applications for grants from corporate and private foundations, umbrella fund-raising or- ganizations such as the United Way, and po- litical fund-raising organizations;

3. Notices of employment opportunities in news- papers and trade journals;

4. Lists of new purchasers or renters of commer- cial equipment;

5. Directories of new occupants in office build- ings and commercial centers;

6. Lists of self-employed individuals, found through the Dun and Bradstreet files, to iden- tify people who have loaned money to emerg- ing firms;

7. Omnibus marketing surveys to identify indi- viduals who have loaned money to or worked for family or friends starting a firm;

8. Surveys of real estate agents to identify indi- viduals inquiring about sites for firms.

Implications

Using four properties of intentionality, re- sources, boundary, and exchange as guidelines for identifying and selecting emerging organiza- tions has implications for both methods and the- ory in organization theory and entrepreneurship. For example, life cycle models of organizations, such as those described by Van de Ven (1980a) in organization theory and Timmons, Smollen, and Dingee (1977) in entrepreneurship, would benefit from an expanded description of the vari- ables characterizing organizational birth.

We find that traditional organization theory models (e.g., Greiner, 1972), strategy models (Porter, 1980) of organizational stages, or even the traditional entrepreneurship models of or- ganizational stage (Timmons, Smollen, & Dingee, 1977) are less important to understanding the cre- ation process than we originally thought. We find that most theories of organizational stages have a macro perspective (organizational changes in structure or process are studied over long periods of time, from birth to maturity), whereas our perspective is micro (organizational changes in structure or process are studied pri- marily at the gestation, prebirth, and birth stages) encompassed by the establishment of intention, boundary, resources, and exchange. Conse- quently, organization creation models, like Katz and Kahn's (1978) initial stages and Van de Ven's (1980b) three-stage model, are more useful in describing these micro interests. Researchers

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might benefit from increasing the degree of de- tail in traditional theories of organizational stages to include important within-state events, or, perhaps, by combining micro and macro stage theories.

Finally, the ability to identify and select organizations-in-creation by using the four properties provides an opportunity to explore how the study of emerging organizations might have an impact on some theoretical issues in organization theory and entrepreneurship.

Emerging Organizations and the Population Ecology Perspective

Population ecology's original question "Why are there so many kinds of organizations?" (Hannan & Freeman, 1977) places particular em- phasis on variation due to newly created organi- zational forms as a major source of change in organizational populations (Aldrich, 1979; Han- nan & Freeman, 1984; McKelvey, 1980). Recent critiques of the population ecology perspective have questioned the validity of the claim of or- ganizational diversity, and as a result, research- ers have asked, "Why are organizations so simi- lar?" (DiMaggio & Powell, 1983). This view posits that new organizations pattern themselves after existing organizations; therefore, there will be little diversity in organizational forms among the population of existing organizations. We suggest that there is a high degree of diversity in organi- zational populations, but this has not been recog- nized because the samples of new organizations that have been used are too old. The effects of selection or institutionalization of the population of new organizations (depending on your point of view) have already occurred by the time most samples are identified and studied. For example, liability of newness arguments (Carroll, 1983; Singh, Tucker, & House, 1986; Stinchcomb, 1965) could be much stronger if based on samples of organizations identified at earlier ages. Singh, Tucker, and House (1986) found only a modest degree of liability of newness in their population of new organizations. This, we believe, was due to their basing their sample of organizations on one property-boundary (incorporation data).

Because most sampling frames focus on one type of property (intention, resources, exchange, boundary), there may be some advantage to se- lecting sampling frames that reflect properties more likely to occur (or more likely to be recorded) earlier in the process of emergence. In the Singh et al. (1986) example, it is plausible that some of the organizations they studied may have emerged (demonstrated all four properties) long before formal incorporation was sought. Incorpo- rated organizations may represent old new organizations, that is, organizations late in their process of emergence. If the Singh et al. (1986) sample had been an intention-based study (which captures organizations at an earlier age), a larger diversity of organizational forms would have existed, and it is likely that the liability of newness among these organizations would have been much higher.

Diversity in organizational forms is likely to be greatest when organizations are being or- ganized, that is, when organizations are emerg- ing, not after they have become established organizations. We view the organization-in- creation as very transitory. Because an emerg- ing organization lacks structural inertia, agents may try and abandon many organizational forms until either some type of organizational fit (both internal and external) is mac-. or failure occurs as resources are expended in the organizing process. This is because the costs of changing various goals, structures, and so forth are so much lower for the emerging versus established organization. The opportunity to identify organi- zations-in-creation through the four properties en- hances a researcher's abilities both to observe this variation and to study how it is generated.

In addition, selection pressures of emerging organizations are likely to be greatest when the organization is forming rather than when the or- ganization already exists because emerging or- ganizations are likely to have few reserves (Gal- braith, 1973) to buffer shocks from environmen- tal pressures. So while new combinations of or- ganization forms are being attempted in these emerging organizations, selection pressures are simultaneously eliminating most of them. The

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emerging organization is therefore a unique situation in which both the organization's abili- ties to adapt and environmental selection pres- sures are high. By using the four properties as a framework for selecting samples of emerging organizations, we are likely to find a larger pop- ulation of diverse organizational forms to observe the effects of variation, adaptation, institutionali- zation, and selection.

Emerging Organizations and the Entrepreneurship Perspective

A continuing challenge to entrepreneurship researchers has been to focus on the process by which organizations are created (Vesper, 1980). Schumpeter's view (1934) that entrepreneurship involves creating new technologies, ideas, products, markets, and organizational forms is similar to the previous discussion on variation. It is likely that doing something new will involve creating variations of existing forms. Yet entre- preneurship researchers have been reluctant to focus on emerging organizations and have fre- quently settled for retrospective work on smaller existing organizations (Wortman, 1985). The ef- fect of studying organization creation after the fact has been to muddy the waters further in differentiating new entrepreneurial organizations from existing small businesses (Carland, Hoy, Boultan, & Carland, 1984). The use of the four properties as a framework for selecting samples of emerging organizations is clearly appropriate for enabling entrepreneurship researchers to study organizations-in-creation. The ability to identify organizations early in the creation pro- cess should be valuable for determining the suc- cess and failure of different strategies for or- ganizing. Vesper (1983) suggested that most en- trepreneurial activities end in near-misses- organizations that die while emerging. Studies of newly incorporated organizations, for ex-

ample, are likely to be conducted too late to observe these near-misses. It is therefore possi- ble that because researchers have not observed emerging organizations and new organizations early on, they have not recognized most entre- preneurial activity.

Conclusion The four properties of emerging organizations

provide a framework for identifying and select- ing new organizations. The four properties also provide commonalities between entrepreneur- ship and organization theory as well as links between studies of emerging organizations and existing organizations. Yet these properties also have value for identifying organizations-before- creation, that is, preorganizations. Prior to the existence and interaction of the four properties, there is something more than randomness but less than an organization. These preorganiza- tions vary according to which properties are used, what order the properties appear in, and how long the properties last. By focusing on organizations-in-creation, that is, the transition from preorganization to new organization, we are likely to acquire a better understanding of the nature of the concept of emergence and the answer to the question "How do organizations come into existence?"

Research on emerging organizations is fraught with inherent ambiguity. Emerging organizations are likely to be small, fragile, and volatile. The process of organizational emergence may be analogous to the types of interactions that take place at the atomic and subatomic levels in physics. In order for us to identify, analyze, and understand the organization-in-creation we must change our perceptions and methodologies. Heisenberg's ideas on indeterminancy and com- plementarity (1958, 1971) may provide insights into the limits of our quest.

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Jerome A. Katz (Ph.D., University of Michigan) is Assis- tant Professor of Management and Decision Sciences, School of Business and Administration, Saint Louis University. Please address all correspondence to him at: Institute of Entrepreneurial Studies, Saint Louis University, 3674 Lindell Boulevard, St. Louis, MO 63108.

William B. Gartiier (Ph.D., University of Washington) is an Assistant Professor in the School of Business Administration, Georgetown University.

The authors thank participants in the 1986 Academy of Management symposium on organizational found- ing-Jack Brittain, Robert Brockhaus, Glen Carroll, Arnold Cooper, John Freeman, and Andrew Van de Ven-for their critiques of the ideas expressed in this paper.

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