Local and Non-local Pre-founding Experience and New Organizational Form Penetration: The Case of the Israeli Wine Industry

Abstract

This paper presents a theory of how new organizational forms penetrate local populations. We theorize that founders with pre-founding industry experience in non-local populations are more likely to adopt locally novel forms. Pre-founding experience within local and non-local industry populations should also allow organizations to reach larger size and produce superior quality products, both of which contribute to the persistence of the novel organizational form. We evaluate these predictions in an analysis of the transformation of the population of Israeli wineries between 1983 and 2004, when five existing organizations witnessed the arrival of 138 new wineries. This explosion in numbers coincided with a shift from kosher toward non-kosher wine production, the new organizational form. Although the four largest Israeli wineries in 1982 were kosher, roughly 75 percent of the new entrants were established as non-kosher producers. We analyze how founders' pre-founding experiences helped the novel non-kosher form penetrate the local population. The results show that non-local wine industry experience prior to founding increased the odds that a new entrant would select the non-kosher organizational form. At the same time, both local and non-local pre-founding experience improved the size and product-quality outcomes achieved by the non-kosher entrants. This had an additional effect on form penetration by improving the impact and longevity of the novel-form producers.

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