Random Walks and Organizational Mortality

Abstract

I wish to thank Glenn Carroll, John Freeman, Steve Mezias, Marshall Meyer, David Schmittlein, and three anonymous referees for their comments on a prior draft, Arieh Epstein for his contributions as a research assistant, and Mark Fichman for many provocative discussions. A simple model is developed here that relates organizational age and mortality rates. The critical insight of the analysis is that surviving organizations will tend to be organizations that were, in prior periods, successful, and this prior success, in turn, will buffer them from subsequent selection pressures. The model is then tested using data on the Argentinian and Irish newspaper industries. Further empirical analysis examines the degree of heterogeneity in these two populations of organizations, and a subsequent parametric analysis provides some insight as to the sources of this heterogeneity.'

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