The Development and Institutionalization of Subunit Power in Organizations

This research is part of a larger project on the semiconductor industry under the direction of John Freeman and Michael Hannan and was supported by grants ISI-8218013 and SES-8510277 from the National Science Foundation. The author would like to thank Jerry Goodstein for help with data collection and comments and Ellen Auster, Glenn Carroll, Bob Drazin, Jim Fredrickson, John Freeman, Don Hambrick, Mike Tushman, and three anonymous ASO reviewers for their helpful comments on an earlier draft of this paper. The research reported here examined the effects of founding events on the evolution of subunit importance in the semiconductor industry from 1958 to 1985. The environmental period during which the organization is founded and the background of the entrepreneur starting the organization were shown to create conditions under which particular functional areas come to be regarded as more important. Patterns of influence established at founding are also demonstrated to maintain some consistency over time, contingent on the organization's performance, the organization's age, and the tenure of the entrepreneur. Inertial and institutional arguments are developed to explain the role of past practice in shaping future organizational action. Distributions of power and subunit importance represent not only the influence of current conditions but also vestiges of earlier events, including the organization's founding.'