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The dynamics of organizational emergence: a contemporary group formation perspective.

The specialty of group dynamics in the field of social psychology remains a potential source of ideas for entrepreneurship research. The core work in group dynamics has focused on the development and operation of groups dating from the classic of Cartwright and Zander (1968), and repeatedly applied in organizational behavior (for key reviews see Gist, Locke, & Taylor, 1987; Levine & Moreland, 1990). This approach, started with groups of 6 to 12 people, has extended to include individuals acting in behalf of a group or organization at one end of the spectrum, and plant sized groups at the other. In between these extremes exist new research strategies and ideas for entrepreneurship research.

At the individual level, group dynamicists believe that the process of socialization takes place through the modelling and learning of roles among group members (Schein, 1976). Applied to entrepreneurs, Scherer, Brodzinski, and Weibe, (1990, 1991) have shown that entrepreneurial learning likely occurs within families through a process of role modelling. The general idea of intergenerational transfer, lacking the psychological model of Scherer and Weibe, can also be found in Laband and Lentz (1983) and Laband, Lentz, and Sophocleus (1984).

The importance of the process of taking on roles cannot be overemphasized, because it is through this process that individuals learn how to act in their chosen group. Additionally, the adoption of the group role has profound effects on how the individual sees the world. Once within a role, the person is more likely to see in terms of "us vs. them," with a favored in-group of similar role-holders (us) and an out-group of holders of different roles (them). The creation of the psychological boundary is central to the boundary process of emerging organizations (Katz & Gartner, 1988).

Over the past twenty years work has progressed to understand the minimum conditions under which individuals develop the group mentality characterized by boundary placement and differential treatment characterized by "us vs. them" thinking. The research has focussed on the minimal group paradigm (Tajfel et al., 1971; Tajfel, 1982), or MGP.

Until the MGP was developed, it was thought that one-person entities were somehow entirely different from collections of two or more people. Thus sociologists generally talked only of social organizations, which contained two or more people. The problem with this approach from the standpoint of entrepreneurship research is that it systematically excludes the majority of existing businesses, since over 50% have only one member (Star, 1979; Katz, 1984). In addition, it fails to provide a conceptual basis for the precursors of social organizations, where one person develops an idea, gathers resources, establishes boundaries, and even begins exchange all before the second person (a partner or an employee) is added.

With the MGP approach, it becomes apparent that situations which put people into a heightened state of awareness, in which they see themselves as part of a group or organization, is sufficient to create the change in behavior typical of group membership. In practice when the individual starts acting in the organizational role of "founder," or "owner," or "proprietor" he or she begins to take on new role expectations and behaviors consistent with involvement in social organizations.

While MGP researchers have focused on social identity as the outcome of MGP situations, recent work (Rabbie, Schot, & Visser, 1989) has suggested an alternative interpretation of MGP, in which the MGP behaviors are described as rational, instrumental behavior aimed at maximizing economic self-interest, rather than Tajfel's idea that the behaviors reflect a striving for a positive social identity. This approach makes MGP even more directly applicable to studies of emerging firms and solo entrepreneurs. Additionally, the extension of group dynamics work to incorporate MGP means that the models of social psychology can be legitimately applied to all entrepreneurial organizations, even the smallest ones.

With the MGP approach, group dynamics research, such as changes in work groups as they add new members (e.g. Littlepage, 1991; Mullen, Symons, Hu, & Salas, 1989) can be more directly and consistently applied to entrepreneurship settings. Finally all entrepreneurial organizations from one person to a thousand have a shared theoretical grounding in the social psychology of groups.

The other area of group dynamics which has potential impact on entrepreneurship comes from the extension of group dynamics approaches to larger and more taskoriented organizations, particularly the work on participative decision making in work groups (Katz & Kahn, 1978). This line of research, initiated by Kurt Lewin, has its greatest field experiments in the processes called the "New Plant Revolution" (Lawler, 1978, 1990). Lawler, Richard Walton, and a host of others applied social psychological principles of group design, reward systems, and participative leadership and decision making to the creation of high-involvement, high-performance plants. Despite an ongoing controversy about the success of the approach at the "Topeka plant," the model has provided a wealth of detailed information on the processes of organizational creation and change, and has generally been seen as a success in itself, as well as a source of new techniques such as pay-for-performance and quality circles.

The new plant approach reflects a different, perhaps complementary, approach to liability of newness issues than do ecological approaches (Singh, Tucker, & House, 1986). In new plant studies conceptualization occurs at the group and individual level, the impacts of task, reward and technology are explicitly considered, and leadership is conceptualized as a major intervening variable. These processes overlap only slightly with ecological models liabilities, which focus more on industry and environmental variables. For entrepreneurs and venture capitalists, the new plant approach offers greater opportunity to conceptualize and design remedies for the types of problems normally encountered in establishing a business.

Finally, there is increasing convergence between the leading-edge ideas in social psychology and those emerging in entrepreneurship. For example, until recently, group development was thought to proceed in an orderly manner with new groups going through stages in a relatively predictable manner. Gersick (1988, 1989, 1991) however has shown that when looking at groups in real situations, their progress is more dependent on time and task demands than on the stages of development. This process of movement appears as more of a disjoint, chaotic process than an orderly one. This finding parallels the metaphorical use of chaos theory suggested by Bygrave (1989), and has considerable face validity when applied to cases regarding team efforts in new ventures or new product development efforts.

Gersick's process model has direct application for models of organizational emergence, such as that of Katz and Gartner (1988), which also posits a recurring, nonidentical process punctuated by alternating periods of stability and instability. One potential adaptation of the Gersick findings to the organizational emergence model of Katz and Gartner is provided in Figure 1. Together the two approaches provide an understanding of the key processes and contents of new firm creation, and suggest the potential richness of entrepreneurship theories derived from social psychological research.

For entrepreneurship researchers lacking a background in psychology, the writings of social psychologists, particularly contemporary ones, can be daunting. However, the complexity of their works is due to almost sixty years of refinement in labs and the field, and reflects the strength of the discipline. Moreover, the lessons of social psychology outlined above represent properties of high descriptive power, high robustness and established operationalizations. They are among the models easiest to adapt and utilize by entrepreneurship researchers.

In time, perhaps, social psychologists will discover the opportunities entrepreneurship research as a avenue has to offer. Research on the social psychology of minimal groups in the field, such as one-person organizations, or research on group or firm formation in vivo would enrich the conceptualizations and generalizability of selected social psychological theories. The two fields have a great deal to offer one another.


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Jerome A. Katz is Associate Professor of Management and Associate Director of the Jefferson Smurfit Center for Entrepreneurial Studies at Saint Louis University.

I would like to thank Bill Gartner, Betsy Gatewood, and Cheryl Nietfeldt for their support in the preparation of this manuscript, although all remaining errors are the responsibility of the author. I would also like to thank Kelly Shaver, Stan Seashore, Ed Lawler, and Hazel Markus who at different times of my scholarly development reminded me of my disciplinary roots in social psychology and made the complex understandable.
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Author:Katz, Jerome A.
Publication:Entrepreneurship: Theory and Practice
Date:Jan 1, 1993
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