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studying the world’s largest corporation

Paul Ingram, Lori Yue, and Huggy Rao have a paper in a recent issue of AJS that looks at the success of community activists who protest the openings of Wal-Mart stores in their neighborhoods. The article begins with these intriguing facts:

During the period starting from 1998 and ending in 2005, Wal-Mart floated 1,599 proposals to open new stores. Wal-Mart successfully opened 1,040 stores. Protests arose on 563 occasions, and in 65% of the cases in which protests arose, Wal-Mart did not open a store.

It’s pretty astonishing that local activists were able to thwart Wal-Mart’s efforts to open a store 65% of the time. Wal-Mart, the world’s largest corporation, surely has the political capital to win many more of these battles, and yet they frequently succumb to activist pressures. Why? The article explains that we can better understand this outcome if we think of the interaction between Wal-Mart and its activist nemeses as a sort of strategic dance in which Wal-Mart probes its environment to test the level of community support for a store and retracts when it views protests as a signal of potential regulatory costs and weak customer enthusiasm. One reason I like the study is because it promotes the idea that activists protests are a sort of market signal that shapes producer entry and adaptation to local consumer demands. In this sense, protests and other forms of public activism indirectly shape market supply.

Another reason to like the study is that it is one of the few organizational studies of Wal-Mart. It is surprising that there is so little organizational research on Wal-Mart given its dominance in the global market, its prominent position in American consumer society, and its broad political influence.  It’s also a relatively unique organizational phenomenon. Part of what allowed it to capture the global retail market is because it was more quickly able to adapt to the new market environment where global supply chains became a source of competitive advantage.  Wal-Mart is the GM of contemporary capitalism, and yet compared to GM in the 40s-60s, organizational scholars have yet to really make it a primary object of study.

As Jerry Davis has pointed out (see, for example, the comments in this post), our theories of organizations are not well suited to studying these new sorts of organizations that dominate the current market. Wal-Mart would seem like a good place to start.  I expect orgheads to fill me in on what I’m missing here (e.g., dissertations being written, articles I haven’t yet noticed).

Written by brayden king

November 29, 2010 at 11:27 pm

15 Responses

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  1. Bethany Moreton, a historian at UGA and Harvard Divinity School, has a fantastic multi-award-winning book on Wal-Mart that was reviewed recently by Robert Frank in the Times Book Review. As long as we’re on the APD tip for research on global corporations with southern roots, historian Bartow Elmore at UVA is working on a fascinating dissertation on Coca-Cola.

    It’s not that surprising that there is so little research on Wal-Mart, Coca-Cola, etc. Global corporations go out of their way to make it very hard to study their inner workings and have a slight resource advantage over your typical grad student.

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    carolinewlee

    November 30, 2010 at 12:34 am

  2. An economist at Iowa State, Ken Stone, did a number of studies on Wal-Mart’s entry into small rural towns. He began the work in the late 1980s and continued into the mid 1990s. A book emerged from the work:
    Stone, Kenneth E. Competing With the Retail Giants, John Wiley and Sons, New York, February, 1995.

    http://www2.econ.iastate.edu/faculty/stone/

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    Randy

    November 30, 2010 at 2:55 am

  3. Walmart failed big in Germany and retreated in 2006. Any published studies on this?

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    Christoph

    November 30, 2010 at 6:04 am

  4. From the historian Nelson Lichtenstein, there’s

    The Retail Revolution: How Wal-Mart Created a Brave New World of Business

    The paperback is out this year from Picador.

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    Elizabeth

    November 30, 2010 at 4:58 pm

  5. I want to second Brayden’s call for more organizational work on Wal-Mart. Moreton’s book and Lichtenstein’s book are both excellent, and it’s frustrating that organization theorists have not followed their lead. How does Wal-Mart have 1.4 million US employees, yet maintain a 40% or higher annual turnover rate? Why is monopsony not a matter of concern to antitrust authorities?
    Howard Aldrich points out that the annual number of articles on IPOs vastly outstrips the annual number of actual IPOs, and I have ranted to colleagues that the ratio of papers on biotechnology (a relatively trivial industry) to papers on Wal-Mart (possibly the most important corporation in the world) is about 100 to 1. What gives?
    Two possible reasons for the Wal-Mart drought: (1) papers on Wal-Mart constitute case studies, and organizations journals only like papers with fixed effect models and Huber-White sandwich estimators [which explains how Paul and friends got away with their study: regression means truth]; (2) Wal-Mart’s being *actually* important is not the same as being *theoretically* important, and organizations journals only like papers that “contribute to theory.”
    Any other thoughts?

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    Jerry Davis

    November 30, 2010 at 6:25 pm

  6. @Jerry: Having tried to publish case studies myself, with mixed success, I can personally say that it is not the easy path. I once had a nice chat with Paul DiMaggio who seconded that motion and referred to his own difficulties with case studies. And if one of the leading organization theorists our times has problems, imagine the lowly graduate student!

    I would add that in a management program it might even be a kind of professional self-handicapping. At least in sociology, there are enough successful ethnographers and historical folks who would respect a solid organizational case study. They would back you up. But in a professional school, you have to impress not just your own discipline but folks in policy and economics who have bought the line that “qualitative=not science.”

    On point (2) – you could make that argument, size does not equal importance. But I would say we have to take seriously any economic phenomena the size of Wal-Mart. An entity that large will be strongly entwined with the rest of the economy. And if that doesn’t deserve our attention, then we don’t deserve to call ourselves social scientists.

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    fabiorojas

    November 30, 2010 at 7:04 pm

  7. One colleague I know is just getting started on a Wal-Mart project, so people are interested.

    Not to belabor a dead horse, but as we’re seeing with organizational research, the profession rewards certain kinds of outputs (say, business schools and top-tier journal articles; funding agencies and certain topics, typically involving high-tech or innovation in particular fields). Some people – especially those on the tenure track, who need to land research funds, or need to generate an article every year – react accordingly. Those who don’t conform not only have to do the research, but also build an audience and leap over a higher bar of skepticism.

    However, it’s interesting to think that the majority of organizational lessons taught in undergrad and professional schools are based on excerpts from ethnographies and qualitative research…

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    KatherineKChen

    November 30, 2010 at 9:39 pm

  8. Do we have data on whether Wal-Mart is historically unprecedented (I suppose it depends on the dimension: # of employees, mkt share, relative revenue, etc)?

    More generally, does Wal-Mart buck the trend (well, this is still up in the air — depending on how one slices the data and who one talks to) of actual decreases in average organizational size?

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    teppo

    November 30, 2010 at 10:58 pm

  9. Teppo, could you provide a link/cite on the trend toward decreasing organizational size?

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    teageegeepea

    December 1, 2010 at 2:27 am

  10. […] Posted by teageegeepea under Uncategorized Leave a Comment  Brayden King at OrgTheory notes how successful anti-Walmart protest groups have been (at least on those occasions when they protest). To borrow from Albert O. Hirschmann’s […]

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  11. So, there’s an interesting discussion, org size-related, on organizational diseconomies — here are some of the key citations:

    Zenger, T. R., & Hesterly, W. S. (1997). The disaggregation of corporations: Selective intervention, highpowered incentives, and molecular units. Organization Science, 8(3), 209–223.

    Brynjolfsson, E., Malone, T., Gurbaxani, V., & Kambil,A. (1994). Does information technology lead to smaller firms? Management Science, 40(12), 1628–1644.

    Bhide, A. (2000). The origin and evolution of new businesses. Oxford: Oxford University Press.

    I don’t know what the latest is in terms of average organizational size (over time) — obviously nailing the argument depends on just how comprehensive of a dataset one is able to put together (at one point I looked at pulling this type of data set together, but it simply proved too unwieldy). Certainly in many industries the decreased size finding holds (you can, for example, trace the argument from Mansfield, 1968). There are some relatively counter-intuitive benefits associated with smaller org size.

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    teppo

    December 1, 2010 at 6:41 am

  12. Thanks, teppo.

    Like

    teageegeepea

    December 1, 2010 at 7:17 am

  13. Organizational size may be due for a revival in research interest, because it’s much more interesting than it seems:
    (1) We don’t know what “size” means. Organization theorists often treat size as if it were a single construct, readily proxied by several interchangeable variables (employees, assets, sales, market capitalization). But while these measures were very highly correlated in the 1950s-1980s, when the “largest” firms were manufacturers, they are now fairly independent. (GM is big on revenues and employees, and was very very low on market cap; Exxon is big on revenues and market cap, medium on employees; Google is big on market cap, medium on revenues, and pretty tiny on employment; Wal-Mart is huge on every measure.) Check out Figure 1 here: http://orm.sagepub.com/content/13/4/690.full.pdf+html (or if you can’t access it, let me know and I’ll send a copy).
    (2) Employment size looks very different in the largest firms today than the largest firms 30 years ago. 9 of the 12 largest US corporate employers are in retail today; in 1980 most were manufacturers like GM and Ford. Wal-Mart’s primary type of facility employs 300-400 persons with quite limited interdependence, and can maintain a very high turnover rate without anyone noticing. Ford’s River Rouge plant (where both of my grandfathers worked) employed over 100,000 persons at its peak in the 1940s, and the work was highly interdependent, making it much more susceptible to labor organization. So, size means something different in retail.
    (3) There is remarkable variation cross-nationally and over time in the size of the largest corporate employers. The largest company based in Colombia (population: 45 million) has 7000 employees. The largest company based in Denmark (population: 5 million) has over 400,000 employees (albeit not all in Denmark). Moreover, there is a very, very strong negative correlation between the proportion of the labor force employed by the largest domestic firms and income inequality at the national level. Scandinavia has huge firms and low inequality; Latin America has tiny firms and high inequality; Mediterranean countries are closer to Latin America, while non-Anglo Western Europe is closer to Scandinavia. In the US, corporate size and inequality are astonishingly negatively correlated over time: bigger firms==>lower inequality. (I have an article coming out on this topic in ROB with brilliant doctoral candidate and job-seeker J. Adam Cobb; email me if you would like a copy.)

    So, size may in fact matter, depending on what we mean by “size” (and, I supposed, what we mean by “matter”).

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    Jerry Davis

    December 1, 2010 at 2:15 pm

  14. […] week, Brayden wrote up a very interesting article showing that protesting a proposed Wal-Mart store decrea…. My question: Is it ethical to protest […]

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