Organizational ecology theory examines how organizational populations change and develop over time through stages of founding, growth, transformation, decline, and death (Hannan & Freeman, 1977, 1989). The theory addresses the forces of social, political, and economic systems that (1) increase organizational diversity, for example, creating new organizational forms, and (2) decrease organizational diversity, for example, driving away certain organizational forms via competition. The theory also looks at the dynamics within organizational populations (Hannan & Freeman, 1989).

Aldrich and Ruef (2006) reported that there are literally hundreds of thousands of organizations in the world, varying in size from tiny to enormous. Hannan and Freeman (1977) asked the question, “Why are there so many (or so few) different kinds of organizations?” (p. 7). To answer this question, Hannan and Freeman borrowed from Hawley’s work on human ecology (1950, 1968) and explored a population ecology of organizations. However, they extended Hawley’s work in two ways: (1) using explicit competition models showing how organizations change in structure depending on their environmental pressures, and (2) using niche theory to examine how organizations change in dynamic environments.