Trade Associations Matter as Units of Selection,as Actors Within Comparative and Historical Institutional Frameworks,and as Potential Impediments to Societal Wide Collective Action

Organizations as Units of Selection

In the evolutionary model of variation, selection, retention, and struggle, selection can take place within and between organizations (Aldrich & Ruef, 2006). Within organizations, internal selection processes can favor some routines and practices over others, and between organizations, external selection forces can favor some organizations and doom others. When organizational ecologists first proposed that organizations could be seen as units of selection within an evolutionary framework, many critics objected, arguing that organizational mortality was not a significant source of change across industries and that strategic action helped most organizations adapt to their changing environments. Those days are long gone, thanks in part to the many studies produced by organizational ecologists documenting the high exit rates in most organizational populations, particularly for young organizations (Aldrich, 2015).

Nonetheless, to claim that something is a unit of selection, a researcher must argue that the thing being selected is highly stable as an entity, and thus can be retained within a particular selection environment. Since Nelson and Winter’s (1982) classic book, most organization and management scholars have taken routines and practices for granted as units of selection. However, claiming that organizations qua organizations were units of selection was initially a harder sell. Few of the early organizational ecology studies of populations such as restaurants and unions bothered to make the theoretical case for organizations as units of selection, seeming to argue that if something could be counted, it qualified as a selectable entity. Instead, the conceptual argument for considering whole organizations as potential units of selection was made by scholars studying things like organizational boundaries (Aldrich, 1979) and organizational culture (Martin, 1992).

Claiming organizations as units of selection seems easiest in the case of business organizations, which have “owners,” are recognized in law as individuals with the right to enter into contracts, and operate in competitive markets where boundary protection is a critical issue. However, what about nonprofit voluntary associations, such as trade associations? What forces create sufficient coherence inside the claimed boundaries of trade associations to allow researchers to treat them as entities? The contributors provide an elegant and theoretically satisfying answer to this question: Trade associations focus their members’ attention on collective interests, creating shared understandings about issues and a collective identity that unifies an association and justifies calls for action by the association on the members’ behalf.

The leadership and staff of associations must craft a compelling story about an association’s raison d’être, and then infuse the association’s activities with meaning such that they can retain their members and recruit new ones. Spillman describes this as their “cultural infrastructure” around which the association’s activities can be organized, such as trade shows and industry publications. Accordingly, the production and diffusion of meaning is a critical task for an association’s staff. Although I have stated this in prescriptive terms, staff members have no guarantee that their attempts will produce a collective identity that members will accept, nor an organization whose boundaries members will want to defend. Indeed, as Spillman notes, trade association boundaries only partially accord with official “industry” designations that are the basis for governments’ collections of statistics and issuance of regulations. From the perspective of firms trying to decide what trade association to join, imagine the difficulty that hybrid firms such as Amazon, Google, eBay, and Facebook had in figuring out what association is appropriate. As a result, they formed the new Internet Association, based in Washington, D.C., and tasked the new association’s staff to work out how its boundaries would be defined.

As several authors noted, the collective identity pursued by an association may succeed in defining an industry to the media and regulators, in turn putting the association on a stronger footing. For example, Kahl writes of associations as forging market discourse and shaping market cognition. But he notes that association activities can also enact blinders that hamper effective action, as in the insurance industry. Going forward, the issue of enacting organizational boundaries within which a collective identity emerges strikes me as a critical issue for people studying trade associations, as well as for scholars interested in organizational culture and symbolism.

Cross-National Variation in Institutional Structures Shaping Business Interest Associations

The pioneering work by Schmitter and Streeck on organizing business interests was meant to be a multinational comparative study, but problems in coordinating the creation of a common data collection framework undermined the prospects for truly comparative analyses. Investigators in the different countries comprising the research alliance pursued their own interests, using different questions and indicators, and so it was difficult to directly compare interpretations across national contexts. Since then, as several of the papers note, cumulative research has been spotty, and I would argue that part of the problem stems from lack of attention to international differences. ¹ For example, in the United States, by law, trade associations are voluntary and open, meaning that no businesses that are plausibly within the industry boundaries claimed by an association can be denied entry, and conversely, denied exit. In some other nations, however, membership in an industry’s association is compulsory by law. That changes the game. In the four papers constituting this Dialogue, only Spillman was careful to note that her work pertains to American trade associations, and not to all business interest associations globally.

Trade associations do not inhabit the same kind of environments in all nations and that affects their ability to achieve policies favoring their interests. Instead, institutional frameworks for business interest association differ substantially between countries, as made clear by a compelling new book on interest group politics in Europe by Dür and Mateo (2016). Their comparative analysis of interest groups—business associations, labor unions, professional associations, and citizen groups—across five nations shows that not only do most interest associations represent businesses, but that their access to government officials is quite different from that of other associations. They call business associations “insiders,” as opposed to “outsiders,” because business associations typically focus on providing information to decision makers (politicians and regulators), whereas other associations focus on mobilizing the public to put pressure on decision makers.

For my purposes, two points regarding future research arise from Dür and Mateo’s (2016) research. First, they show the value of not treating trade associations and other business interest associations in isolation, but rather in comparing their activities with those of other interest associations. Many things that trade associations do are driven not because they are business interest associations but because they have to follow many of the same paths as other interest associations, such as those are representing the public. Second, across nations, political systems differ substantially in the way interests can be pursued, with important contingencies including the difference between pluralist versus corporatist systems, the extent to which political institutions depend upon the information provided by interest groups, and the extent to which political institutions are actually open to lobbying. In this regard, the American political system is, to some extent, an outlier, and we should be careful about drawing inferences concerning “trade associations” from studies only conducted in the United States.

Trade Associations Are Potentially an Impediment to Collective Action Toward Political Solutions in the United States

I believe the long-term decline in class consensus within the American business elite (Mizruchi, 2013) has raised the relative power of trade associations, compared with the powerful peak business associations of a bygone era, paving the way for more narrow self-interested actions and diminishing the influence of other kinds of interest associations. Historically, business managers and owners could attempt to exert influence at four different levels in the system. First, they could get involved as individual executives, contributing money, lobbying officials and agencies, and so forth. Second, representatives of their organizations could do the same, especially through board interlocks with other firms in different industries, through which they could diffuse general business practices as well as practices aimed at producing public goods (Davis & Greve, 1997; Galaskiewicz, 1985). Third, firms can participate in trade associations for specific industries that support favored policies and practices (Ozer & Lee, 2009). Fourth, and perhaps most important, a handful of peak associations sat above the previous three levels, cutting across firms and industries, and claiming to speak for the business community as a whole. For example, the now-defunct CED (Committee for Economic Development) advertised itself as offering “reasoned solutions from business in the nation’s interests.”

Mizruchi argued that after World War II, American business leaders, working individually and through peak associations, were voices of moderation and pragmatism as the American economy expanded and U.S. influence in the world grew. Foregoing narrow self-interest, they accepted the legitimacy of organized labor and some federal oversight of the economy. By pursuing a policy of what the CED referred to as “enlightened self-interest,” they made it possible for the federal government to pass significant legislation that took account of national collective interests, such as the construction of the interstate highway system and improvements in the social security system, as well as the expansion of Medicaid. However, all this changed in the 1970s, as businesses were buffeted by global competition, rising inflation, and strong public pressure to do something about the environment, public health, working conditions, and so forth. That pressure led to the creation of many new federal agencies in the 1970s, such as the Environmental Protection Agency. What Mizruchi characterizes as a relatively harmonious working environment prior to the 1970s involving government, business, and labor changed into a much more confrontational system. The financialization of American corporations in the 1980s intensified pressures on executives and diminished their enthusiasm for pursuing collective solutions (Davis, 2009; Mizruchi, 2013). The corporate scandals of the early 2000s and the Sarbanes-Oxley Act of 2002 further disrupted the formerly cozy relationships between members of the corporate elite (Chu & Davis, 2016).

Changes in patterns of mergers and acquisitions, initial public offerings, and the growing importance of private equity firms have led to the slow disappearance of corporations from the American economy over the past two decades (Davis, 2016). Publicly held corporations might have felt some obligation to temper their self-serving action with more public-regarding actions, to the extent that shareholders and activists could hold them accountable. However, privately held corporations have no such watchdogs, and thus can act with much more autonomy and disregard for collective and societal interests.

Thus, because of these changes, over the past three decades, the business elite has fragmented and lost its ability to act collectively (Walker & Rea, 2014). Unlike in earlier eras, when presidents and political leaders could call upon business leaders in peak associations to help them push for policies that might involve some sacrifices on their part, elites pulled back into policies reflecting more narrow self-interest. Mizruchi argues that many of the problems plaguing U.S. politics—extreme partisan polarization and inability to enact needed legislation, such as improvements in national highway infrastructure—stem from the damages done to social and political consensuses by developments since the 1970s. Consequences can even be seen at the state level, where efforts by public interest associations to expand Medicaid, under the Affordable Care Act, ran into strong opposition by conservative nonprofit advocacy organizations that mobilized public opinion against expansion (Hertel-Fernandez, Skocpol, & Lynch, 2016). Traditional general business interest associations like the Chamber of Commerce, as well as associations of hospitals and doctors, were unable to overcome special interest lobbying against expansion.

With the loss of elite cohesion resulting in fewer class-wide constraints on businesses pursuing narrow self-interest and lobbying against policies purported to be in the public interest, strong trade associations are much better positioned now to pursue their own interests. In the past, they might have been constrained by networks of ties between firms and their membership in strong peak associations. However, in the changed political and economic environment, they now have much more room to fight for industry-level benefits against more comprehensive cross-industry solutions, as in issues such as environmental protection. Moreover, in this new environment, big firms are not as constrained by class-wide norms as in the past, and they can use their dominance within trade associations to push for their own interests (Barnett, 2009). Whereas in the past special interest associations such as the American Legislative Exchange Council or Americans for Prosperity might have been restrained by needing to justify their actions to more moderate peak associations, that is no longer the case (Jackman, 2013).

The United States is entering uncertain political times, with political parties polarized, and collective action in the public interest is apparently extremely difficult to achieve. To the extent that the decline of elite class cohesion and moderate business peak associations weakens the forces of conciliation and compromise, strong trade associations may step into the void and make matters worse. Of course, as Walker and Rea (2014) remind us, we should not conflate business unity with business power, and each case must be assessed on its own merit.

Final Thoughts

I would be delighted if the four papers in this special section were to rekindle interest in empirical research on business interest associations. For evolutionary theorists studying organizations, the governance issues facing trade associations as they attempt to construct and defend their boundaries present an opportunity to address issues of organizations as units of selection. For scholars using historical and comparative frameworks from an institutional theory viewpoint, the study of trade associations presents an opportunity to study similar kinds of organizations in very different institutional settings. For social scientists interested in social and economic justice, trade associations represent powerful actors with the potential to undermine the pursuit of collective action for achieving public goods. For all three reasons, trade associations deserve more attention from the organization and management theory community.