Boundary Formation in Emergent Organizations


Journal Article

An extensive literature in organizational theory discusses how established organizations shape and maintain their boundaries but offers little guidance as to how organizational boundaries emerge in the first place. This paper examines boundary formation in business startups using a nationally representative dataset of U.S. nascent entrepreneurs. We propose several distinct roles for individuals entering into entrepreneurial activity, distinguishing between "insiders" (owner-managers) who commit both time and financial resources to these startups and "outsiders" (including passive investors and advisors) who offer more limited resource commitments. Two important criteria demarcating organizational insiders and outsiders in emergent organizations are functionality and perceived trustworthiness. Our results suggest that boundary formation is more often based on a potential member's trustworthiness, as perceived by peers, than functionality, emphasizing considerations such as transaction cost minimization and uniqueness of resource contributions. We propose several mechanisms that may account for this result among nascent entrepreneurs, including a lack of economic sophistication, calculative trust, and the importance of social solidarity for founder recruitment. © 2007 Elsevier Ltd. All rights reserved.

Full Text

Duke Authors

Cited Authors

  • Xu, H; Ruef, M

Published Date

  • 2007

Published In

Volume / Issue

  • 25 /

Start / End Page

  • 125 - 153

International Standard Serial Number (ISSN)

  • 0733-558X

Digital Object Identifier (DOI)

  • 10.1016/S0733-558X(06)25004-3