organizational valuation

Source: Carroll & Hannan, 2000, 70-71

Organizational valuation is related to organizational forms and organizational populations. A firm exists only as long as it has value in its ecosystem.

Organizations and other corporate actors face evaluation by members, particular external constituencies, and the society at large. The various kinds of evaluators might have different perspectives and impose different, perhaps conflicting, demands. The more positive the (aggregate) evaluations of an identity, the more resources will be available for the organizations with that identity.

Valuation judgments are made both by insiders and outsiders. Members decide how much loyalty to give to an organization, constituencies decide whether to engage in transactions with the organization and whether to support it in disputes, and so forth. To represent this abstract content, we specify two evaluation functions, one pertaining to the judgments of ""insiders"" (members of the organization) and one pertaining to ""outsiders.""

Valuation involves all sorts of social reactions to organizations based upon their identities. For instance, valuation can involve judgments by members about whether an organization has remained faithful to its traditions and culture. Valuation can also mean general social approval by controllers of resources, the belief that organizations possessing a certain identity are valid organizations deserving of support. Valuation can also mean the literal calculation of pecuniary value in the sense that investors in stock markets explicitly or implicitly make calculations of the expected value of films. When these expectations take form of organization into account, then the process bears on the definition of identities.

Valuations of features can change over time, as new practices emerge, technologies evolve, and cultural and political views shift. In this context, we must address the volatility of the evaluations of identities. If big changes in the evaluation of an identity can take place instantaneously, then evaluations of identities do not serve as a basis for potentially stable social identities. So, we make the seemingly reasonable assumption that valuation functions change smoothly over brief intervals, that the views that underlie evaluations do not change sharply and discontinuously.