Liability of newness

The liability of newness phenomenon describes the different risks of dying of an organization during its life course. It states that at the point of founding of an organization the risk of dying is highest and decreases with growing age of the organization. There are basicly three reasons why this might be the case (see Stinchcombe, 1965):
  • New organizations which are acting in new areas ask for new roles to be performed by their members. The learning of the new roles takes time and leads to economic inefficencies.
  • Trust among the organizational members has yet to be developed since in most cases the new employees of a firm do not know each other when the organization is founded.
  • New organizations have not yet built stable portfolios of clients.

    These considerations can - at least in some respects - also apply to the new rules of an organization. A new rule also implies new roles that have to be learned and members have to develop trust towards the new rule. According to this theoretical concept a new organizational rule should also have its highest risk of beeing abolished just after its founding (see Schulz, 1993).

    Literature: Schulz (1993), Stinchcombe (1965)

    Entry by: Klaus Beck

    November 10, 1997
    Direct questions and comments to: Glossary master