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In 1981, W. Richard (Dick) Scott of Stanford's sociology department described a paradigmatic revolution in organizational sociology that had occurred in the preceding decade. In Organizations: Rational, Natural, and Open Systems (Scott, 1981), he depicted the first wave of organizational theory as based in rational models of human action that focused on the internal dynamics of the organization. He described the second wave, found in human relations theory and early institutional theory, as based in natural social system models of human action but still focused on the internal “closed system.” A sea change occurred in organizational theory in the 1970s as several camps began to explore environmental causes of organizational behavior. The open-systems approaches that Scott sketched in 1981 were still seedlings, but all would mature. What they shared was an emphasis on relations between the organization and the world outside of it. The roots of these new paradigms can be traced to innovations of the 1960s. Contingency theorists Paul Lawrence and Jay Lorsch (1967) had argued that firms add new practices and programs largely in response to external social demands and not simply to internal functional needs. James Thompson (1967) argued that organizations come to reflect the wider environment and particularly the regulatory environment.

For many years, Stanford University has had a major organizations research faculty distributed across at least four schools and numerous departments. By its existence, that faculty has recruited others of similar quality. It has attracted a strong group of students who in due course have gained their doctorates at Stanford and have populated North American, European, and Asian universities.

When I arrived at Stanford in the fall of 1993, the university was a thriving site of organizational research. The department of sociology served as a sort of epicenter, with workshops on organizational ecology (led by Mike Hannan), organizations in the world polity (John Meyer and Francisco “Chiqui” Ramirez), and healthcare organizations (Dick Scott). In the school of education, Jim March was intriguing a new generation of students with his puzzles and wisdom. In addition to Mike Hannan's joint appointment, the Graduate School of Business featured such luminaries as Jeff Pfeffer, Joanne Martin, Jim Baron, Joel Podolny, and Bill Barnett. Slightly further afield, Ray Leavitt and Michael Fehling had begun to train engineers to think about organizational issues, as they developed computer simulations with nuanced attention to cognitive and decision-making processes. Steve Barley would join (what was then) the department of industrial engineering in 1994 and Mark Granovetter would join the department of sociology in 1995, adding fresh insights from the sociology of work and economic sociology, respectively, to what was already a firm foundation for organization studies. The umbrella organization that linked many of these efforts was the Stanford Consortium on Organizational Research (SCOR), which had been guided by Dick Scott's able leadership since 1988 and hosted an annual organizations conference at the beautiful Asilomar retreat in Monterey, California.

Dick Scott's “statesmanship” stands out as an obvious factor in explaining the Stanford phenomenon. By statesmanship, I refer to what Selznick (1957) meant by the institutional leader who plays a fundamental role in making an organization an institution that has the capacity to develop, adapt, and endure over time. Perhaps this goes without saying; Dick's statesmanship has been recognized elsewhere with the aim that he will know how much he is appreciated for his vital role.

Charged with a daunting task of organizational analysis, the good Stanford graduate of my era dutifully turns for inspiration to Dick Scott's Organizations: Rational, Natural and Open Systems. It is not quite the Bible, but it has a far more useful index and bibliography. And, as a beginning, I often encourage my own students to consider the basic “elements of organizations” that Scott presents in the form of a simple “diamond” typology, originally attributed to Harold Leavitt (1965) and in the most recent edition (Scott & Davis, 2007) updated to reflect the work of Nadler, Tushman, and Nadler (1997). This typology directs attention to five key components of any organizational phenomenon: (1) the participants; (2) the formal structure; (3) the informal structure; (4) the technology; and (5) the environment. Considering each of these elements may shed some light on the Stanford experience.

A summer spent at Stanford University in 1973 contributed significantly to my emerging perspective on organizations and generated the spark I needed to begin working on what became Organizations and Environments (Aldrich, 1979). Dick Scott invited me to be the second visiting scholar to participate in the Research Training Program on Organizations and Mental Health, following my Cornell colleague, Karl Weick, who had done it the year before. Curiously enough, Paul Hirsch, a former colleague of mine in graduate school, was the third visiting scholar in the program. I taught an organizational theory course to a class that included Chuck Snow, Kaye Schoonhoven, and a number of Mike Hannan and John Meyers' students. I suspect that I learned as much over those three months as did the students in my course.

This chapter attempts to explain why the community of scholars at Stanford University generated an unparalleled amount of highly influential theory and research on organizations in the last three decades of the 20th century.¹

The 1980s and 1990s at Stanford University were a uniquely productive era for research on organizations and labor markets. I describe three important, interconnected themes that characterize the research on organizations and labor markets that emerged from Stanford during this era: the central role of the firm in a multi-level system that determines labor market outcomes, the role of institutions in both creating and constraining labor market outcomes, and the dynamic, often unexpected, consequences of labor market outcomes. I describe the genesis and development of each theme and conclude by discussing what lessons can be learned from this era about creating an innovative and productive research culture.

Cultural portraits usually begin with a description of the context, but as this material is covered elsewhere in this volume, this introduction will be mercifully brief. At any time during the last four decades, there have been dozens, perhaps even hundreds, of Stanford University faculty and doctoral students interested in studying organizations. They have been scattered across the campus, often in small groups within larger schools and departments. They have been based in the Sociology Department and the Organizational Behavior and Strategy areas at the Graduate School of Business. There were always a handful at the Education and Engineering schools, as well as a scattering of individuals doing related work in Psychology, Political Science, and Anthropology. In spite of their numbers, before the Stanford Center for Organizational Research (SCOR) was founded in 1972, many of these faculty, postdoctoral fellows, and doctoral students felt rather isolated. They had little contact with colleagues across campus who shared their interest in organizations and little collective clout when resources were being distributed.

Institutional theories of organizations in sociology have focused on exteriority and constraint over the past three decades, in keeping with their roots in macrosocial theory (Parsons, 1956). These theories have mostly examined the macrocontext for organization- and field-level activities, rather than the microprocesses through which humans accomplish particular actions. However, with the widespread diffusion and adoption of neo-institutional theory (hereafter NIT) as the default framework within organizational sociology, some authors have been unable to resist extending it to encompass microlevel change processes. In particular, people studying entrepreneurship, broadly defined, have created a new category of actors, called institutional entrepreneurs (hereafter IEs), along with associated new concepts, such as embedded autonomy. Organization studies journals now routinely publish papers on the topic of institutional entrepreneurship (Leca & Naccache, 2006), and special sections of mainstream management journals also regularly feature such papers.