Perspective ---From Gaussian to Paretian Thinking: Causes and Implications of Power Laws in Organizations

Pierpaolo Andriani () and Bill McKelvey ()
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Pierpaolo Andriani: Durham Business School, Durham University, Durham DH1 3LB, United Kingdom, and eBMS-ISUFI, Universita' del Salento, Italy
Bill McKelvey: UCLA Anderson School of Management, University of California, Los Angeles, Los Angeles, California 90095

Organization Science, 2009, vol. 20, issue 6, 1053-1071

Abstract: Although normal distributions and related current quantitative methods are still relevant for some organizational research, the growing ubiquity of power laws signifies that Pareto rank/frequency distributions, fractals, and underlying scale-free theories are increasingly pervasive and valid characterizations of organizational dynamics. When they apply, researchers ignoring power-law effects risk drawing false conclusions and promulgating useless advice to practitioners. This is because what is important to most managers are the extremes they face, not the averages. We show that power laws are pervasive in the organizational world and present 15 scale-free theories that apply to organizations. Next we discuss research implications embedded in Pareto rank/frequency distributions and draw statistical and methodological implications.

Keywords: Pareto; power law; Gaussian statistics; oganization; average; extreme events; scale-free theory (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (38)

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