Liability of newness
Source: SFB 504
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).