the organizational ecology of foundings and failures in the african airline industry, 1933-2005

8/15/2019 The Organizational Ecology of Foundings and Failures in the African Airline Industry, 1933-2005

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The Orga niz ati on al Ecology of Foundingsand F ailur es in the Af ric an Airline Ind ustr y,1933-20 05

A Thesis Presented By

Jef fre y Christ opher A gu er o

To

The Harvard University Department of Sociology

In Partial Fulfillment for the Degree of

Bachelor of Arts

With Honors in Sociology and African Studies

Harvard University

Cambridge, Massachusetts

24 March 2006


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Table of Contents

1 Acknowledgements

2 Abstract

3 Introduction

4 Global Politics and Airline Entrepreneurship

5 The African Airline Industry

6 Theoretical Background

7 Data and Methods

8 Results and Discussion

9 Conclusion

10 Bibliography

11 Appendix

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Acknowledgements

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Without the help and guidance of my very knowledgeable and extremely patient and

flexible advisor, Professor Frank Dobbin, I would not have been able to complete this

project. He assisted me every step of the way and always had time to devote to the

endeavor. Equally important to both the development of the initial project and advice and

suggestions along the way was David Ager. His willingness to help out and timely were

always greatly appreciated.

I would also like to thank Victoria Kent and the entire Department of Sociology

undergraduate team for their assistance and guidance throughout the project, including

the departments funding. Terri Oliver in the Department of African and African

American Studies also was helpful over the past year. Lauren Rivera and Mia Bagneris

assisted in editing and directing the nature and direction of the project, as the graduate

student advisors in each department. In addition, I owe a debt of gratitude to John

Mugane for stimulating my interest in Africa on the first day of my first-year at Harvard.

Asante sana mwalimu.

Finally I would like to thank my friends and family for their continual reassurance and

motivation throughout my research, which provided valuable at a number of points.

Specifically I wish to thank my mom and dad for supporting me and allowing me to

attend Harvard, without which I would have never had access to some many excellent

opportunities, including this thesis.

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Abstract

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Airlines are extremely vital components of modern society. They serve as the

main method of transportation between countries and regions and contribute to the free

flow of people, goods, and ideas a necessary condition of the global marketplace. An

analysis of the dynamics underlying the African airline industry through the lens of the

population ecology framework provides excellent insight into how the organizations

interact and respond to global political events such as the end of World War Two, the fall

of the Soviet Union, and the struggle for independence. I collected data over the entire

lifespan of the African airline industry from 1933 to 2005 in relation to the birth and

death patterns of firms during that period. After conducting regression analysis of the

founding and failure of these airlines, I found that the industry follows the same general

dynamics outlined in other ecological models relating to density, age, and rate

dependence. In addition, the results show that birth rates were positively impacted by the

end of World War Two, the end of the Cold War, and the granting of independence;

likelihood of failure was also reduced during these periods, leading to a net increase in

density. These results offer insight into both population ecology and African

development policies. Future ecological studies should consider international

populations and put greater emphasis on the effect of political environment. Likewise,

development activists would be wise to spend more time understanding the underlying

dynamics of developing nations industries and how they are affected by environmental

changes. Such insight can provide assistance when formulating policies designed to

encourage growth by increasing knowledge of how organizations will respond to these

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changes. Future research should focus on comparative approaches with other regions and

the inclusion of additional variables to further substantiate the hypothesis.

Introduction

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When Oroville and Wilbur Wright successfully flew worlds first airplane at Kitty

Hawk in 1903 little did they realize the revolution their inaugural flight would soon

begin. More than a century after their historic flight, our world relies on air travel as a

means of transportation more than ever before. While catastrophic events such as plane

crashes or terrorist hijackings result in a short-term realization of the importance of air

travel, by and large the vast structures and mechanisms that serve as the foundation for

our system of air travel goes largely taken-for-granted and unnoticed. As impressive as

modern aircraft are, equally astounding are the organizations that have been put in place

to operate and coordinate the journeys of these massive, flying vessels. To fully

appreciate these systems it is necessary to better understand the rules and processes that

govern the interaction between airline firms.

As the world continues to shrink on a daily basis as a result of globalization,

barriers that once separated nation states dwindle in response to increase in transnational

communication, and airlines serve as a major vehicle for promoting such change.

Passenger air travel has transformed a journey that previously took weeks or months by

boat or train into a trip no longer than a days travel. Consolidation such as this is integral

to the free flow of people and ideas required by modern society and understanding how

such systems operate in underdeveloped regions such as Africa can provide excellent

direction in how to more effectively design structures within these regions so as to more

easily promote a global economy.

Considering the importance of air travel to globalization this project seeks to

investigate the organizational dynamics of African airlines, paying particular attention to

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the processes governing the founding and failure rates of firms. Drawing on the

population ecology literature as originally conceived by Hannan and Freeman, I assume

that density, age, and birth and death dependence affect the entry and exit of African

airlines. Additionally, I propose that three political factors the end of World War Two,

the granting of independence to former colonies, and the end of the Cold War all

positively contribute to firm growth and reduce likelihood of organizational mortality. I

am to explain the historical changes in the airline population in the context of the political

changes that occurred during these periods.

In spite of recent gains in economic production and huge sums of foreign aid,

Africa continues to be the worlds most underdeveloped region. Huge amounts of time

and money have gone into studying the development crisis afflicting Africa, but more

research is necessary to understand the structures underlying African society. Rather than

simply pumping more money to fix the problems, we must seek to understand how the

institutions within Africa work. The application of a methodology such as population

ecology, which has been used to analyze changes in organizations in the West, proves to

be extremely valuable in understanding the organizational dynamics governing the

population of firms within Africa. Analyzing how African organizations operate, respond

to environmental changes, and ultimately live and die can help to illuminate new more

effective methods at sustaining development as well as offer comparisons between Africa

and other regions of the world. The dynamism of the airline industry and its importance

across the continent towards furthering the flow of people and ideas makes it a prime

candidate for study. My hope is that this project will provide at least some insight into

the processes underlying African organizations.

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Global Politics and

Airline Entrepreneurship

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Ecological Perspectives on Political Environment

Previous studies in organizational ecology have considered a number of factors

including age, density, birthrates, and death rates in their studies of the changing nature of

organizational populations, but relatively few have analyzed the specific effects of

political changes on the organizational environment. Some of the major research that has

taken political variables into consideration involves the study of newspapers in a number

of countries. Studies of newspapers in Argentina and Ireland have shown that political

turbulence raises birth rates, and similar studies of newspapers in the United States and

Finland showed that political turbulence also increases failure rates. (Delacroix and

Carroll 1983; Carroll and Huo 1986; Amburgey et al. 1988) Evidence also shows that

newspapers founded during these turbulent times have shorter life spans and a higher risk

of because of their role as opportunists, taking advantages of the temporary spike in

resources (Carroll and Delacroix 1982). While these studies definitely provide insight

into the role of political events on organizational populations they are limited to the

national and local scale and do not investigate global changes in politics. Likewise, the

studies limit themselves to only the newspapers within one country and there is no study

of the global newspaper industry. In studying the African airline industry, I have been

able to focus on the effect of global politics on a multi-national, continent-wide

organizational population. Additionally, whereas the studies of newspapers have found

that political effects stimulate birth and death rates, I hypothesize that the political effects

in this study increase birth rates and decrease death rates, providing a net overall increase

to the industrys population.

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The Role of Political Effects on African Airlines

Beyond demographic characteristics of the population such as age and density, I

propose that three political factors affect the birth and death of African airlines: the end of

the World War Two, the end of the Cold War, and the granting of independence to African

nations.

The Post-World War Two Era

The period after World War Two leads to higher birth rates and lower death rates

of airlines for two main reasons: increased legitimacy of airlines on the whole, and the

application of new technology to an already present infrastructure. This period begins

roughly at the end of the Second World War and continues to the present.

Hypothesis #1:

Greater legitimacy of the airline industry by international organizations in the post-World War

Two era led to increases in birth rates and decreases in the likelihood of failure.

The 1940s saw the development of a bevy of international organizations that

began to establish standards transcending national boundaries. Institutions such as the

World Bank and the International Monetary Fund were founded in 1946, and aimed to

provide economic assistance and regulation on a global scale. More applicable to

airlines, was the establishment of the International Air Transport Association (IATA) in

1945 and the International Civil Aviation Organization (ICAO) in 1944. The IATA is a

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trade organization made up of airlines from around the world and collects data from its

members on a variety of variables ranging from the number of planes in a fleet, the size

of the workforce, average load factors, and routes traveled. Additionally, the IATA

compiles reports and papers on current issues applicable to its members on such issues as

changes in safety regulations, the impact of world events on air travel, and fuel price

predictions. (IATA 2006) The ICAO, a unit of the United Nations, is the closest thing to

an international air transportation regulatory agency that exists. Major activities of the

ICAO include negotiating air traffic rights between countries, planning future routes, and

establishment standardized communication and safety protocols. One major contribution

of the ICAO is the development of a standardized air traffic control designator and code

system for pilots and air traffic control to communicate; equally valuable was the creation

of a uniform system of four-letter airport codes for travel agencies, airlines, and pilots to

use so that routes and fares can be calculated with a universal set of city identifiers.

(ICAO 2006) Both the IATA and the ICAO have assisted greatly in standardizing the

international airline industry. Increased standardization and regulation helped to increase

the legitimacy of the airline industry by increasing public awareness, easing air travel,

and improving the feelings of safety in the air. Additionally, the ICAO has integrated

governments into the airline industries activities through the process of route negotiation

and traffic rights. This linkage between the government and the IATA gave even more

legitimacy to the airline industry as a whole, because government cooperation with IATA

signified an implicit act of external legitimacy; if governments viewed airlines as

illegitimate they would refuse to negotiate routes, but because they did negotiate routes it

implies they recognize airlines as a legitimate organizational form. Such recognition by

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governments greatly raises the overall legitimacy of airlines because governments are

considered very high status institutional actors; the recognition by such a high actor raises

the organizations status to a level that makes other institutional actors (i.e. banks, private

investors, consumers, etc) equally willing to give support to airlines. (Baum and Oliver

1991) Steps such as these have resulted in greater public confidence in air travel, leading

to a greater willingness to devote resources in airlines, thus increasing birth rates and

decreasing death rates.

Hypothesis #2:

New advances in aviation technology and their application to an already present infrastructure,

as well as increases in population reduced death rates and increased birth rates after World War

Two.

In addition the development of institutions such as the IATA and ICAO in the

post-World War Two era, technological improvements combined with an already present

infrastructure in place during the scramble for Africa facilitated growth. The

infrastructure for air travel had already been established in Africa as the colonial powers

used air travel as a primary means of connecting cities and regions across the continent.

Because of the relative ease in establishing airfields in undeveloped areas, the colonial

powers most notably Britain and Germany heavily used airships to connect their

colonial possessions in the 1920s and 1930s. The establishment of terminals, runaways,

training programs, and protocols allowed air travel to continue to grow and thrive in the

post-colonial era. (McCormack 1976) World War Two was the first conflict to rely

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heavily on airplanes, and the new technology was used extensively in both combat and

transportation of troops and supplies. After the end of the war, significant technological

process had been made in both the aircraft themselves and their related systems. The

turbojet engine and turbofan were the most notable technological innovations during the

war. (Loftin 2004) The jet-engine allowed for much faster travel as well as for longer

flights than previously covered by propeller aircraft. These increases allowed airlines to

improve their efficiency and carry more passengers at a time to cities much further away.

The application of these technologies to the international passenger industry combined

with a war-depressed global economy resulted in considerable growth and expansion into

new markets and routes. When considering the infrastructure that was already in place

from the pre-World War Two imperialist struggles, Africa significantly benefited from

increased air activity as the new technologies were easily integrated. The worldwide

volume of air travel, as measured by passenger air traffic, increased seven fold between

the end of World War Two and 1980, signaling just how much the industry grew.

(Jonsson 1981) These factors led to increased density and births and decreased death rates

in the post-World War Two era.

The End of the Cold War

Similar to the period after the end of World War Two, the end of the Cold War

also signaled increased birth rates and decreased likelihood of death. Throughout the

period from 1945 to 1989, both the Soviet Union and the United States used Africa as

they did much of the developing world as a battleground for the Cold War. Though

geographically distant from both the U.S. and the U.S.S.R., the recently independent

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nations of post-Colonial Africa presented ideal breeding grounds for the competing

ideological and political systems of the two super-powers. The United States sought to

spread democracy throughout the world and the U.S.S.R. aimed to impose its socialist

model of government to newly developing nations; both countries found takers for their

respective policies in Africa, but they also both cultivated the development of

authoritarian regimes as well. The U.S. and the U.S.S.R. equally exploited the desperate

need of African nations for economic and military support, and in some cases the support

paid off with countries adopting their respective political ideologies. Countries such as

Senegal and Tanzania followed the Soviet Union closely with the adoption of African

socialism. (Thomson 2004) More frequently however, African heads of state had the

ability to garner resources and support from both sides yet remained largely unaligned in

the conflict (Melady 1965). Rather than adopt a strictly socialist or democratic model,

nations such as Zaire leveraged resources from both sides but remained largely

authoritarian under Mobutu. South Africa serves as another prime example of this, as the

U.S. government feared that too much direct intrusion into Pretorias affairs would result

in a tip in favor of the Soviets. This led to President Reagans hesitation to impose full

sanctions against South Africa during the 1980s despite similar moves by other countries.

(Moss 1995) In general, the Cold War era allowed for authoritarian, totalitarian, and to a

lesser extent socialist regimes to grow in Africa. Socialist and authoritarian regimes

allowed to remain in place during the Cold War contributed significantly to Africas

social, political, and economic underdevelopment. (McFerson 1992)

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Hypothesis #3:

The decline of socialist and authoritarian regimes after the end of the Cold War resulted in

increases in democratic and popularly-elected governments. These changes contributed to the

development of greater economic freedom and marketplaces that generated greater resources.

The added resources increased birth rates and decreased the likelihood of disbanding.

With the fall of the Soviet Union came greater political participation and the

development of democratically grounded institutions which allowed for the emergence of

greater political and economic freedom and a stronger marketplace. Once the threat of

authoritarian African regimes retracting from the U.S.s democratic gestures and to a

socialist model was rendered moot at the end of the Cold War, the U.S. was able to take a

more active role in encouraging popular control and the lifting of restrictions placed on

the national markets across the continent. Essentially, the end of the Cold War allowed

for a more aggressive democratization of the continent as there was no need to pander to

dictators once the bargaining chip of Communism fell off the table. The fall of

Communism not only allowed the United States to take a more active role in the

promoting democracy but also allowed for greater agitation by democratic-activist groups

within African nations. The combination of international pressure and internal

movements contributed to more democracy in post-Cold War Africa. (McFerson 1992)

In 1989, only four African countries were rated as democratic regimes, but by 1992, 18

countries were considered at or in progress of reaching democratic status. Though

democratic participation and political freedom has made strides, there is still much work

to do as authoritarian regimes in such countries as Zimbabwe hamper efforts for continent

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wide stability and freedom. That said, the fall of the Soviet Union saw a surge of

recognition for the need of democratic structures and institutions in African societies.

(Moss 1995) Higher degrees of political freedom led to greater economic activity and a

stronger marketplace. Economic growth in turn spurred demand for air travel and

increased the available resources for airlines. Greater resources increase the birth rate

and decrease the likelihood of failure.

The end of the Cold War also contributed to new movements calling for an

increase in U.S.-Africa trade relations, with advocates pushing for a new sustainable

development that would benefit both sides of the Atlantic. (Seidman 1992) The opening

of markets post-1989 contributed to greater integration of Africa into global economy

leading to growth in many sectors. Such growth spurred greater need for air travel as

Africas economy moves more towards the new global, information-based economy.

Though clearly Africa still has a long way to go, the increased emphasis on ideas and

communication required in the new global marketplace has helped to also increase the

need for air travel, in turn generating more resources for airlines.

Hypothesis #4:

The end of apartheid in South Africa allowed for a return of Western investment and the

recertification of landing rights to and from South Africa, significantly increasing birth rates

and decreasing deaths rates among airlines across the continent.

The end of apartheid had both direct and indirect effects on the African Airline

Industry. In terms of direct consequences, beginning as early as the 1960s, European and

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other African nations restricted South Africa Airways from flying over or landing in their

countries. The United States and Australia imposed these types of sanctions in the 1980s.

Additionally, other airlines, including Air Canada, closed their offices in South Africa in

protest of the countrys regime. Following apartheids end, South African Airways

regained its landing rights, re-opening access and tickets sales to previously restricted

markets around the world and by the end of 1991 had actually increased its internal

African flight schedules to 11 African nations and four Indian Ocean Islands.

Furthermore, the end of apartheid allowed other African carriers which had refused to

land in South Africa or allow South African airline firms to fly over their airspace

(notably Egypt and Kenya) regain those privileges as well. Within a few years, almost all

other African nations had returned airspace rights to South African Airways and resumed

normal operations to Johannesburg and Cape Town (Pirie 1992). The end of apartheid

allowed for the removal of these restrictions, reopening many markets to South African

Airways and also reopening routes to South African cities to other African airlines.

Clearly this dramatically increased the level of air traffic and demand for air travel in

Africa, both of which signaled a more lucrative environment for foundings and provided

added resources so as to decrease firm failure.

In addition to the direct effects on the airline industry at the end of apartheid,

indirect effects characterized by overall increases in economic production also

contributed to airline growth. In 1977, the United Nations passed an arms trading

embargo on South Africa and larger scale efforts to sanction the country economically

began gaining significant momentum. While the United States and the United Kingdom

never opposed official sanctions on South Africa, many companies in North America and

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Europe did voluntarily stop or reduce their investment in South Africas economy

(Wheeler 1974). At the end of apartheid, a majority of the countries returned their

investment and UN sanctions were lifted. Not only was more money directly available

for African airlines, but the return of investment in other areas of society that require air

travel stimulated growth in the airline industry and allowed for expansion of new routes

and greater demand for passenger traffic. Perhaps the largest industry impacted by the

end of sanctions and boycotts was the South African tourism industry which rebounded

significantly in the post-apartheid years clearly generates a significant volume of air

traffic.

Colonial Independence

I also project greater African independence to increase birth rates and decrease

likelihood of failure. As nations in Africa gained their independence, leaders were faced

with a number of challenges, most notably trying to unify a country made up of many

disparate and distinct ethnic, cultural, and religious groups. Additionally, a mentality of

these nations trying to establish themselves as legitimate sovereign states in the

international community also ran strong.

Hypothesis #5:

Independent African nations divert resources to maintain their national airlines because they see

them as a demonstration of their newly obtained national sovereignty and as a method for

increasing their status in the international community. Therefore, a higher proportion of

independent African nations is associated with an increased rate of births and a decreased rate

of failure.

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Newly minted nations wish to increase their status and view the creation of

national flag carrying airlines as an easy and immediate method of increasing their status.

Often they lack the requisite technical and financial resources to responsibly create

airlines, but for the sake of national pride and status-development they allocate their

resources towards the development of international airlines anyways. (Heymann 1962)

Contributing to this were the declarations regarding the sovereignty of any country over

its national airspace made at the Chicago Convention on Air Transportation in 1944 in

that new countries seek to demonstrate their recently achieved sovereignty by having an

airline that bears their countrys name land in other cities. (Cumming 1962) Heymann

discusses how after its independence in 1958, Ghana almost immediately began to setup

intra-Africa and transatlantic and trans-Indian ocean routes to places as far away as

Japan; they often did this without sufficient planes, and when they did eventually acquire

planes, they lacked the funds to pay for them in their treasury. Ghana wished to increase

its status by becoming the main airline that connected Africa with the rest of the world

and other carriers mimicked this ambition. The desire of nations to use airlines as a

means of increasing their international legitimacy and state pride contributed to the birth

of airlines as states were eager to have as many airlines as possible. Additionally, the

commitment of governments to maintaining airlines for the sake of national pride and

political legitimacy even when they were unprofitable resulted in the nationalization and

public ownership or subsidization of many firms, thus significantly reducing their

likelihood of failure.

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Hypothesis #6:

The division of colonial regions into smaller, sovereign states resulted in higher birth rates

because individual countries each developed their own airline.

Independence also contributes to firm growth because large regions formerly

controlled by one colonial power and in turn served by one airline, were split up into

smaller, autonomous nations, each with its own airline. Two major examples of this

come to mind: West African Airways Corporation (WAAC) and East African Airways

Corporation (EAAC). (Cumming 1962) WAAC originally served Nigeria, the Gold

Coast (Ghana), Sierra Leone, and Gambia, but soon only began to serve Nigeria as other

countries developed their own airlines upon gaining independence. Thus, WAAC

remained, but Ghana Airways, Sierra Leone Airways, and Gambia Air Shuttle were all

created also. On the opposite side of the continent, EAAC encountered a slightly

different fate as it disbanded and Kenya Airways, Air Tanzania, and Uganda Air were

founded in its place once these countries gained their independence.

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The African Airline Industry

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The second-largest continent in the world both by land mass 11.7 million square

miles and population 843 million persons as of 2002 Africa is a land of much

diversity. Economically the continent ranges from the poorest in the world, such as the

$500 USD GDP per capita of Sierra Leone, to that equal with many Western societies, the

top of which is South Africa with a GDP per capita of $10,000 USD (United Nations).

An example of this is further seen in that two-thirds of the entire continents GDP is

accounted for by five of the fifty four countries in Africa, with South Africa and Nigeria

being the only sub-Saharan countries included within that group. The diversity also

manifests itself politically, as the African continent includes authoritarian dictatorships,

democratic republics, socialist regimes, theocracies, and plain anarchy. Socio-culturally,

Africa is equally diverse, emphasized most perhaps by the more than 2000 unique

languages, plus countless dialects, spoken across the continent. To some extent, the

diversity of Africa is overwhelming, and any attempt to conduct a quantitative analysis on

a continent-wide basis would seem fool-hardy at best. How then is a statistical analysis

of the continents airline industry possible?

Despite the great diversity within Africa on the surface, as the worlds most

under-developed continent, combined with a legacy of colonial rule and paternalism,

focusing ones scope to a specific industry is highly feasible and appropriate. One of the

major linkages among African nations lies in the low population density present in most

nations. Of the 198 nations and dependencies measured for population density in 2004

by the CIA, Namibia ranked 192nd with two people per square kilometer as the lowest

ranked African country. At the high end, the island nation of Mauritius topped out 11th

with 603 persons per square kilometer; in terms of the highest mainland country, Rwanda

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came in 21st with 320 people per square kilometer. In general, African nations are well

towards the lower end of the scale, and according to the UN, in 1995 Africa had an

average of 243 people per 1000 hectares in 1995, roughly one half of the worlds average.

The low population density of Africa means two things for air travel within the continent.

First, it shows the need for flights that connect remotes parts of the continent and of

individual countrys with each other. This implies the need to grow services such as

commuter flights and intra-continent airlines that provide air connections between major

urban and commercial hubs and remote villages and areas. Clearly, there is no

expectation to connect every village in Africa with a major city using air travel, as this is

both infeasible in terms of structural demands and engineering constraints, but greater

connection with distant regions is desirable. The second implication of the low density is

that carriers will likely face low passenger load factors on external flights for lack of

concentrated populations. As of 1995, Africas urban population was at only 35%

making it the least urbanized continent on Earth. Though there are obviously heavily

concentrated cities such as Lagos, Nairobi, Cairo, and Johannesburg across the continent,

in general Africas population is predominantly rural and is assumed to stay that way until

at least 2025 according to the UN. In general, the low population density and

urbanization in Africa increase the need for internal air service to connect more remote

communities with large urban centers, but at the same time limit the passenger load

factors on any international flights for lack of demand and feeder capabilities.

Connecting these portions of the country are important for social, economic, and political

reasons. Economically, African countries that contain natural resources inaccessible by

other means can take advantage of these resources by utilizing air travel to reach them.

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For example, the development of air travel in Ethiopia allowed for the harvesting and

transport of a remote coffee-growing crop that was then exported to Europe for high

value. Without air travel it would have been nearly impossible to transport workers and

necessary machinery to the remote villages where these crops grew (Heymann 1962).

Socially, air links provide a remedy for the isolation of some communities that are far

away from vital resources such as healthcare or reliable food supplies. Politically, air

travel helps to unify a country and create political stability by ensuring that the central

government has direct and immediate reach over far away regions that may be

geographically isolated. These factors are common to countries across Africa and in turn

affect the airlines operating within those countries by confronting them with similar

challenges and issues.

In addition to the low population density, the low GDP per capita and economic

purchasing power of most Africans makes air travel a very, very expensive luxury that is

foreign to most of the population. Considering that the price of an air ticket approaches if

not exceeds the entire annual income of the average citizen in most African nations, it is

easy to see why air travel is well out of reach of the masses. This financial incapacitation

leads to a vast under utilization of air travel in Africa. To give a view of the extent of this

underutilization and lack of demand, despite having a population relatively equal to that

of Europe, the total passenger-kilometers performed (the total number of additive

kilometers that an airline carried passengers for in a given year) in 1985 of the top fifteen

African airlines combined, was less than each of the top seven members of the IATA. To

give a more complete view, consider that the sum total of the top fifteen African airlines

was less than that of either United or American Airlines in the United States and is

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roughly equivalent to that of Air France. Fleet size also emphasizes the small size of

African airlines, as the total fleet size for the top 15 African airlines in 1985 topped out at

279, compared with American Airlines which had an individual total of 270 planes. It

should also be noted that planes used by African airlines tend to be older and smaller than

those used by their Western counterparts. This under utilization and lack of demand for

air travel in Africa is common throughout the continent and serves as a unifying

environmental factor for the analysis of the population of African air carriers. (Taneja

1989)

Politically, African airlines also share a similar environment. In terms of

regulation, African governments take a hard line stance against free market competition

and in favor of heavily regulated fares and subsidization if not outright ownership of

firms. Governments take an active hand in airlines because they realize the need for such

a service and understand that due to the presence of generally only one major carrier per

country, if that firm were to go bankrupt the country would lose virtually all air service.

Due to this, they actively assist airlines through both direct financial means and by setting

ticket prices both domestically and internationally (the latter of which is done in

conference with foreign governments). In general, African governments argue that

airlines provide many benefits for their nations, outside of the purely financial

performance of the airline itself, and the institutions of these airlines must be preserved to

ensure further development in their respective nations. Some benefits of an airline to the

nation-state include the flow of people for business and tourism and the transportation of

goods for international export and trade. All African airlines face tight government

control and regulation on many items including types of planes, routes flown, and of

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course ticket prices (Taneja 1989). Though these regulations may differ slightly

depending on the individual country or countries of ownership, the industry as a whole is

characterized by stiff political regulation. The other element of political environment

faced by African airlines relates to the instability in the political structure of the

continent. Though the relative political stability of the African continent continues to

increase in recent years as institutions are setup in these societies, in general there is a

great deal of uncertainty in the environment and firms must deal with the potential for

vast political changes and regime shifts in their own base country or in neighboring ones,

that may dramatically affect their business model. Events such as apartheid in South

Africa, genocide in Rwanda and Sudan, violence in the Congo and the like all clearly

impact commercial organizations such as airlines and are frequent throughout the modern

history of the continent.

Tied largely to this point is the shared political history of almost every African

country to European imperialism. A plethora of literature exists on the colonial legacy in

Africa and so I will touch on this just briefly. African nations share a legacy colonialism

that generally ended in and around the 1960s by which time many of them had received

their independence. Though there were some airlines present before the end of

colonialism, as nation-states were created independent of their European overseers, these

new countries began to create their own airlines or expand the scope of previously stifled

commercial passenger airline industries. In either case, colonialism had and continues to

have a profound effect on African life, the airline industry no exception.

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Theoretical Background

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This section provides a brief background on the study of organizations including

Webers original study of bureaucracy, the evolutionary approach to organizational

change, and population ecology, and their underlying principles.

Weberian Tradition of Organization Study

Max Weber, hailed as the father of sociology and in many respects an

organizational sociologist himself first officially documented the importance of the

organization in society in his discussion on bureaucracy. Weber viewed the bureaucracy

as an iron cage of order and rationality and his conception of such a structure

exemplifies the nature of the organization in the modern society. In discussing the

bureaucracy Weber wrote:

"From a purely technical point of view, a bureaucracy is capable of attaining the

highest degree of efficiency, and is in this sense formally the most rational known

means of exercising authority over human beings. It is superior to any other form

in precision, in stability, in the stringency of its discipline, and in its reliability. It

thus makes possible a particularly high degree of calculability of results for the

heads of the organization and for those acting in relation to it. It is finally

superior both in intensive efficiency and in the scope of its operations and is

formally capable of application to all kinds of administrative tasks. (Weber, et al

1958)

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Webers discussion of the bureaucratic structure and its efficiency and precision is

supplemented by his notion that the bureaucratic apparatus has made man only one piece

of a larger structure, designed for a common goal. Man still maintains his separate

identity and ideas, but these are counterbalanced by the larger and more overarching goal

of the organization.

"No machinery in the world functions so precisely as this apparatus of men and,

moreover, so cheaply. . .. Rational calculation . . . reduces every worker to a cog

in this bureaucratic machine and, seeing himself in this light, he will merely ask

how to transform himself into a somewhat bigger cog. (Weber, et al 1958)

Ultimately, Weber views the bureaucracy as an iron cage, trapping individuals in a set

of rules and regulations. The continuous desire of the bureaucracy to be more and more

rational and efficient removes the human agency, as individuals fall prey to the plethora

of rules that govern the system.

Another important factor in Webers work lies in focus on the social, political, and

historical factors when analyzing social phenomena. Weber stressed the need to examine

more than just one dimension on any event. Specifically, in discussing economic events,

he stresses the need to evaluate those activities that are economically conditioned and

economically relevant, citing the importance of the latter because they have

consequences which are of interest from the economic point of view (Weber, et al.1958).

From this we can discern Webers emphasis on looking beyond any one specific factor,

and instead understanding social and historical events as being affected by economics,

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culture, and politics. Webers emphasis be applied to understanding how state

independence and the post-World War Two and post-Cold War eras have affected the

growth of airlines.

Adaptive and Evolutionary Theories

The previously dominant theory in organization studies focuses on explaining

change through organizational evolution and adaptation. Though there are many

variations and spin-offs of this brand of organizational theory, the common thread linking

the approaches together lies in the importance of internal firm dynamics and strategy in

generating organizational change. Proponents of the adaptation approach suggest that as

organizations face threats, responses, and changes in their respective environments,

individual actors within these organizations will recognize these changes, devise

solutions to meet them, have the resources and power to be able to do so, and eventually

carry out the necessary alterations. There is agreement among all adaptation scholars that

larger and older organizations are the way they are because they have been better able to

adapt to the environment and accordingly, they have more effective mechanisms to deal

with environmental change. Such theoretical works put a great focus on the power of

agency of the individual and tend to dismiss larger structural constraints as well as issues

of what if the individuals are unable to muster the resources to bring about such change.

(Hannan and Freeman 1989) Below is a brief examination of some of the leading

frameworks in adaptive theory.

Lawrence and Lorsch (1967) outline contingency theory focuses on understanding

the specific environmental factors of any organization and finding the most effective

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structure for all of those contingencies. The contingency theorists argue against any one

type of specific organizational structure as a cure-all universally, and instead they push

for looking at the particulars of each firm, both internal and externally. They argue that

the structure that works best for a small organization with only a few dozen employees

operating in a highly segmented industry may work terribly for a large, multi-national

organization with a large market share. Contingency theory heavily stresses size and

technology as important factors in determining the most effective structure for a given

organization.

Another major approach to evolutionary theory involves Pfeffer and Salaciniks

resource dependency approach (1978). This theory focuses on the role that external

actors play in giving resources to organizations, and states that organizations will react

differently to different environmental actors relative to the degree which they provide

resources necessary for the organization to function. Likewise, all organizations will

continually try to minimize their dependence on outside sources, though in reality it is

impossible to fully be independent. Resource allocation clearly impacts airlines and most

often comes in the form of revenue from passenger sales and financial investment from

either governments or private parties. Though organizations are responding to

phenomena outside of themselves, the change and evolution in the organizations

structure occurs from within. More specifically, as organizations are faced with these

outward challenges, it is the actors within the organization that make decisions (all while

jockeying within their own internal power structures) on how to adjust the resource

allocation and consumption structure of the organization itself, so as to best respond to

the environmental changes.

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A final major framework on organizational evolution involves neo-institutional

theory, which focuses on the role that society-wide social norms and conceptualizations

of what is considered a legitimate organization play and how they are diffused within

the organizational environment (Meyer and Rowan 1977; Powell and DiMaggio 1991) In

turn, organizations respond and emulate these norms in order to be seen as legitimate

actors within the social context and as eligible receivers of resources. Though similar in

the focus on resource acquisition to resource dependency theory, neo-institutionalism

puts less emphasis on the internal processes of grappling for power and control in order

to be able to allocate the resources that Pfeffer and Salacinik discuss, and more on the

interaction between and among peer organizations while taking into consideration a

degree of structural processes. Specifically applicable to this project is the concept of

legitimacy of a given environment. In order to be eligible for resources from institutional

actors, an organization must be viewed as legitimate by those actors. African airlines

gained their legitimacy through the development of the IATA and ICAO and their

interaction with the governments. In addition, as more and more airlines joined the

industry, the organizational form was viewed as more legitimate and received more

resources. In this way, greater density does not necessarily lead to more competition but

also greater chances of survival as the industry on a whole has more resources from

greater legitimacy. The neo-institutional theorists also demonstrate how smaller, newer

organizations will imitate and copy the processes of larger, older, and more successful

organizations within their field in order to meet expectations of legitimacy so as to be

able to acquire resources to grow; this process of imitation is known as isomorphism.

Institutionalists also emphasize how government policies and regulations, professional

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networks and trade organizations facilitate the development and diffusion of norms

within an organizational population and among society in general. This point underscores

the significance of the IATA, ICAO, and governments in helping to establish the

legitimacy of the airline industry.

Population Ecology Theory

The ecological approach to organizations focuses on analyzing dynamics at play

between organizations rather than within the organizations themselves. While ecologists

do agree that humans have a certain amount of agency to change organizations from the

inside out, ecologists generally assume a large degree of structural inertia in organizations

and do not expect significant changes in the nature or structure of any single firm over its

lifespan. Instead, they examine diversity at the population level and explain the variance

within a population as a result of constant changes in the population itself as firms with

different structures and processes constantly enter and exit the market; within a market,

greater entries suggest more diversity as new forms are introduced and greater exits

imply less diversity as unsuccessful forms are weeded out. Ecologists view populations

of organizations as those firms sharing a similar environment and explain the entry and

exit of members as a result of the underlying social, economic, and political processes at

work. As environmental conditions shift, the processes relating to founding and failure

change as well (Hannan and Freeman 1977).

With the understanding of these foundations and that population ecology views

organizational populations as in constant flux with continuous births and deaths of

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organizational actors I move to examine the factors that ecologists view as governing

these birth and death processes.

Density Dependence

Ecologists assume that carrying capacities the total number of organizations that

a given environment can maintain to change slowly because the structural constraints

on any social system limit the number of organizations of a certain form. Assuming that

carrying capacities are relatively fixed and change little in the short term, the size of the

population its density is an important variable to consider when evaluating

organizational dynamics. In turn, ecologists view founding and failure rates as density

dependent; they change with changes in the population size. But, before proceeding into

the nature of these changes, I must first clarify the meaning of density.

Because selection models seek to examine the dynamics at play between

organizations in a given environment they conceptualize density as the total number of

firms in the environment. I undertake a similar approach and measure the density of

African airlines as the total number of firms rather than by fleet size, total employees, or

economic production. My justification for using the total number of firms as opposed to

another measure is two-pronged. First, the practical constraint of data collection limits

the other available measures of densities to a more limited time span, leaving out a

portion of the industrys history. More importantly however, because I am interested in

studying inter-organizational dynamics, aggregate measures of production such as

passenger kilometers performed do not provide adequate insight into population level

dynamics and provide only a general snapshot of the industry as a whole. Accordingly, in

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the footsteps of previous ecologists, I use the total number of firms as the measure of

density for airlines as well.

Moving forward with the understanding of density as the number of firms, let us

evaluate how density impacts the birth and death rates of organizations. Initially,

ecologists view density as having a positive effect on birth rates, with higher densities

resulting in a higher number of births, but as density reaches very high levels (the

carrying capacity) density is predicted to have a negative effect. This split effect of

density renders the overall effect as non-monotonic. The justification for why density

initially results in initial growth centers on two main pieces: the expansion of requisite

knowledge for firm creation through networks that expand with higher density and

increase processes of institutional legitimation and support.

On the first point, ecologists argue that information to start organizations is

reserved for those who are within the established organizational networks; these

individuals are referred to by Hannan and Freeman as insiders. Specifically in

organizations that are largely absent from the mainstream public eye in industries where

there is little outside scrutiny or insight, the relevant knowledge regarding structure,

processes, and other integral components to starting an organization is tightly controlled

in the networks of established organizations. And though this applies especially to

organizations without a large public profile, even in fields that do garner public attention,

it would be difficult to be a total outside and come from an entirely different field and be

able to successfully found an organization without first having at least some type of

experience or knowledge about how the industry works and how best to strategically

structure and position ones self to effectively compete for resources. In the frame of the

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fight for legitimacy makes the acquisition of resources more difficult as they must justify

their presence and usefulness in the environment. This difficulty in acquiring resources

and lack of social legitimacy creates more obstacles and barriers to achieving success and

accordingly the entrepreneurial attitude needed to create more firms is absent and leads to

less foundings. An example of this dynamic at work can be seen in the young

commercial spaceflight industry which at the present time has only a few companies in it

as a result of the large cost to get involved, the lack of a profit at the present time, and the

skepticism from the public at success. As the industry grows, the government may

provide incentives for organizations to start in this field or profitability of firm currently

operating may spur new growth. Likewise, once commercial space flights are launched

and the public sees that product actually in place and that it can be done safely, the

industrys customer base will grow. On the opposite side of the spectrum, large industries

with many firms have much greater institutional support and social legitimacy, and would

see higher birth rates because of this. Such legitimacy is especially evident in taken-for-

granted industries where the organizational form is considered a normal and natural part

of society. For such organizations, there is often a great deal of support from government

agencies and a large customer base to draw profits. A fine example of such an industry

would be the modern day fast-food restaurant, which sees a great deal of foundings each

year as it is very popular among the mass population and makes tremendous profits.

Many organizations are founded each year in this industry as they believe they can

receive sufficient institutional support to survive.

While expanded information networks and increased institutional legitimacy may

contribute to initial increase in density, as density grows too large and the number of

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firms reaches the carrying capacity, intense competition leads to a scarcity of resources

and a decline in birth rates. Carrying capacity constitutes a range of population size that

a given industry, above which point growth is negative. . In industries where there are

restrictions (whether natural or artificial) that limit the number of firms or the potential

number of customers, firms are less likely to be founded in industries that are close to or

at these capacities. The reasoning behind this lies with the principle that as an industry

reaches its carrying capacity that is the maximum number of firms that it can hold

then organizations will start to fail at much higher rates as there is less of or none of the

pie available. Looking towards the cell phone industry in North America and Europe this

dynamic illustrates itself nicely. Because there is a finite population of people in each of

these regions and since it is reasonable to assume that each individual will only need one

cell phone, eventually the market for new cell phones will become very small.

Accordingly, there will be very few new customers to compete for and companies will

begin to suffer from lack of new sales. Investors and entrepreneurs would likely feel

more trepidation to investing in such a market as the likelihood for failure is higher.

From this example we can see how while greater density does support a higher birthrate

initially, at some point there will be a decline as resources become too scarce to justify

new births.

Mirroring the density processes that govern birth rates, selections theorists

envision similar processes regulating disbanding rates of organizations as well. The

theoretical model proposed originally by Hannan and Freeman and later tested and

substantiated by other studies draws on a number of different factors that affect

disbanding at different density levels. They conclude that failures will occur when

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density is low because of the lack of legitimating the organizational form faces from the

prevailing environment. If there are low numbers of airlines then the resources that the

firms need to survive will be less accessible as the organizational form of the airline itself

struggles to gain legitimacy and solidify instutionalized support for its form. For the

airline industry, physical facilities such as commercial airports or landing strips as well as

financial structures such as governments or investment firms often are reluctant in their

desire to assist an industry that has only a few members. As the population of firms

grows key institutional actors are more apt to support the industry as a whole and the

networks and mechanisms for acquiring resources, as well as the allocation of the

resources themselves are solidified as a result of greater legitimacy for the organizational

form. At lower densities, with less institutional support organizations have a greater

likelihood of failure as they cannot acquire the necessary resources; at higher densities,

once the industry or form has gained legitimacy, firms are less likely to fail due to lack of

available resources.

Though initial increases in density help an organizational form to achieve

institutional legitimacy and support, higher densities come with problems of their own.

Specifically, as an organizational population reaches a higher density, competition

increases and firms are fighting off more competitors for a limited set of resources.

Hannan and Freeman point to increases in both direct competition between individual

firms and diffused competition among the population in general, as density rises. Direct

competition rises within the airline industry occur as individual airlines directly compete

with a competitor in specific markets. For example, as more airlines were founded in

South Africa, the market between Johannesburg to Cape Town went from two carriers

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(South African Airways and Commercial Air) to more than a dozen. While there may be

some increase in overall demand for seats on that route due to population increases and a

general rise in air travel, in all likelihood there was not such a rise to the degree of

increase that occurred. This is a prime example of the increase in diffused competition

that occurs with increased density, just as the entrance of East African Safari Airways

Limited into Precision Air Services market between Nairobi, Kenya and Arusha, Tanzania

for ferrying safari vacationers back and forth was an example of increased density

leading to increases in direct competition. Selection theory stipulates that as though

initial increase in density reduce failure rates, once density reaches a specific point (the

carrying capacity that was discussed earlier) higher density leads to increase disbanding

rates as competition becomes to intense and resources become scarce. In considering the

effects of legitimization and competition mechanism in regards to density, the curve

describing failure rates as they relate to density mirrors the same non-monotonic curve

that characterized density and birth rates.

Waves of Foundings and Failures

Ecologists predict that foundings and failures of organizations occur in waves,

depicted by a non-monotonic curve. Foundings in the preceding year signals a lucrative

environment for airline founding as resources are seen ample enough to support new

growth. Examples of this in the airline industry focus on the expansion of routes to new

markets that were previously not served or under-capacity. Potential entrepreneurs are

persuaded to found firms when times are good in order to take advantage of potential

profits. As the number of births increases to very large numbers however, potential

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entrepreneurs may be dissuaded from founding firms in response to the potential of

resource exhaustion. Investors believe that the large number of airline foundings over

recent years in a specific market may soon spell overcapacity in that market and thus be

hesitant that their company will be able to acquire the necessary resources to survive in

the long-term. In general, smaller waves of foundings are seen to positively impact birth

rates, but extremely large numbers of births are depress birth rates, or at the very least not

increase them as much as smaller numbers of births do.

Complementing the waves of births, ecologists also theorize that waves of failures

affect populations in a similar manner. Though a few failures may not have any effect on

the population as a whole, the failure of many organizations in the previous year signals

that the environment is inhospitable and generates a lack of confidence in the airline

industry as a whole. A small number of failures is viewed as not signaling an industry or

form-wide failure as the resources and facilities vacated by the now defunct firm are

available to its former competitors and may allow that firm to survive. Disbanded

airlines often leave behind flying rights between specific cities, empty terminals and

planes, or out of work employees, all of which can be used by airlines that are still

operating and may be able to prevent these firms from dying or by new firms that enter

the market. But, as the number of disbandings reaches very high levels, it acts as a signal

that times for airlines are bad and that there are not sufficient resources to sustain all the

firms in the environment. Also plausible is that the current organizational form is

misaligned with the environment. Other institutional actors such as governments,

investors, or third party organizations may become increasingly cautious in supporting

airlines and reduce their levels of support, which further reduces available resources and

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increases death rates. Many firm failures in a given year suggest that the airline industry

may be weak due to overcapacity, lack of demand, or other reasons, in turn decreasing

institutional support and making firm failure more likely in subsequent years.

Age Dependence

Another factor that affects failure rates of organizations is age dependence in

individual firms. Research has shown that younger firms face a liability of newness as

they struggle for legitimacy in the environment and face greater threat of mortality until

they establish themselves (Hannan and Freeman 1988). Even in established industries or

organizational forms, younger organizations face a much fiercer battle for resources until

they can ritualize their methods of resource acquisition. Contrastingly, while older

organizations do face a certain liability of becoming outdated and becoming obsolete for

their environment, they do not face the battle for resources that younger organizations

face as they have established and ritualized methods of acquiring the necessary resources.

Likewise, older organization command institutional legitimacy as they often form a

foundational role in the environment and should their mortality be in danger, institutional

actors within the environment may act to protect older organizations in fear of large scale

environmental or operational changes if they were to disappear. A prime example of this

is if the so-called legacy airlines in the United States were to fail; the government has

provided loans and assumed pensions to prevent these legacy carriers from liquidating

because such failure would lead to a catastrophic impact on the U.S. by both reducing

domestic traffic and cutting off the country from international routes to Europe and Asia.

Similar effects occur in African nations as many countries have only one or two carriers

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that provide air service between that country and the outside world; the end of such

routes would dramatically affect these nations economically, politically and socially.

With any airline, international routes, specifically those to Europe and North America are

governed by a complex set of negotiated treaties between nations that grant individual

carriers permission to fly these routes. Because most of these treaties were negotiated in

the 1960s, 70s, and 80s, many younger carriers do not have permission to fly

international routes as they are reserved for the older carriers. And, because an end or

interruption in international service to Europe and North America, as well as to regional

centers such as South Africa or Nigeria, would be extraordinarily detrimental to any

country, the airlines who fly those routes (who are older in firm age by design) would

receive more institutional support should they appear likely to fail; this reduces their

likelihood of failure. Circumstances such as these are especially prevalent in Africa

where almost all national flag carriers were established decades ago and are state-run,

funded, or heavily subsidized.

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Data and Methods

This section provides an account of the methods and procedures involved in

carrying out the analysis of the African airlines. Specifically I discuss collection of the

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data, formatting of the variables, and the processes of regression. Additionally, particular

attention is paid to the difficulty in acquiring data from under-developed nations which

lack standardized and routine mechanisms for collecting reliable annual data.

Defining the Population

A major issue continuously discussed in population ecology literature deals with

one of the most fundamental issues with any population-level study the definition of the

population itself. The researcher faces a precarious position in defining the population.

On one hand, he does not want to define the parameters of the population so narrowly as

to limit the number of cases and exclude potentially valuable data in the overall

experiment. Such exclusions can lead to an incomplete understanding of the ecological

processes occurring within a given population. Oppositely, the researcher does not want

to define the population so large as to include organizations that are substantively

different in both structure and environmental. Defining the field too broadly and

including too many (different) types of organizations also runs the risk of making data

collection difficult. In discussing population definition, Hannan and Freeman offer the

following insight:

A population of organizations has a unitary character in this sense if its members are

affected similarly by changes in the environment, including other populations. So

ecological analyses of organizations assume that populations can be identified in such a

way that member organizations exhibit very similar environmental dependencies.

(Hannan and Freeman 1989)

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Deferring to Hannan and Freeman, operating environment is essential to correctly

defining the population.

First, it is necessary to define the operating unit, in this case the passenger airline.

All of the data on African airlines and those airlines of other continents refers to primarily

passenger based firms and excludes those who do solely cargo or shipping based

business. The selection of firms for this analysis was limited to those companies that had

at least 10 percent of their scheduled services in passenger traffic each year. This does

not serve as an especially constricting criterion, as the vast majority of African airlines

deal in both passengers and commercial cargo transport. Additionally, I incorporate both

scheduled (i.e. regular commercial) and non-scheduled (i.e. charter) airlines. While some

may consider these two types of firms to be substantively different, within the still

developing African airline industry, charter firms serve both leisure and commercial

needs the same as scheduled carriers. Additionally, charter and scheduled airlines

operate under the same general restrictions (i.e. safety and maintenance standards and

flight routes) and face similar hurdles (i.e. under-demand and high prices for fuel). The

lack of substantive and regulatory difference faced by charter and scheduled carriers

allows for an aggregate analysis of both together.

Data Collection and Reliability of Sources

Collecting data on Africa is a difficult task in of itself, and collecting data on

historical events on the continent proves an even greater challenge. While reliable and

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easily accessible data on airline firm founding and death is easily available in Western

countries, it is much more difficult to obtain on Africa. Two major problems emerge in

the collection of data: 1) lack of reliable recorded data, and 2) inaccessibility of the data.

African nations and governments are becoming increasingly efficient at recording figures

ranging form citizen education-level to financial acquisition between firms, however such

efforts are relatively recent in much of the continent and outside of South Africa and

some West African nations, very little recorded official data pertinent to airlines exists

before the 1950s. Even if such data does exist it is often not available online or in hard

text format in the United States or Europe and may exist only in a small room in an

obscure department in the country itself. Because such detailed data collection far

exceeds the bounds and resources afforded to this thesis project, I have had to rely on the

best available data in print and online sources.

The primary resource used to compile the original list of airlines in Africa was the

IATAs annual World Air Transport Statistics (WATS) that has been published and

compiled annually since 1956. These data books contain a wealth of information ranging

on both the aggregate and individual airline level for all of the IATAs member airlines.

All of largest airlines in Africa by passenger traffic are members of the IATA but virtually

none of the smaller airlines are. Additionally, though IATA keeps reliable data on the

membership status of airline in its database (whether or not it is a full member, an

associate member, or has relinquished membership), there are many occasions when an

airline will give up membership in IATA but still remain in operation. Likewise, some

airlines do not gain entrance into the IATA until meeting certain minimal standards,

which may not occur until several years (or even decades) after their original founding.

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Thus, while WATS provides an excellent starting point for data collection in the industry,

the annual membership list must be corroborated with other data sources in order to

develop a fully comprehensive picture of firm foundings and failures, because they do not

necessarily coincide with IATA membership dates.

To supplement the IATA data and determine the actual lifespan of specific firms a

number of other sources were used. First and most frequently, data was gathered by

searching LexisNexis Media search engine for firm names to find the pertinent dates and

years of company foundings, failures, mergers, acquisitions, and so on. A great deal of

data was uncovered and clarified using LexisNexis and other media related search

engines, however the problem with this method is that in order to search for a given firm

it is necessary to have the name of the firm itself, and even with the IATA data many

firms were still excluded. To rectify this exclusion a number of independently run, third-

party websites were utilized to gain the names and in some cases general date ranges of

airlines. Websites such as AirTimes, Wikipedia, Airline History, and Air-Dir may seem

dubious as academic resources at first glance, but in an industry that lacks accessible and

well-documented records such as the African airline industry, they are often the only

source for a researcher to begin. Furthermore, data was acquired from such sources only

when it could be verified with additional sources such as the companys website, WATS,

media outlets, or independent reports. As is now obvious, unlike the study of other

industries, specifically those in Europe or North America, the lack of a singularly

responsible regulatory body or trade organization that regulates this industry, makes it

quite arduous to collect data.

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imposed on data collection as described above do not make it feasible at the current time.

Minimum value is 0, maximum value is 164.

Density in the Previous Year. Density is measured as of January 1 of the year prior to the

given year in total number of individual firms. Minimum value is 0, maximum value is

156.

Number of Births. This variable measures the number of births between January 1 and

December 31 of the given year. Data is measured in number of individual firms.


Number of Births in the Previous Year. This variable measures the number of births

between January 1 and December 31 of the year prior to the given year. Data is measured

in number of individual firms. Minimum value is 0, maximum value is 22.

Number of Deaths. This variable measures the number of deaths between January 1 and

December 31 of the given year. Data is measured in number of individual firms.


Number of Births in the Previous Year. This variable measures the number of deaths

between January 1 and December 31 of the year prior to the given year. Data is measured

in number of individual firms. Minimum value is 0, maximum value is 9.

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Proportion of Independent African Nations. The variable noting proportion of

independent African nations out of a total of 54 as of January 1 of the given year. Data

was obtained from Encyclopedia Britannica online and though precise date data is

available, for the sake of continuity it is measured at the annual level. Minimum value is

0.056, maximum value is 1.000.

Population of Africa. The population variable was obtained from the United Nations

Annual Yearbook as well as the population estimates projected by the United Nations

from 1950. Because the time period also extends to 1933, it was necessary to interpolate

the population on a linear model from 1930 to 1950. The population estimate for 1930 of

200 million people was obtained by calculating a calculation of a global population of

2.07 billion in that year and an estimated population percentage of 9.6% of the worlds

population in Africa. The 9.6% rate is based on the United Nations estimates which have

8.1% of the population of the world in Africa as of 1900 and 12.9% of the population in

2000, and assume steady growth in population throughout the period. Though not an

exact measure of population it does provide one in line with other models and is the best

approach possible considering no official numbers are available from a census at that

time. Population from 1950 onwards is very reliable as it was obtained from the United

Nations. The population is expressed in millions of people. Minimum value is 204,

maximum value is 906.

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Post-World War Two Period. This variable measures the period after World War Two and

begins in 1947 until 2005. Data is coded as one (1) for the years from 1947 onwards and

as zero (0) for years 1933-1946.

Post-Cold War Period. This variable measures the post-Cold War period from 1990-

2005, as signaled by the fall of the Berlin Wall. Data is coded as one (1) for the years

from 1990 onwards and as zero (0) for the years 1933-1989.

Time Trend. This variable serves as a control in the birth analysis and ranges from 1-73.

Industry Age. This variable is very similar to time trend but measures the age of the

industry as of January 1 of the given year. Minimum value is 0, maximum value is 72.

Firm Age. This variable measures the age of the firm as of January 1 on the given year

and is coded as a whole, real number. Minimum value is 0, maximum value is 72.

Disbanding. Used only in the failures analysis this variable is coded as zero (0) if the

event did not happen and as one (1) if the event did happen. Dates of disbanding come

from the same data used in the Number of Deaths in the Current Year variable.


Analyzing Foundings Using Poisson Regression

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Poisson regression is used to model the birth processes of the population as it is

the most easily used method for modeling an arrival process. Arrival processes are

extremely effective at modeling events that signal the arrival from one state to another, in

this case the arrival being the birth of the organization from previous non-existence

(Hannan and Freeman 1987). The Poisson model separates the period of time during

which arrivals occur into different temporal or spatial regions and relies on the

assumption that the arrivals in one time interval are independent of previous or

subsequent regions creating a model of time-independence. The basic model of a simple

Poisson process is shown below:

This elementary Poisson model is not sufficient for use in analyzing the foundings of

organizations, and drawing on previous work it is necessary to add in additional

variables.

Analyzing Failures Using Logistic Regression

Unlike the birth analysis

the organizational ecology of foundings and failures in the african airline industry, 1933-2005

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