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

Andriani, P.; McKelvey, B.

doi:10.1287/orsc.1090.0481

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

Andriani, P.; McKelvey, B.

Authors

P. Andriani

B. McKelvey

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.

Citation

Andriani, P., & McKelvey, B. (2009). From Gaussian to Paretian Thinking: Causes and Implications of Power Laws in Organizations. Organization Science, 20(6), 1053-1071. https://doi.org/10.1287/orsc.1090.0481

Journal Article Type	Article
Publication Date	Nov 1, 2009
Deposit Date	Mar 24, 2010
Publicly Available Date	Sep 22, 2014
Journal	Organization Science
Print ISSN	1047-7039
Electronic ISSN	1526-5455
Publisher	Institute for Operations Research and Management Sciences
Peer Reviewed	Peer Reviewed
Volume	20
Issue	6
Pages	1053-1071
DOI	https://doi.org/10.1287/orsc.1090.0481
Keywords	Pareto, Power law, Gaussian statistics, Organization, Average, Extreme events, Scale-free theory.