Local and non-local pre-founding experience and organizational form transformation: The case of Israel's wine industry

he twin expectations of local imprinting and of organizational form inertia (Stinchcombe, 1965) make it difficult to see how we ever observe form changes within local populations of organizations. In this paper, we present a theory of new form invasion that features both local and non-local pre-founding industry experience as drivers of both organizational form selection and performance with the selected forms. This theory further suggests a blending process. Pre-founding experience in non-local populations leads founders to establish organizations with the novel forms. When these founders also have pre-founding experience in the local population, their new organizations tend to perform better. This facilitates the establishment and persistence of the new organizational form. We evaluate these predictions in an analysis of a major transformation of the population of Israeli wineries. Between 1982 and 2003, the population of Israeli wine producers grew from just five to more than 100. This explosion in numbers coincided with a shift toward non-kosher wine production. Although the four largest Israeli producers in 1982 were kosher, roughly eighty percent of the new entrants were established as non-kosher producers. After arguing that kosher versus non-kosher wine production represent two distinct organizational forms separated (at least initially) by strong form boundaries, we analyze how the novel non-kosher organizational form successfully invaded the local population of kosher producers. Our results attest to the joint effect of local and non-local pre-founding experience, and thus corroborate our theory of form invasion.