Evolutionary perspectives Flashcards
Evolution talks to?
- Creation of variety – firms pop change, but also dis equilibrating and random forces of innovation and mutation
- But selection by environ reduces variety – comp, reg, imitation
- Result – through inheritance – reproduction, imitation – cumulative formation of industry and firm structure as adaptation to environ
Schumpeter 1942?
- Theory of growth around contribution of innovation – no innovation – static equ – no growth
- But, monopoly capitalism – less emphasis on p comp – higher levels of comp in terms of technical and organisational innovation
- It’s the large firm that takes the idea and scales it
- We then have Gales of creative destruction around capitalist system –
- Fundamental impulse keeping capitalist engine going, from new consumers, goods and methods of prod – industrial mutation revolutionises econ structure, destroying the old one
Schumpeter - implications?
- Static efficiency – allocative efficiency at point at time less important than dynamic, being the process
- Society benefits from comp between new products, tech and forms of organisation than from p comp
- Monopoly may be good – higher investment and innovation
Creative destruction?
- Seeds of corporate failure sown in periods of success
- Markets have periods of quiet punctuated by shocks and discontinuities
- During quiet periods, firms w superior products and tech earn econ profits
- Entrepreneurs exploiting opp created by shocks enjoy econ profits during next period of quiet
- Implication –
- Creative destruction implies the isolating mechanisms protecting a firms comp adv won’t be permanent – life exp of comp adv shrinks as tech and tastes change rapidly
How can firms survive forces of creative destruction?
- Access to scientific expertise may be important for riding the wave
- E.g., pharmaceutical firms stay in close touch w scientific community
- Expect shock to come from universities for example – firms will want to know whats going on
- Tech sourcing FDI?
- Clustering and spatial agglomeration so that you pick up on new innovations quickly
- E.g., Cambridge biotech discovery
Evolutionary perspectives - common themes?
- Organisational ecology – Hanna and Freeman
- Neo-Schumpeterian school – Nelson and Winter
- Research on innovation, diffusion etc.
- Cumulative adaptation – firms adapting to environ
- Acquired characteristics
- Smalls steps and cumulative effects of changes leading to adaptation to environ
- Lamarckian – inheritance of acquired characteristics, principle of use and disuse
Evolutionary perspectives - strengths and weaknesses?
- Environments have a role in shaping organisational forms
- Organisational forms appear to have life cycles – co ops, worker owned firms, digital platform
- But –
- Organisations are human constructs – created – animals don’t redesign themselves
- What exactly is being reprod out there
Intro?
Evolution key in many fields
Evolution only a possible general approach for analysis of complex systems
Organisational ecology?
- Example, demography of organisations
- What impacts the rates of change of organisational pop, analysis of variation in vital rates for organisational pop – founding rates, merger rates, disbanding rates etc.
- Approach attempts to relate changes to environ
Organisational ecology 2?
Organisational form = properties making organisations similar
organisational population = set of organisations in a specific space over a time period
Organisation reliability and accountability also require that organisation structures are reproducible - resulting inertia
Relatively inert - slow to change
Reliable compared to ad hoc groups
Routines develop which direct activities - retained in firms but not in ad-hoc groupings
Accountable
What determines size of population?
- Niche – carrying capacity
- Organisations in the niche dep on birth, death and merger rate
How does population develop through time?
- Comp – scarce resources in the niche, comp in pop for resources – increase w time
- Legitimation – social acceptance of an organisational form – increases w time
- formation rates increase initially, comp increases too as more organisations in niche – comp eventually affects formation rates
- liability of newness – when new organisational form comes in – lack of social acceptances at offset e.g., Airbnb
Forces affecting population density?
Vital rates of founding and death are density dependent
Legitimacy processes produce positive density dependence in founding rates
Competition produces negative density dependence in founding rates
Nelson and Winter - Evolutionary theory of economic change?
- Routines – rules and structures affecting behaviour
- Routines – repetitive behaviours
- Routines – coordinating mechanisms that trigger behaviours
- Routines – repositories of firm knowledge
- May inc hiring policy, procurement rules, policies on investment, business strategies on oversea investment etc.
Processes of economic change - selected features - Nelson and Winter?
- Firms satisfice rather than max – search locally for solutions – bounded rationality – maybe close to existing routines, may change v incrementally
- Search modelled rationally, assuming prob of finding a better technique to a function of investment in search
- Diff for firms to ignore what they have done in past – search is path dependent
- Search also a routine – i.e. even strategic planning can be routine – search path dep
- Selection by market forces favours firms which happen to find better techniques or which use better search rules than others
- Techniques making some firms better will spread in pop partly by expansion, partly by imitation
- In this process, new mutation of routines will be generated, as others imitate and this can be a source of innovation – link to clusters debate
- Innovation demonstrated to be a routinised activity as usually comprises new combinations of existing routines
- Econ system continually injected w new mutations of routines – econ system in a state of flux
Implication
