By Koen
Frenken, Utrecht University
Evolutionary economics emerged as a branch of economic theory in the
early 1980s with the publication of the seminal work by Nelson and Winter
(1982). Though recent, it builds on earlier work from the 1940s and 1950s
by distinguished economists including Joseph Schumpeter, Herbert Simon
and Edith Penrose.
Evolutionary economics started out mainly as a critique to mainstream
economics that explains economic phenomena from rational choices of profit-maximising
firms and utility-maximising agents. Evolutionary economists argue instead
that most decisions of firms and consumers are taken in a habitual manner
because their rationality is bounded. Nelson and Winter speak of routines
in this context. In this, they follow the seminal work by Simon (1957)
on decision-making.
Continues
Markets are to be understood as selection devices that select firms on the basis of their routines. Firms with low-productivity routines will lose market share and will eventually exit the market, while firms with high-productivity routines will gain market share and prosper. Less successful firms may also try to copy the routines of more successful firms through imitation, while new routines are introduced in the market by innovation. Firms particularly search for innovations that open up new markets so that they can have a temporary monopoly until rival firms start to imitate. This theory of competition by innovation follows on the seminal work by Schumpeter (1942).
As a theory of market competition, evolutionary economics has mainly been applied in the field of industrial organisation. From the 1990s onwards, evolutionary economics has also become popular in the field of organisation theory and management science. Evolutionary theory implies that firms have to acquire a set of routines that are fit relative compared to those of competitors and that are hard to copy by competitors.
The growth of firms can then be understood as a process of diversification in which a particular set of routines is applied in an increasing number of markets, following on earlier ideas of Penrose (1959).
Other research fields where evolutionary economists are currently active include economic geography, environmental economics, game theory, growth theory, innovation management and network theory.
Author's selected bibliography
Nelson, Richard R. and Winter, Sidney A. (1982) An Evolutionary Theory
of Economic Change. Cambridge, Mass.: Belknap Press of Harvard University
Press.
Penrose, Edith T. (1959) The Theory of the Growth of the Firm. Oxford:
Basil Blackwell.
Schumpeter, Joseph A. (1942) Capitalism, Socialism and Democracy. New
York: Harper & Row.
Simon, Herbert, A. (1957) Models of Man. New York: John Wiley and Sons
Author's selected Links
Portals
- Portal ‘Evolutionary Theories in the Social Sciences’
http://www.etss.net/index.php
Working Paper series
- DRUID, http://www.druid.dk/index.php?id=22
- LEM, http://www.lem.sssup.it/wplem.html
- MPI Jena, http://www.econ.mpg.de/english/research/EVO/discuss.php
- PEEG, http://econ.geog.uu.nl/peeg/peeg.html
Simulation modelling platform
- Laboratory for Simulation Development, http://www.business.aau.dk/~mv/Lsd/lsd.html
Conferences
- European Meeting on Applied Evolutionary Economics (EMAEE), http://www.emaee.net
- International Joseph A. Schumpeter Society Conference,
http://www.iss-evec.de/
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