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Asymmetric selection among organizations

August 7th, 2009 | Posted by admin in 2003 - (0 Comments)

William P. Barnett, Aimee-Noelle Swanson, and Olav Sorenson

We discuss the creation of organizations and their survival as distinct selection processes, and consider the significance of their divergence. In particular, to understand the implications of entrepreneurial booms, we propose the possibility of asymmetric selection, where entry selection and exit selection differ from each other in strength. An observed increase in founding rates hence may reveal a decline in the selection threshold for entry—implying lower average fitness among boom-time entrants. When such an expansion occurs, organizations born during these periods of heightened entry should suffer higher failure rates in the fitness threshold required for survival remains stable or becomes more stringent. We also discuss other processes that might educe founding waves, and explain the different implications of these accounts for our empirical model. Estimates of the model support our theory of asymmetric selection in two out of three markets using a comprehensive dataset describing organizations in the U.S. computer industry.

Industrial and Corporate Change, 12 (2003): 673-695

Olav Sorenson

Is starting a new business more difficult in an emerging industry or in a mature industry? The density dependent model of organizational ecology maintains that the industry’s age is irrelevant; the number of firms currently occupying the market niche determines the industry’s competitive structure. Nevertheless, population-level learning predicts historical asymmetry in entry barriers. Over time, the average fitness of the surviving population members increases, making market entry more difficult. At the same time, surviving organizations become increasingly spread out across the resource space, providing niches that new firms can exploit. Thus, industry-level evolution systematically alters the environment that both existing organizations and new firms face. I offer a new specification for the founding rate model that synthesizes ecological and evolutionary perspectives. Tests of this model in the American automobile industry support its merit.

Social Science Research, 29 (2000): 307-326