Professor Sidney Winter
Economic Analysis for Business Strategy: The Case of the Evolutionary Approach
Professor Sidney Winter, Wharton School, University of Pennsylvania
Speaker(s) Web Pages:
Semester: Winter 2007
Date: Friday, March 23, 2007
Time: 1:30 - 3:00 PM
Venue: Room 4212, School of Education
Introducer: Brian Hilligoss, School of Information
This presentation makes the case for evolutionary economic theory as the most useful style of economic analysis for understanding business strategy. The starting point is a definition of the strategy problem as involving the effective management of key “slow-moving” variables, such as capabilities, reputations, scale, and executive teams. When firms increase their competitive strength by making expenditures that enhance the effectiveness of such variables, they are essentially making investments under uncertainty – typically, ones whose returns are substantially separated in time from the costs. In models created in the evolutionary tradition, firms are characterized precisely by their slow-moving “state variables,” particularly including variables relating to scale and to “competence.” The typical point of such an inquiry is to see how a hypothetical evolutionary competition among heterogeneous firms plays out. Once one acknowledges that temporally-embedded competition under uncertainty is at the heart of the strategy problem as it is of evolutionary analysis, the strong complementarity of the two appears obvious. It then becomes apparent, however, that the crucial topic of wealth creation has been seriously under-examined in both evolutionary economics and strategy. The shortcomings (relative to the strategy problem) of standard economics, with its characteristic orientations to pure ex ante analysis, to objective “right answers” (optimization), to “bygones are bygones,” and to equilibrium conditions, also seem quite obvious.
The background paper by M.G. Jacobides, S.G. Winter and S.J. Kassberger –
“The Evolutionary Dynamics of Wealth, Profit and Sustainable Advantage”– serves as the primary source of examples of the implementation of evolutionary modeling in the quest for understanding of business strategy.
Reading List: you must be logged in to view this list
- "Preface to the Japanese Translation of An Evolutionary Theory of Economic Change" and "The Evolutionary Dynamics of Wealth, Profit and Sustainable Advantage," Michael G. Jacobides, Sidney G. Winter, Stefan M. Kassberger