Evolutionary Theory of the Firm

Nelson and Winter argue that an evolutionary theory of organization is a superior description of firm behavior than orthodox views around optimization and that routines act as the genes of the firms in their model.

The evolutionary theory defines the firm as a set of essential skills, gained from its learning ability. The theoretical assumption that forms the base of this paper is based on the importance of knowing the relationship between firms in different market, recognized at economic level. For this reason the paper was based on a systematic review and critical analysis of the literature on the subject which is considered to be a universally accepted assessment technique, used to create a structured summary of previous developments on the theories of the firms. Based on the need to address these questions, the objective of this paper is to critically analyze the theories of the firm in terms of how they influence the behaviour of the rational entrepreneur. The research goal is to identify how they contribute to explaining the evolution of firms and the performance differences between them. Using the numerical simulations we can notice that the steady states are mean square stable. The analysis of a firm’s model considering the physical capital and the quality of the human capital is analyzed. In this paragraph a random model was built taking into account that the economic processes have a high degree of uncertainty. The graphs described in the present paper show, that the states of the variables are asymptotically stable in probability. In this perspective the research goal is designing and testing models of evolution and revealing the firm’s performance in a competitive environment affected by risk and uncertainty by using mathematical models.

Nelson and Winter’s book is a classic of organization theory in particular and is well known more broadly in the literatures on innovation, organizational leaning, and economics. It has been cited more than 16,000 times and figured prominently in many other extremely highly cited works.

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