Evolutionary Theory of Entrepreneurship
The Survival of the Fittest: Evolutionary Theory in Entrepreneurship
Why do some industries explode with thousands of new startups while others remain dominated by a few "dinosaurs"? To answer this, we have to look past individual psychology and look at the "population." This is the realm of Evolutionary Theory—a perspective that views the business world not as a battlefield of heroes, but as a biological ecosystem.
In this view, the entrepreneur is the source of variation in the economic "gene pool."
The Three Pillars of Economic Evolution
Evolutionary theory, popularized by scholars like Howard Aldrich, applies the Darwinian logic of biological evolution to the life cycles of organizations. It relies on four distinct stages:
- Variation: Entrepreneurs introduce new "traits" (business models, products, or technologies). Most are accidental or experimental, but they provide the raw material for change.
- Selection: The market acts as the environment. It "selects" the most fit variations. If a product doesn't solve a problem or a business model can't make money, it is selected out (goes extinct).
- Retention: The successful traits are kept and institutionalized within the firm. Other companies then "inherit" these traits by imitating the winner.
- Struggle: Organizations compete for limited resources—capital, talent, and customer attention. This competition forces continuous adaptation.
While the roots of this theory go back to Joseph Schumpeter, Howard Aldrich is the foundational figure who bridged biology and sociology to explain how entire populations of organizations emerge and change over time.
Individual vs. Evolutionary Perspectives
| Feature | Individual Perspective | Evolutionary Perspective |
|---|---|---|
| Focus | The founder's traits and skills. | The fitness of the "organizational form." |
| Failure | A personal mistake or lack of grit. | A necessary clearing of "unfit" models to improve the ecosystem. |
| Success | Brilliance and execution. | A match between the firm's traits and the environment's needs. |
The "Red Queen" Effect
In evolutionary biology, the Red Queen hypothesis suggests that organisms must constantly evolve just to stay in the same place relative to their competitors. For entrepreneurs, this means that even if you have a "fit" product today, the environment (technology, regulations, customer tastes) is always shifting. If you stop innovating, you become an evolutionary dead end.
Conclusion
Evolutionary theory teaches us that failure is a functional part of the system. When a startup fails, its "genetic material"—the lessons learned and the talent involved—is redistributed back into the ecosystem to create new, more "fit" variations. To succeed, don't just build a product; build a "variation" that the current environment is hungry to select.
References
Related Theories
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Population Ecology
Explores how environmental factors select for or against entire populations of organizations, mirroring natural selection.
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Niche Theory
Examines how firms survive by occupying specific "ecological" spaces to avoid direct competition.
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Disruptive Innovation Theory
The business equivalent of "punctuated equilibrium," where sudden shifts create new dominant species of firms.
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Genetic Theory of Entrepreneurship
Looks at the biological and heritable traits that may predispose individuals to entrepreneurial behavior.
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Dynamic Capabilities Theory
Focuses on how organizations "evolve" their internal processes to stay relevant in shifting environments.
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