A Darwinian theory of transformation pressure – the stimuli of negative shocks for productivity and renewal in established firms
AbstractThe theory of transformation pressure maintains that central actors in established firms will be more productive when experiencing an actual fall in profits. Actors fearing that the survival of the firm is at stake will then become more alert, calculating and creative favoring a transformation. The neo-Schumpeterians follow Schumpeter by largely ignoring the importance of negative driving forces for innovations and the productivity performance of firms. In the neoclassical Schumpeterian literature stronger competition and also lower product demand may induce innovations and productivity increases in established firm. But this literature neglects the underlying psychological mechanism. The ideas in the theory of transformation pressure can easily be incorporated into a Darwinian framework emphasizing basic human drives, the struggle for existence and the adaptation to new external circumstances. The results from tests of the theory of transformation pressure are ambiguous. An experiment confirmed that firms are governed by bounded rationally but only partly that they will upgrade their growth strategy in a profit recession. There are arguments in both industrial economics, psychology and neuroscience for a qualified theory of transformation pressure. Productivity is enhanced by moderate pressure or by periodic shifts between hard pressures and good opportunities.
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Bibliographic InfoPaper provided by Stockholm University, Department of Economics in its series Research Papers in Economics with number 2013:4.
Length: 59 pages
Date of creation: 18 Jan 2013
Date of revision:
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Postal: Department of Economics, Stockholm, S-106 91 Stockholm, Sweden
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transformation pressure; bounded rationality; creative destruction; negative driving forces; productivity growth; innovations; neuroscience; stress; economic psychology; universal Darwinism;
Find related papers by JEL classification:
- B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Institutional; Evolutionary
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-03-09 (All new papers)
- NEP-ENT-2013-03-09 (Entrepreneurship)
- NEP-EVO-2013-03-09 (Evolutionary Economics)
- NEP-HME-2013-03-09 (Heterodox Microeconomics)
- NEP-HRM-2013-03-09 (Human Capital & Human Resource Management)
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