Evolutionary Theory And The Market Competition

Evolutionary theory study of processes that transform economy for firms, institutions, industries, employment, production, trade and growth within, through the actions of diverse agents from experience and interactions, using evolutionary methodology. Evolutionary theory analyses the unleashing of a process of technological and institutional innovation by generating and testing a diversity of ideas which discover and accumulate more survival value for the costs incurred than competing alternatives.This paper presents study the behavior of the firms on the market used the evolutionary theory.The paper is to present in full the developments that have led to the re-assessment of theories of firms starting from the criticism on Coase's theory based on the lack of testable hypotheses and on non-operative definition of transaction costs. In the literature in the field studies on firms were allotted a secondary place for a long period of time, to date the new theories of the firm hold a dominant place in the firms’ economic analysis. In an article, published in 1937, Ronald H. Coase identified the main sources of the cost of using the market mechanism. The firms theory represent a issue intensively studied in the literature in the field, regarding the survival, competitiveness and innovation of firm on the market. The research of Nelson and Winter, “An Evolutionary Theory of Economic Change” (1982) is the starting point for a modern literature in the field which considers the approach of the theory of the firm from an evolutionary perspective. Nelson and Winter have shown that the “orthodox” theory, is objectionable primarily by the fact that the hypothesis regarding profit maximization has a normative character and is not valid in any situation. Nelson and Winter reconsidered their microeconomic analysis showing that excessive attention should not be paid to market equilibrium but rather to dynamic processes resulting from irreversible economic exchanges. This paper is focused on the market competition. In this market the firms must define its behaviour and formulate strategies for future actions affected by risk and uncertainty. The conclusions of the paper reveal that using a theory of the firm as reference framework regarding the representation of the economic agent’s on market structure, opens the way for a new field of investigation.