Emergence and evolution of organizations out of garbage can dynamics: A few insights for the theory of the firm, entrepreneurship, and industrial economics

This paper illustrates an artificial ecosystem where hierarchical organizations emerge out of collisions between individuals, problems, solutions, and choice opportunities according to the rules of the Garbage Can Model of organizational choice (GCM).

These organizations are subject to dynamics of imitation, growth, and extinction depending on relative fitness. In particular, organizations must be able to provide advantages over isolated individuals in order to exist.

In this artificial world, alternative GCM decision styles separate organizations that are founded around original competences and innovations from those that are based on variable degrees of creative imitation of existing practices.

This distinction provides, first of all, a micro-foundation for the debate between the liability of newness and the liability of adolescence of newly-founded organizations and, secondly, an explanation for the heterogeneity of firm size distributions across industries and regional economies.

Furthermore, it suggests an evolutionary mechanism for a large majority of imitating firms to co-exist along a minority of highly innovative ones.

Finally, the GCM suggests that for flexible, flat organizations, crowdsourcing-like mobilization of internal resources adds dynamics and complexity to evolutionary and resource-based views.

This dynamics contributes to the rationales for the existence of organizations and, furthermore, it highlights a generally neglected aspect of the creative destruction of firms and industries. 

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Authors at the Department of Management: Guido Fioretti.