Markets select among organizational forms over multiple generations; equilibrium is temporary and competitive advantage decays as the environment and population adapt.
The argument.
The useful unit of analysis is not only the firm at one moment. It is the population of firms across time. New organizational forms enter, some exploit an unoccupied niche, competitors imitate the successful traits, and the environment changes in response to the population now occupying it.
This makes competitive advantage partly generational. A strategy can be superior when rare and ordinary after imitation. The very success of an operating model changes the market conditions that made it successful.
Equilibrium is therefore not a final state. It is a temporary settlement between current technology, capital, consumer behavior and the distribution of competing firms. Innovation disturbs it; selection creates a new population; that population creates the conditions for the next disturbance.
For operators, the implication is uncomfortable: there is no permanent recipe. The firm has to preserve the capacity to mutate without confusing yesterday’s selected traits with timeless virtues.
Return to the Economics Office index, or read Fourth Derivative in the Free Public Library.