Research Papers in Economics, Department of Economics, Stockholm University
A Darwinian theory of transformation pressure – the stimuli of negative shocks for productivity and renewal in established firms
Abstract: The 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.
Keywords: transformation pressure; bounded rationality; creative destruction; negative driving forces; productivity growth; innovations; neuroscience; stress; economic psychology; universal Darwinism; (follow links to similar papers)
JEL-Codes: B52; D21; E32; L21; O31; (follow links to similar papers)
59 pages, January 18, 2013
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