If It Doesn’t Kill You: Learning from Ecological Competition

Abstract

Learning theory explains how organizations change as a result of experience, and can be used to predict the competitive strength of individual organizations and competitive pressures in organizational populations. We review extant learning theoretical propositions on how competitive strength is affected by experienced competition, founding conditions, and observed failures of other organizations. In addition, we propose that niche changes are an important source of learning. We test these propositions on data from the Norwegian general insurance industry. We find that historical density increases failure rates, contrary to some earlier findings, and also that the effect of founding density supports the density delay rather than trial-by-fire hypothesis. We find that failures of others before and during the lifetime of the organization reduce failure rates, and niche changes reduce failure rates for joint-stock companies but not for mutual firms. Overall the findings suggest that organizations learn more cheaply from the failures of others than from their own experiences, and that the stresses of competition can overwhelm the learning effects of competition.

Citation

Greve, H.R. and Rao, H. (2006), "If It Doesn’t Kill You: Learning from Ecological Competition", Baum, J.A.C., Dobrev, S.D. and Van Witteloostuijn, A. (Ed.) Ecology and Strategy (Advances in Strategic Management, Vol. 23), Emerald Group Publishing Limited, Leeds, pp. 243-271. https://doi.org/10.1016/S0742-3322(06)23008-0