Stuidies On The Theory Of Coevolution Between Firm And Industry

The theory of coevolution between firm and industry is the theoretical frontier of evolutionary economics. The modern evolutionary economics shares the same belief about the Darwinism, which provides a broad theoretical framework for the analysis of the evolution of all open and complex systems, including socio-economic systems. If we aplly the Darwinism into multilevel system, and establish the coevolution links between levels, Darwinism can coincide the theory of complicated system. Therefore, one of the most important developments in the modern evolutionary is coevolution. The topic of this article embodies the new frontier of the evolutioanry theory. We believe that this research will improve the modern evolutionary economics.For a long time, the theory of firm evolution and the theory of industry evolution are independent. In the theory of firm evolution, the changes of industry are held, and in the theory of industry evolution, the firm evolution is neglected, and always assumed as a steady vehicle analogous to a gene. Therefore, firm evolution focuses on the initiative of firm, and industry evolution focuses on the effect of natural selection. However, The dynamics of the industry is always accompanied with the increase and decrease in multiplicity and heterogeneity of firms, and such multiplicity and heterogeneity paly key roles in the industry evolution. Therefore, industry and firm are in the coevolving stiatution. So based on the coevolution theory, we can know the nature and rules of the firm and industry evolution better.The methodology of the article is as follows. First, we use disequilibrium analysis in the paper. Second, it is based on the methodology of Ecological Rationality. Third, we use the analysis of complicated sysytem, namely the dynamics of the multilevel coevolution. Fourth, we use the combination between induction and deduction. Fifth, we test some conclusions by simulation.Firstly, the paper studies the general theoretical framework of the evolutionary economics. This paper anaylses three types of dynamics, namely, nonlinear dynamics, self-governance dynamics and coevolution dynamics. Compared with nonlinear and self-governance dynamics, the coevolution dynamics sets up feedbacks between the lower level evolution and the high level evolution, considering that there are variations in the micro-level, so it is a dynamics with more nature of evolution.We define the notion of coevolution as follows: two interators are considered in the coevolution situtiation, if there exists mechanism of multi-feedback, and they must affect each other in evolutionary dynamics. Properties of coevolution are as follow: multidiretional causalities, multilevelness and embeddedness, complicated system, postive feedback and path dependence. We also study the four engines of coevolution, namely naive selection, managerial selection, Hierarchical Renewal and Holistic Renewal.Before studying the coevolution theory between firms and industry, we focus on the firm evolutionary theory and industry evolutionary theory respectively. Because the theory of firm evolution has been neglected by traditional evolutionary economics, we focus more on it and form a heuristic analysis for it. We also compare the contract theory and evolutionary theory of the fim to illustrate a more universal concept about nature of the firm. The article considers that the existence, boundary and internal organization of the firm have been impacted by both transaction cost and knowledge accumulation. We consider that the cognition process and contract designing have both existed in the cycle of the learning process of the firm. The primary purpose of the firm is to make the judgment of the entrepreneur come true, and by the accumulation of the common knowledge and after implicit knowledge turns to explicit knowledge, the firm enter into the phase of contract designing. Therefore, we established a analysis logic between knowledge evoloution and contract designing.The paper constructs the theoretical framework for the coevolution between firms and industry, which contains aims of the theory, methodology, basic assumption, core concepts and the logic of analysis. The theory focuses on knowledge dynamics of the firm and industry, and the feedback mechanism between them. The theory is based on the methodology of Ecological Rationality, and its basic assumption is that firms are heterogenous and the firm is rule-maker, also having bounded initiative.We also induct four core concepts, namely knowledge, entrepreneur cognition, learning process and models of interaction. There are three major engines in the entrepreneur cognition, namely engine based on the living danger, engine based on the role danger, and engine based on ideaology. There are also three kinds of leaning, which are considered in the article, namely non-conscious learning, routine-based learning and belief learning. Based on the network theory, we generalize three kinds of models, namely regular network, small world network and random network. The paper shows that when the industry is in the birth of the life cycle, the regular network prevails, when the industry is in the growing phase of the life cycle, the small world network prevails, and when the industry is in the maturity of the life cycle, the random world network prevails.The main idea of the analysis for the coevolution between firms and industry is as follows: firm is the behaviour subject, and the industry is emergent during the interaction between firms. The industry provides the learning enviornment and selection enviornment for firms. Interactions are not only the mechanism of knowledge diffusion, but also the important approach of the innovation. Therefore, through interaction, the evolution of firm can diffuse the knowledge to the industry, and the industry also has big effects on the evolution of the firm as learning and selection enviornment. When the firm adjusts or change itself to adapt to the enviornment, the induatry also adjust or change. The speed and direction of coevolution is influnced by the firm's innovative ability, imitative ability and the model of interaction.Firms will take up different leaning behavior in the diferent evolutionary enviornmrnt. The evolution of the firm is not only affected by firm's initiative (learning ability), but also affected by the industry enviornment (learning and selection enviornment). The knowledge dynamics of the firm is non-linear process, which increase slowly in the birth phase, increase fastly in the development phase, and incerase slowly in the mature phase. During the accumulation of knowledge, the firm becomes changing from the innovative to the imitative, and the special knowledge gradually has been changed to the general knowledge. The industry has experienced the process with increase and decrease of multiplicity. In the development phase, innovation is the major engine for knowledge growth, but in the mature phase, imitation is the major engine for knowledge growth. When the industry technology arrives at the frontier of the technology space, firms may have gained the optimal technology, and then may stop innovation. The firm and industry will reach a steady situation.The speed of coevolution is diferent in the diferent evolutionary phase. The dynamics of coevolution is also nonlinear process, which increase slowly in the birth phase, increase fastly in the development phase, and incerase slowly in the mature phase. During the birth phase, the coevolution is mainly affected by the external selection enviornment. During the develepment phase, the coevolution is mainly affected by the industry's learning enviornment (or knowledge enviornment). During the mature phase, the coevolution is mainly affected by the industry's selection enviornment (or competition enviornment). Cooperation prevails during the birth and development phase, and competetion prevails during the mature phase. The former embodies the properties of knowledge with externality, postive feedback and complementarity, and the latter embodies the properties of knowledge with scarcity and competition. With the evolution of the cognition, the interaction in the coevolution changes from the local to the global.The article has several creativities. First, the topic of the article is orginal and foresighted. Second, the article originally establishs the general theoretical framework for the analysis for the coevolution between firm and industry. Third, the article probes some basic and complicated question of evolutionary economics, and makes some improvements. There are also some shortcomings in the article. First, it is lack of empirical study. Second, there are many questions that need to study deeply. Third, it does not take the government into account, so there is few policy analyses or advise.