Leadership & Organization Development Journal

The phenomenon of organizational evolution: a model for analysis

Santos Alvarez Ma Valle
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 The phenomenon of organizational evolution:
a model for analysis
Keywords
Organizational change,
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Leadership, Decision making,
Model
Abstract
Traditionally, organizational
evolution has been forgotten and
only recently has it been analyzed
by evolutionary theories:
evolutionary economics and
organizational ecology. According
to the evolutionary economics the
evolution of the firm is drawn as a
process of individual adaptation
running parallel to the evolution of
environment. However, population
ecology suggested that
organizations have not the ability
to adapt themselves and the
process of organizational
evolution is out of the
organizational field. So, the
adjustment to changed
environmental conditions is
achieved largely by the death of
old organizations and the birth of
new ones. We propose a model of
organizational evolution
combining the adaptation
perspective ± evolutionary
economics ± and the selection one
± population ecology of
organizations. The adaptative
ability lies in the endowment
resource and capabilities that
managers build using
organizational capabilities.
Received: October 2001
Revised: January 2002
Accepted: February 2002
Leadership & Organization
Development Journal
23/4 [2002] 215±227
# MCB UP Limited
[ISSN 0143-7739]
[DOI 10.1108/01437730210429089]
Santos Alvarez Mã Valle
EconomõÂa y AdministracioÂn de Empresas, Facultad de CCEE y Empresariales,
Universidad de Valladolid, Valladolid, Spain
Introduction
Organizational evolution broke into
economic studies with the work of Alchian
(1950), who, based on the principals of
biological evolution, pointed out the process
of natural selection which the environment
imposes on firms and the relevance of
organizational adaptation as a survival
guarantee. The economic system is
considered as an adoptive system which
guarantees the survival of the most adaptable
businesses. This focus allows us to establish
a correspondence between the process of
natural selection and that of economic
competition. This equivalence constitutes the
cornerstone on which an analogy between
economic and biological processes is built,
which permits a reinterpretation of business
behavior.
More recently interest in studying
organizational evolution was renewed with
the publication of Nelson and Winter's book
(1982), An Evolutionary Theory of Economic
Change. This attracted the attention of
several investigators, whose still scattered
contributions have given rise to a stream of
investigation in the study of businesses
which currently focuses on its development
and final consolidation: ``evolutionary
economics''. Thus, a dynamic perspective
emerges which yields a historical dimension
to business and which opens new horizons in
behavioral analysis. Business evolution is
explained here based on a concept of business
which emphasizes organizational capacities.
In addition, the phenomenon of
organizational evolution has also been
addressed in a group of studies which,
deriving from the initial contributions of
Hannan and Freeman (1977, 1984), have
comprised what is known as the ``ecological
perspective''. In this case, evolution is
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addressed from the viewpoint which
provides a conception of rigid organizations,
incapable of responding to the challenge of
adaptation raised by environmental
evolution.
Both currents of investigation coincide in
pointing out that the adaptation is the
objective which controls the process of
organizational evolution and, thus, that
which acquires a starring role in the study of
the phenomenon of evolution. The purpose of
this paper is the study of organizational
evolution and the adaptive mechanisms
which shape such evolution. In this respect,
our objective is double: on the one hand, we
wish to analyze more deeply the evolution
which businesses undergo and the
adaptation mechanisms, while on the other
hand we attempt to develop a model of
organizational evolution which incorporates
the different theoretical proposals reviewed.
With respect to our objectives, this
investigation is divided into three sections.
In the first a theoretical review of the
phenomenon of organizational evolution is
carried out, both from the perspective
supported by evolutionary economics as well
as from that offered by an ecological outlook.
The different mechanisms of adaptation
foreseen in both theoretical proposals are
analyzed. In the second section of the paper,
as a conclusion to the preceding section, an
analysis model is proposed. A few brief final
conclusions, which give content to the final
section, close this study.
Organizational evolution:
a theoretical analysis
The question of organizational evolution has
been addressed from the evolutionary
theories[1] available in the study of firm. In
analysis of business the term evolutionary
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[ 215 ]
 Santos Alvarez Mã Valle focus refers to those theories which attempt
The phenomenon of to search for explanations for the
organizational evolution: development which organizational forms
a model for analysis
experience over time, in relation to the
Leadership & Organization
Development Journal environment in which they act. Specifically,
23/4 [2002] 215±227 we have found two focuses: one of a purely
economic character ± evolutionary
economics ± and another of a more
sociological character ± population ecology,
both inspired by the arguments of biological
evolution (Nelson and Winter, 1982, p. 11;
Hannan and Freeman, 1989, p. xiii).
With respect to the phenomenon of
organizational evolution, these focuses refer
to three key elements: variety, selection and
retention or heredity (Campbell, 1969).
Variety refers here to the diversity of
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behaviors existing in economic reality and to
the differential behavior among the firm
(Metcalfe and Boden, 1992, p. 49). Insofar as
the second element is concerned, the
evolutionary focuses identify an analogy
between the mechanism of natural selection
and the relation which the businesses
maintain with the environment in which
they operate. They propose that
environment[2] represents the mechanism in
charge of carrying out natural selection in
the economic sphere; that is to say, it is in
charge of selecting those businesses and
organizational procedures most appropriate.
It can thus be deduced that organizational
evolution is controlled by the objective of
adaptation. With respect to the heredity,
there are profound discrepancies among the
different theories of evolution[3]. To the
extent to which the fact that the genetic
component is fixed is admitted the role that
heredity plays in the processes of evolution is
totally without importance. In spite of this
common trunk on which evolutionary
economy and population ecology rely to
illustrate organizational evolution, profound
discrepancies also exist. Let us examine in
detail the propositions from all of them.
The evolutionary economics
The business is conceived to be, above all, an
entity of learning, whose limits are
determined not only by its knowledge, but
also by its capacity to learn (Foss, 1994, p. 19;
Caccomo, 1995, p. 47). Thus, the most
characteristic property is its character of a
warehouse of specific knowledge. This
knowledge is reflected in the organizational
routines, which accumulate the internal and
idiosyncratic learning brought about in the
activity of the business and which forms a
hierarchized structure[4] (Saviotti and
Metcalfe, 1991, p. 9; Winter, 1991, p. 190).
Routines[5] are defined as models of behavior
followed repetitiously and therefore
[ 216 ]
predictable and regular, subject to
modification if the conditions of the
environment change (Nelson and Winter,
1982, p. 14; Winter, 1990, p. 275). In this way
routines act as the hinge which connects the
behavior of the business with the
environmental stimuli, in such a way that
the processes of change in decision rule are
linked with the dynamics of the economic
environment[6]. This, together with the fact
that routines reflect the past of a business,
lead to the conclusion that routines are
adequate both for internal conditions as well
as those surrounding the firm (Nelson and
Winter, 1982, pp. 14-6). In short, routines and
decision-making rules constitute the
inheritance of the firm's past, supply the base
for predicting its future behavior and
constitute the sources of continuity of
organizational behavior (Nelson and Winter,
1982, p. 96; Winter, 1990, p. 276). Furthermore,
this conception allows us to perceive the firm
as a historical entity. This provides it with
stability and response capability in the face
of exogenous changes.
For evolutionists, firm evolution is
synonymous with the evolution of the
different firm routines through the triptych:
variation-selection-retention (Miner, 1994). It
is understood that the generation of new
routines can take place accidentally ±
without intentional behavior ± but, above all
they occur through a deliberate process of
search for new routines. Likewise, the
deliberate process may derive from a
behavior in itself routine ± guided by
superior order routines ± or they may be the
result of adverse conditions ± stimulated by
exogenous change and unfavorable firm
results (Winter, 1971, p. 245; Douma and
Schreuder, 1991, p. 162). Likewise, this
deliberate process has two development
methods: innovation and imitation[7].
Innovation refers to those processes of trial
and error deriving from internal
investigation. Imitation[8] supposes that a
firm, in its search for new routines,
appropriates the investigations performed by
others, in such a way that it copies from
successful firms the observable elements
associated to such success (Brittain and
Freeman, 1980, p. 308; Nelson, 1995, pp. 69, 71).
The generation of internal variety is
conditioned by already-existing routines,
essentially by those of superior order (Nelson
and Winter, 1982, p. 18; Douma and
Schreuder, 1991, p. 161). This consideration
lends an idiosyncratic character to the
adaptive responses[9]. In contexts of
uncertainty and of limited rationality the
adaptation is imperfect and differential
between the firms (Metcalfe and Boden,
 Santos Alvarez Mã Valle 1992, p. 53). This implies an additional source
The phenomenon of of diversity.
organizational evolution: The process of selection is represented by
a model for analysis
competition, that is, by the firm's fight to
Leadership & Organization
Development Journal remain in the market. The environment
23/4 [2002] 215±227 selects, from the set of routines, those which
increase the survival probability ± internal
selection ± (Douma and Schreuder, 1991,
p. 164; Aldrich, 2000). So, the selection
mechanism facilitates evaluation of the
viability of organizational practices and the
best routines with respect to which
uncertainty is resolved ex-post through the
competition which the firms face (Nelson,
1995, p. 63; Caccomo, 1995, p. 49). Considering
firms as historical entities allows us to
deduce that the environment moulds the
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organizational species which are, in
themselves, the result of an evolutionary
process (Knudsen, 1995, p. 203).
Retention, or heredity: refers to
accumulative retention of the routines
selected by the environment. Given that the
firm inherits through rules and
organizational routines its ability in
developing productive transformations,
these are converted into the genetic
equivalent of the businesses and
maintenance of such routines over time
fulfills the role of genetic heredity (Nelson
and Winter, 1982, p. 142; Saviotti and
Metcalfe, 1991, p. 13). The hypothesis that
businesses have decision-making rules
which are replaced in agreement with the
principle of satisfaction furnishes genetic
stability and the mechanism of endogenous
mutation (Winter, 1971, p. 247).
Global consideration of the three elements
we have presented ± variety, selection and
heredity ± illustrates the evolution
businesses undergo, which is directed by the
process of adaptation of routines.
On this model the leaders have to choose
and introduce internal changes in order to
respond to the adaptation challenge (Judge
and Zeithaml, 1992; Whestphal and
Fredrickson, 2001). In addition, since
managers are boundedly rational, they must
rely on simplified representations of the
word in order to process information (Simon,
1955). There imperfect representations form
the basis for the development the mental
models and organizational beliefs that drive
evolution decisions. They influence the
manner in which managers frame problems
of adaptation and thus how they search for
solutions. Furthermore, the managerial
cognitive representations may play a central
role in terms of determining the adaptative
response, and ultimately, the development of
the organizational evolution (Zyglidopoulos,
1999; Hambrick and Mason, 1984; Tripsas and
Gavetti, 2000; Bovey and Hede, 2001). Thus,
leaders play an active role in the adaptation
and evolution process of the firm
(Pegels et al., 2000; Lovas and Ghoshal, 2000).
The ecological perspective
In population ecology, firms and
organizations are structured systems of
routines which are dominated by
organizational inertia[10] (Hannan and
Freeman, 1984; Amburgey et al., 1993, p. 52)
which limits the flexibility and ability for
organizational adaptation to the
environment. An organizational structure is
considered to present inertia when its
reorganization velocity is lower than that at
which the environmental conditions change
(Hannan and Freeman, 1984, p. 151).
Accepting the organizations are inert means
admitting that their response to
environmental evolution is subject to
important delays which endanger the
viability of such responses. Such
organizational inertia is considered as a
subproduct derived from the natural
selection affecting organizations, given that
it is assumed that such selection tends to
favor organizations whose structures are
more inert[11] (Hannan and Freeman, 1984).
Individual organizations are condemned to
fixed genes with severe limitations in their
ability to adapt to the environment. It is
understood that the organizational
adjustment to environmental conditions
principally[12] occurs through substitution
of organizations and not by individual
adjustment (Nelson, 1995, p. 78). The process
of evolution is thus controlled by diversity of
organizations and by selection[13].
Variety in organizations is produced by
their creation and death, and its origin is in
the chance process of birth of new
organizations. This variety permits the
populations to face future changes and
environmental uncertainty, as when the
environment dictates a change the
appropriate variability is understood to be
present in the population to furnish an
effective response to the changing selection
criteria. The environment is in charge once
again of performing the natural selection: it
chooses the most adapted organizations
within the population. This selection process
occurs under conditions of scarcity of
resources, which implies that the
environment selects organizations when the
total demand for them is greater than the
available offer of resources in the niche
occupied (Hannan and Freeman, 1977, p. 939;
Aldrich, 1979, pp. 27-8). It can thus be deduced
that the forces of selection operate when the
environment elects the subgroup of
[ 217 ]
 Santos Alvarez Mã Valle organizations which best compete for scanty
The phenomenon of resources (Hannan and Freeman, 1977,
organizational evolution: p. 939). Adaptation of organizational
a model for analysis
structures and forms is thus understood to
Leadership & Organization
Development Journal occur principally at population level when
23/4 [2002] 215±227 new organizations replace the older, less
adapted (Hannan and Freeman, 1989, p. 149).
The natural selection demands adapted
organizations. Thus, under the premises of
population ecology adaptation is understood
to be external to the organizations, because it
is produced through a reassignment of the
resources available in the environment,
favoring the best adapted organizations
(Hannan and Freeman, 1989, p. 8).
In this model the organizational evolution
escapes the organizational sphere, so as to
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depend solely on the external forces.
Therefore, leaders' decisions are irrelevant
in the process of guaranteeing adaptation
and in determining the evolution path. The
behaviour of leaders cannot have a
significant impact on an organization's
likelihood to survive (Durand, 2001).
From these explanations on the process of
organizational evolution proposed by the
different evolutionary focuses, the process of
selection to which businesses are submitted
stands out. This selection process imposes
adaptation as the guide for evolution and also
justifies the transcendence of the
environment. The revised approaches
propose us different mechanisms of
adaptation: organizational change and
disappearance.
Adaptation mechanisms: organizational
change and disappearance
Organizational change can be defined as a
process of identification and implementation
of new organizational routines and practices.
The interesting aspect of its study lies in
ascertaining its relevance in the process of
organizational adaptation. Thus, two
relevant questions are suggested: the
possible causal relation which links
environmental evolution and the need for
adaptation with internal changes; and the
consequences derived from such changes:
1 Motivational factors and the internal
nature. Previous investigations[14] show
that organizational changes respond to
environmental evolution as well as to the
misfit which this provokes. In addition, it
is shown that changes can be influenced
by processes of imitation (Santos et al.,
1998; Gemser and Wijnberg, 2001).
Likewise, empirical evidence reflects that
organizational variables-age, size,
organizational form, legitimacy, history,
etc. ± condition internal change processes
to the extent that they represent the
[ 218 ]
endowment of organizational resources
and capacities which influence the ability
to adapt and the organizational resistance
to the pressures applied by natural
selection[15] (Santos, 2001, pp. 100-1).
However, the perception of the adaptation
need by managers is key for the start of
the internal fit process (Landrum et al.,
2000; Whestphal and Fredrickson, 2001).
2 Effects. The various evolutionary schemes
differ in the character, beneficial or
prejudicial, given to the consequences
deriving from the processes of internal
change. While population ecology
emphasizes the negative character of
intra-organizational changes,
evolutionary economics defends the
possibility that these effects can be
beneficial as they facilitate adaptation. We
assume that internal change will be
beneficial for organizational results and
survival, if it arises as a response to the
restructuring of the environmental
conditions and if it is based on the
organizational routines and competencies
established (Haveman, 1992, p. 49). The
change is beneficial when it endows the
organization with capacities to face new
environmental demands. The empirical
evidence available does not present
conclusive results with respect to the
prejudicial or beneficial character of
change[16]. In addition, a few studies point
out the necessity to perform studies on the
consequences associated with the
processes of internal transformation in
dynamic terms, given that these effects
can differ in both the short and the long
run. However, the literature does not
agree with respect to the more or less
disturbing character of changes in
different moments of the temporal
dimension (Singh, et al., 1986b, pp. 173-4;
Delacroix and Swaminathan, 1991, p. 631;
Amburgey et al., 1993, p. 70). In addition,
the empirical evidence shows us that how
the change is undertaken will determine
its impact on the organization (Dowell and
Swaminathan, 2000). And so, the
behaviour of managers also affects the
final results. Lastly, organizational
conditions can also affect the character
and repercussions of the effects
themselves, above all in survival
guarantee[17].
Organizational disappearance represents the
mechanism of external adaptation, inasmuch
as it is imposed by the environment and
produced through a reassignment of
resources among the organizations of a
population. This provokes the
 Santos Alvarez Mã Valle disappearance[18] of the less adapted
The phenomenon of organizations (Hannan and Freeman, 1989,
organizational evolution:
p. 8). Ecological logic directly relates
a model for analysis
environmental evolution to the need for
Leadership & Organization
Development Journal adaptation, with events of organizational
23/4 [2002] 215±227 death, based on the hypothesis that
organizations are incapable of offering an
adequate response to the need for adaptation.
Even when established firms recognize the
need to change in response to shifts in their
external environment, they are often unable
to respond effectively (Tripsas and Gavetti,
2000, p. 1147). We can thus state that
disappearance is the adaptation mechanism
in force in organizations which are not
capable of internal adaptation or in
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organizations in which internal adjustment
processes are inefficient. The studies of
Amburgey et al. (1993), Rao and Neilsen
(1992), Baum (1990) and of Barnett (1990)
confirm the relation foreseen between
environmental evolution and organizational
death. In addition, it is natural to find
numerous empirical models[19] designed to
analyze the effect on risk of disappearance
possessed by variables such as age, size,
organizational form, legitimacy and initial
environmental conditions in which the
organization arises. Available empirical
evidence allows us, in general terms, to
confirm the influence of these variables on
the risk of organizational disappearance. At
any rate, a review of the empirical literature
points out that these variables also influence
sensitivity and, above all, organizational
resistance to the pressures of selection. This
is because they reflect the internal
endowment of resources and routines
(Santos, 2001, p. 100).
Therefore, existing empirical evidence
confirms the validity of the various
adaptation mechanisms and emphasizes the
lack of studies which include a simultaneous
study, from a more global point of view, of the
processes of change and disappearance, given
that both processes can jointly impact the
process or organizational evolution. Within
this framework, the relation that links
organizational conditions stands out, insofar
as such conditions are representative of
resources and routines, with propensity to
change and risk of disappearance. The
endowment with organizational routines and
resources emerges as the principal
conditioning factor of the mechanism of
adaptation utilized by the organization to
confront environmental evolution; it is thus
the determining factor which guides the path
of organizational evolution. Figure 1 shows
the above-mentioned line of argument.
A model of organizational
evolution
Evolutionary developments published to date
require a conceptual ordering within the
framework of an analysis model which
includes the considerations of adaptation we
have been presenting. The analysis model
proposed below should serve to contrast, in
economic-business reality, the path of
evolution followed by organizations in the
context of environmental evolution. The
different elements of the model and the
principal interactions foreseen can be
observed in Figure 2.
The starting point for any model of
organizational evolution is found in the
identification of the need for evolution and
adaptation. It is environmental evolution ±
responsible for the appearance of
environmental misfit which provokes the
demand for organizational evolution in terms
of adaptation. Environmental evolution ±
modification of environmental conditions ±
emerges as the factor responsible for the loss
of level of organizational adjustment to the
environment and thus as the antecedent of
setting off any of the adaptation mechanisms.
Specifically, the changes in environmental
conditions are what alter the resource base
on which the population organizations are
maintained and thus modify their viability
(Brittain and Freeman, 1980, pp. 294, 309). It is
understood that the relevant environmental
evolution is that which makes the strategies,
structures and organizational forms obsolete
and consequently threatens the guarantee of
organizational life. Environmental evolution,
in the line of the studies reviewed[20], follows
a model of progressive evolution submitted to
discontinuities.
Once the fit between the environment and
organizations has been broken, the
environment imposes recovery of the
adaptation lost. The different evolutionary
focuses diverge in the adaptive capacity they
concede to organizations and propose
different adaptation mechanisms ± internal
change and disappearance ± whose validity is
backed by empirical evidence. Specifically,
we understand that the mechanism of
organizational adaptation in control in each
case depends on the development of the
adaptive capacity and on the level of
resistance to the selection pressures reached
in each organization. Given that
organizations differ in availability of
resources and routines, it can be stated that
they differ in their capacity for adaptation
and resistance to adaptation pressures from a
dynamic environment.
[ 219 ]
 Santos Alvarez Mã Valle Figure 1
The phenomenon of Organizational evolution
organizational evolution:
a model for analysis
Leadership & Organization
Development Journal
23/4 [2002] 215±227

++
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Figure 2
Model of organizational evolution

Resources and routines are principally intraorganizational change which enables

responsible for endowing the organization
with capacity for adaptation and the
predisposition to respond to environmental
evolution or to be submitted to the external
mechanism of adaptation. Organizational
routines and dynamic capabilities,
facilitate and guide the processes of
[ 220 ]
internal adaptation. Such capabilities are
thus responsible for the capacity of
organizational response to environmental
evolution. Internal resources are especially
significant in organizational capacity to
resist pressure of selection. In addition, the
endowment of resources and capabilities
 Santos Alvarez Mã Valle determines the selection of the adaptation
The phenomenon of mechanism that the organization offers in
organizational evolution: face of environmental evolution. Leaders'
a model for analysis
management of resources and capabilities is
Leadership & Organization
Development Journal crucial for organizational evolution.
23/4 [2002] 215±227 The proposed model details the adaptation
mechanisms mentioned in the literature and
an assessment of their effects on an
organization's survival.
We therefore accept that organizations
endowed with adequate adaptation capacity
exist ± in which the internal adaptation will
probably guide their evolution ± and that
there are also organizations with scant
adaptive capacity, who are vulnerable to
environmental pressures ± in which
evolution will probably head in the direction
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of disappearance:
1 Internal adaptation. This adaptive
response is reflected materially in
deliberate organizational
transformational processes ± for example:
strategic change, structure change, new
product introductions ± which focus on
the search for routines and behaviors
which are better adapted to the new
situation caused by environmental
dynamics. Internal change permits
adaptation and guarantees the survival of
the organizations which have adequately
developed routines and, above all,
capabilities. This search for solutions can
be resolved through the processes of
innovation and imitation. The latter
processes demand consideration of the
influence that the leading organizations in
the population and, above all their
adaptive responses, have on the process of
internal adaptation. In addition, we have
already pointed out that the formulation
of evolutionary economics recognizes the
idiosyncratic nature of adaptive
responses. This, together with the
evidence from the empirical studies
analyzed, leads us to accept that the
specific conditions of each organization
affect the internal response the
organizations offer to environmental
evolution; that is, they affect the type of
organizational change selected and its
development process.
2 External adaptation. We accept that
external adaptation is the adaptation
mechanism applicable when the
organizational conditions do not allow
sufficient internal flexibility[21] to adapt
to the requirements of environmental
evolution. Disappearance is the
adaptation mechanism in force in
organizations with a low level of
resources and scant development of
modification routines. However, in
contrast to the previously mentioned case,
the environment cannot impose
adaptation before the maladjustments
have appeared. Environments only have
influence when the maladjustments are
real and the need to adapt is urgent. We
therefore conclude that external
adaptation ± organizational mortality ±
operates in the face of continued
adaptation maladjustment between the
organizations and their environments,
and that the direct relation between
environmental evolution will undergo
certain delays.
3 Effects. The adaptive mechanisms
proposed in the model are understood to
be oriented to the obtaining of a common
end: to maintain or recover the
organizational fit to the environment. Its
effects are felt both at an individual level ±
the organizations affected ± and at the
joint level ± the set of population. With
respect to the effects on the population, by
its own concept external adaptation is
assured success, since it provokes the
disappearance of the less adapted
organizations. However, in the case of
internal adaptation the results are less
clear. Only the development of the
processes of transformation and the
organizational results manifest the true
final result with respect to the degree of
adaptation achieved.
Insofar as effects at the individual level,
the various adaptive mechanisms differ
significantly in the degree to which they
affect organizational life. Internal
adaptation supposes a transformation
which alters organizational behavior with
unpredictable results. With external
adaptation, the consequences are sure and
are limited to the disappearance of the
organization affected. Therefore, external
adaptation is excluded from any analysis
of the individual effects which go beyond
the demonstration of organizational
death. Thus, the individual-level analysis
which we perform about the effect of
adaptive response will center on the study
of the consequences derived from the
internal changes in which the internal
adaptation is reflected. Following the
proposal of Amburgey et al. (1993, p. 70),
we assume that these consequences can
change over time, which leads us to
formulate a dynamic analysis, capable of
distinguishing between short and long
term consequences.
. At short range. It is to be expected that
internal changes alter organizational
behavior, given that they imply the
incorporation of new routines. The
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. At long range. The organization
[ 222 ]
new practices may be more or less
adaptive than those replaced. However,
the initial substitution phase is
predictably unsettling. An alteration in
routines increases the probability of
internal conflicts within the
organization (Nelson and Winter, 1982,
p. 134). So, modifying routines reduces
reliability and the guarantee of
organization survival as well (Hannan
and Freeman, 1984, p. 159; 1989, p. 83;
Miner et al., 1990, pp. 694-5).
Furthermore, it alters relations with
the environment (Nelson and Winter,
1982, p. 125), threatening organizational
legitimacy (Hannan and Freeman, 1984,
p. 149). The compatibility between the
existing organizational competencies
and those which incorporate the
processes of change is revealed as a
significant factor in explaining the
perturbations deriving from the
adjustment process (Haveman, 1992,
p. 49). We can thus question the extent
to which the internal process of search
for new routines (which precedes the
organizational change) affects the
degree of initial alteration derived
from it. In change processes managed
internally (those derived from
organizational investigation) it can be
supposed that compatibility between
new and old routines is more fully
guaranteed than in cases in which the
new routines are generated in
environments external to the
organization. We can thus conclude
that the initial alteration deriving from
a change from imitation is greater than
if the change derives from a process of
innovation and internal learning.
reconstructs its internal process and
its relation network. Therefore, the
initial alterations progressively
disappear (Amburgey et al., 1993, p. 53).
The effects of change are liberated from
the initial consequences and come to
depend only on their appropriateness
in the new competitive situation. If the
organizational change implemented
endows the organization with
capabilities for facing a new
competitive situation, this change is
one which improves the organization's
survival. In the long term analysis it is
also necessary to consider the
influence of the internal process which
precedes the organizational
transformation. It is to be expected that
the probability that an organizational
change turns out to be adaptive in the
long run will be greater in the case of
imitation changes than in those
deriving from innovation[22]. It is
convenient to point out that the
innovative path, although risky, if it is
successful can grant the organization a
significant, long-lasting competitive
advantage over the rest of the
population. This success derives from
the better position reached and is
translated into a significant
improvement in life guarantee. Thus,
we accept that the improvement in
survival guarantee from the adaptive
changes by innovation is greater than
in the case of adaptive changes through
imitation.
Analysis of the effects of the internal
adaptive mechanism is completed with the
question as to the opportunity of the
organizational changes. Its relevance is
highlighted in the propositions of the
ecological perspective. This viewpoint notes
that as a result of structural inertia, the
viability of internal changes, even when they
are adequate, is usually compromised
because they arrive excessively late.
Therefore, long term change can have
negative consequences due to two clearly
differentiated situations: if the routines
adopted do not turn out to be the most
appropriate for the competitive situation, or
if the organizational change is implemented
very late. The second situation reflects
ecological arguments, which indicate that
internal changes appear with excessive delay
in response to the conditions provoking
them, due to structural inertia (Hannan and
Freeman, 1989, p. 8).
In effect, the longer the organizational
response to environmental evolution is
delayed, the more difficult it will be for such
a response to produce an improvement in
survival guarantee. We can thus conclude
that the probability that an organizational
change turns out to be delayed and therefore
perturbing in the long run is greater when
such change responds to real maladjustment
than when it responds directly to
environmental evolution[23]. This is not to
say that this alternative is less risky, given
that there is always a risk of undertaking
unnecessary changes or those channelled in
inadequate directions (Zajac et al., 2000,
p. 449).
In closing with analysis of the
consequences derived from change
processes, it is appropriate to point out that
internal conditions, once again, can affect
such consequences (Baum and Oliver, 1991;
Amburgey et al., 1993). In this respect, the
 Santos Alvarez Mã Valle organizational characteristics can facilitate
The phenomenon of development of change processes and
organizational evolution: cushion (or magnify) the alterations deriving
a model for analysis
from such processes. Empirical
Leadership & Organization
Development Journal investigation, although not abundant,
23/4 [2002] 215±227 reflects the significance of organizational
conditions in the analysis of effect derived
from adjustment processes.
Conclusions
Throughout this study it has been stated that,
by the effect of the selection performed by
economic competition, organizational
evolution is directed by a process of
adaptation to the environmental evolution.
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The debate on adaptation typically has been
framed by alternative characterizations of
evolution. For evolutionists, the evolution of
the firm is sketched as a path which runs
parallel to the path describing environmental
evolution. Organizational change is then
presented as the mechanism which allows
adaptation to the environment and that, in
turn, guarantees organizational survival. For
population ecology, however, the emphasis
given to organizational inertia leads it to
point out that relevant change alludes to the
composition of the population more than to
an intraorganizational process. This allows
us to speak of an external adaptation. Thus,
the process of organizational evolution
escapes the organizational sphere, so as to
depend solely on the pressure of selection
emerging environmental change situations.
The study of organizational evolution and
adaptation is based on analysis of two
adaptation mechanisms: organizational
change and disappearance. We can conclude
that the organizational change provokes, at
short range, alterations which progressively
decrease over time and, at long range,
modifications in the capacities and
organizational behavior which affect the
guarantee of survival. The sense in which the
organizational change affects the survival
guarantee classifies it as perturbing or
adaptive.
The firm's endowment of resources and
capabilities determines its ability to respond
and withstand the selection pressure.
Therefore, the actual endowment of
resources and capabilities constitutes the key
determinant in the selection of an adaptation
mechanism. Only the firms or organizations
capable of generating capacities and
flexibility internally can manage their
processes of evolution and take charge of
their survival guarantees. Therefore, the
adaptative ability lies in the endowment
resource and capabilities that managers
build using organizational capabilities, not
in the capabilities themselves (Eisenhardt
and Martin, 2000, p. 1117).
In this context, do leaders impel, impede or
exert no effect on organizational evolution
and adaptation? For population ecology,
leaders have a passive and irrelevant role.
Nevertheless for evolutionist, leaders take an
active role in shaping the adaptative
trajectory of their firm. The central role of
firm's leaders is both to recognise the need
for internal fit and to guarantee the
adaptation ability.
Therefore, the origins of the evolution
process may therefore lie in the ability of
managers to identify and respond to
environmental cues well in advance of
observing performance-oriented pay-offs
(Cockburn et al., 2000).
In this context, the goal of the proposed
evolutionary model is to identify the
evolutionary path followed by businesses in a
context of environmental evolution. With the
conviction that organizational evolution can
be explained on the basis of a combination of
different adaptive mechanisms, the model
has been constructed on the integration of
evolutionary formulations. The general
argument which summarizes the proposed
model can be stated as follows:
environmental evolution requires adaptive
responses ± internal or external ± in
organizations which, implemented under
restrictions of organizational capacities,
provoke differential effects. Therefore, this
model helps reconcile the debates not by
showing that either adaptationists or
ecologists are more correct in their
predictions regarding change and survival,
but by specifying the circumstances under
which each is correct. In summary, the
panorama of investigation described to this
point allows us to visualize the complexity
and the transcendence of the study of
organizational evolution.
Notes
1 The evolutionary theories are those in which
the attention focuses on a variable or set of
variables which change over time, and whose
objective is understanding this dynamic
process (Dosi and Nelson, 1994, pp. 154-5;
Nelson, 1995, p. 54).
2 In evolutionary analysis the concept of
environment is quite broad, given that it
refers to whatever dimension outside the
firms which can affect their well-being and the
selection process they undergo (Nelson and
Winter, 1982, p. 401; Douma and Schreuder,
1991, p. 153). Furthermore, admitting that
environment carries out the function of
selection does not imply that it is a totally
exogenous factor. To the degree to which the
[ 223 ]
 Santos Alvarez Mã Valle
The phenomenon of
organizational evolution:
a model for analysis
Leadership & Organization
Development Journal
23/4 [2002] 215±227 3 Penrose (1952, pp. 806-8) argues that the
4 This hierarchy covers from operational
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5 For a detailed account of the concept of
6 The stabilizing character of routines prevents,
7 An explanation of the equivalence established
8 Alchian's (1950, pp. 313-15) work presents a
9 This implies that exogenous events can set off
10
[ 224 ]
environment is composed of businesses, the
selection process is not separated from the
business, but rather in some manner
conditioned by them (Hannan and Freeman,
1989, p. 14).
analogy of natural selection in the economic
environment is weak because there is no
economic equivalent for hereditary
characteristics, so therefore nothing on which
the selection process can operate. In this paper
Penrose develops a broad criticism of the use
of evolutionary references in business theory,
which generated the commentaries and
replies of Alchian and Enke (1953), American
Economic Review, Vol. 43 No. 4.
routines, of inferior order, up to those of
higher order, which constitute the
modification routines which govern
innovation processes (Nelson and Winter,
1982, pp. 16-17; Levitt and March, 1988, p. 321;
Winter, 1990, pp. 275-8; Nelson, 1991, p. 68).
routine and its transcendence in business
behavior, see for example, Nelson and Winter
(1982, pp. 96-139), Winter (1990, pp. 274-8), and
Nelson (1995, p. 69).
however, the business from responding to
small environmental perturbations and
facilitates (although not completely)
organizational response to external changes.
With respect to the role of routines as an
organizational truce, see Nelson and Winter
(1982, pp. 107-12).
between the processes of innovation and
imitation and those of biological mutation and
reproduction can be found in Alchian (1950,
p. 315). Organizational evolution combines
these processes and thus takes advantage of
innovation in order to extend its current
sphere of activities and expertise; it utilizes
imitation to conserve and deepen its
participation in the area discovered by
successful innovations (de Vany, 1996, p. 432).
series of reasons which justify the use of the
imitation mechanism in the adaptation
process of a firm. For information on the
process of imitation in organizational
evolution see the papers of Nelson and Winter
(1982, pp. 96-136, 143) and of de Vany (1996,
p. 432).
processes of organizational restructuring.
However, the nature of such changes cannot
be foreseen by simply considering the
exogenous events, it also depends on the
routines and inherent capacities of the
business.
This inertia stems as much from internal
conditions as from external factors, see
Hannan and Freeman (1977, pp. 931-3;
1989, pp. 70-90).
11 The initial premise indicates that
environmental selection favors organizations
which fulfill fundamentally two basic
competencies: reliability and responsibility.
Inertia is understood to guarantee these
competencies. Thus, natural selection favors
organizations with greater inertia.
12 Hannan and Freeman (1977, p. 930) recognize
that organizational leaders formulate
strategies which help the organizations to
adapt to the environment. However, they
consider that this process is not important in
relation to the transformation process which
takes place in the population when
organizations are replaced by other, more
highly adapted ones.
13 In this context it is understood that deliberate
organizational variations aimed at adaptation
can only modify the external appearance,
never the genetic component, in such a way
that heredity has no importance in explaining
the process of evolution. Specifically, heredity
represents a continuity role.
14 Boeker (1989), Baum (1990), Kelly and
Amburgey (1991), Delacroix and Swaminathan
(1991), Haveman (1992), Karim and Mitchell
(2000), Sorenson (2000), Zajac, Kaatz and
Bresser (2000).
15 The studies of Singh, House and Tucker (1986),
Boeker (1989), Baum (1990), Miner et al. (1990),
Tucker et al. (1990), Kelly and Amburgey
(1991), Delacroix and Swaminathan (1991),
Amburgey and Miner (1992), Amburgey et al.
(1993), Haveman (1993) and Holbrook et al.
(2000) note the influence of organizational
conditions on change processes and definitely
reflect the dependence which exists among
these variables and the capacity of
organizational adaptation.
16 Studies such as those of Singh et al. (1986a, b),
Miner et al. (1990), Kelly and Amburgey (1991),
and Haveman (1992) reflect these
discrepancies.
17 Studies such as those of Miner et al. (1990),
Baum and Oliver (1991) and Amburgey et al.
(1993) reflect how organization age and
legitimacy moderate the relation between
internal change and risk of disappearance.
18 Disappearance is understood to be loss of
organizational identity. It does not necessarily
imply the evaporation of the organization's
resources and capabilities, since it can be
found associated to a process of organizational
rebirth with a format more adapted to the new
environmental conditions. For further
information see Freeman et al. (1983, pp. 694-5),
and Young (1988, pp. 7-8).
19 In this context typically ecological models are
developed, such as the model of liability of
newness (Carroll and Delacroix, 1982; Hannan
and Freeman, 1989, pp. 244-7), the model of
liability of adolescence (Carroll and Huo, 1988;
Fichman and Levinthal, 1991; BruÈderl and
 Santos Alvarez Mã Valle
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organizational evolution:
a model for analysis
Leadership & Organization
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20
21
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SchuÈsler, 1990), the model of liability of
smallness (Freeman and Hannan, 1983; Singh
et al. 1986b; Delacroix and Swaminathan,
1991), the theory of width of niche and the
theory of resource partitioning (Hannan and
Freeman, 1977; Freeman and Hannan, 1983;
Carroll, 1985), etc. These are all models which,
in general, are backed up by empirical
evidence. A review of empirical studies can be
found in Santos (2001, pp. 70-80).
We refer to the postulates of Schumpeter
(1950), Biggart (1977), Hannan and Freeman
(1989), Miner et al. (1990), and Haveman (1992,
1993).
In this line, Sanchez (1995) and Sanchez and
Mahoney (1996) defend the idea of flexibility as
a way of decreasing selection pressure.
Barnett, W.P. (1990), ``The organizational ecology
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22 If the change occurs due to imitation, the risk
that it will not turn out to be appropriate is
smaller than in the case of changes through
innovation. Only changes which have
demonstrated their validity are subject to
imitation. If the change arises through
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23 When the internal transformation responds to
real misfit, there is a more or less significant
time lapse from the moment that the
environmental evolution is produced until the
maladjustment becomes evident and the
adaptive mechanism is put into functioning.
This delay, which is not produced in the case
of direct response to environmental evolution,
makes it more probable that the response
mechanism will not arrive at the most
appropriate moment.
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