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The present article examines two important effects that have been given scant attention in prior studies of variable risk strategies. The first effect, reference group sensitivity, is the degree to which decision makers' aspirations are sensitive to their reference group. In this paper we compare the performances of decision makers with alternative levels of reference group sensitivity. Second, we introduce the novel concept of community effect. This relates to mobility among multiple segregated reference groups. The performance of decision makers residing in a world with one single population is compared with that of decision makers who have the possibility, which is more or less costly, to switch between multiple populations. The results support the findings from previous studies that variable risk strategies are preferred over fixed risk. The study of a community of populations provides additional insights that both support and complement previous research.

Zipf's law for cities is one of the most conspicuous and robust empirical facts in the social sciences. It says that for most countries, the size distribution of cities must fit the power law: the number of cities with populations greater than S is inversely proportional to S. The present paper answers three questions related to Zipf's law: (1) does the Danish case refute Zipf's law for cities?, (2) what are the implications of Zipf's law for models of local growth?, and (3) do we have a Zipf's law for firms? Based on empirical data on the 61 largest Danish cities for year 2000, the answer to (1) is NO—the Danish case is not the exception which refutes Zipf's law. The consideration of (2) then leads to an empirical test of (3). The question of the existence of Zipf's law for firms is tested on a sample of 14,541 Danish production companies (the total population for 1997 with 10 employees or more). Based on the empirical evidence, the answer to (3) is YES in the sense that the growth pattern of Danish production companies follows a clean rank‐size distribution consistent with Zipf's law.

In this paper, we use an agent-based simulation model to investigate how coordinated exploration by multiple specialists, as in new product development, is different from individual search. We find that coordinated exploration is subject to two pathologies not present in unitary search: mutual confusion and joint myopia. In joint search, feedback to one agent's actions is confounded by the actions of the other agent. Search therefore leads to increasing mutual confusion because agents are unable to learn from feedback to correct their faulty mental models of the search space. Incorrect beliefs held by one agent lead to mistakes, and because it is unclear which agent was wrong, this confuses the other agent, either into revising (correct) beliefs or holding on to (incorrect) beliefs. Sharing knowledge aligns specialists' mental models and counters mutual confusion by inducing coordination around particular search regions. Yet that very effort increases joint myopia, as agents prematurely reinforce each other into choosing from an increasingly narrow portion of the search space. In the extreme, high levels of shared knowledge induce agents to abandon their distinct search approach in favor of a lower common denominator. In coordinated exploration, increasing coordination efforts (such as by increasing communication) reduces mutual confusion but simultaneously increases joint myopia. Efforts to reduce joint myopia, such as by slow learning or lower levels of knowledge transfer, however, automatically increase mutual confusion. As modeled in our simulation, successful joint search needs to balance these two effects. Our results suggest that because unitary-searcher models abstract from epistemic interdependence, their predictions are potentially misleading for coordinated exploration.

Recent theoretical advances allow organizational designers and managers to better understand how decision processes can be improved. These advances allow managers to address a number of critical questions about the structure and process of decision making, issues that are relevant for any kind of organization be it social, political, or economic. Can we add another employee somewhere in the decision process to increase economic performance? Can we add or eliminate a channel of communication to raise the quality of decisions? What level of skill is worth paying for when we hire a decision maker? Is it a good idea to push decision makers beyond their current capacity if doing so increases their error rate by five percent? Where does the injection of inexperienced decision makers hurt the least? We describe an organizational design approach that provides answers to such questions, and we offer specific guidelines that managers can use to improve decision making in their organizations.

At its core, a behavioral theory of choice has two fundamental attributes that distinguish it from traditional economic models of decision making. One attribute is that choice sets are not available ex ante to actors, but must be constructed. This notion is well established in our models of learning and adaptation. The second fundamental postulate is that the evaluation of alternatives is likely to be imperfect. Despite the enshrinement of the notion of bounded rationality in the organizations literature, this second postulate has been largely ignored in our formal models of learning and adaptation. We develop a structure with which to capture the imperfect evaluation of alternatives at the individual level and then explore the implications of alternative organizational structures, comprising such individual actors, on organizational decision making.

Of paramount importance to the natural sciences, the principles of Darwinism, which involve variation, inheritance, and selection, are increasingly of interest to social scientists as well. But no one has provided a truly rigorous account of how the principles apply to the evolution of human society-until now.In Darwin's Conjecture, Geoffrey Hodgson and Thorbjørn Knudsen reveal how the British naturalist's core concepts apply to a wide range of phenomena, including business practices, legal systems, technology, and even science itself. They also critique some prominent objections to applying D

Abstract:We examine an aspect of the argument of Teppo Felin and Nicolai Foss ('The Endogenous Origins of Experience, Routines, and Organizational Capabilities: The Poverty of Stimulus'; 2011) where they reject the claim of Geoffrey Hodgson and Thorbjørn Knudsen ('Darwinism, Causality and the Social Sciences'; 2004) that habits depend crucially on stimuli from the social environment. We argue that while rightly stressing human agency they also create a false dichotomy between agential and environmental factors in the explanation. Felin and Foss create further confusion by hinting – without adequate clarification – at an untenable notion of human agency as an uncaused cause. We raise several questions of clarification for these authors.

The present article focuses on the conditions that allow governments to increase property
rights protection because they expect enough income from such action. We develop a
behavioral explanation, according to which the answer lies in the growth in the importance,
size and wealth of merchant guilds in the medieval era in Western Europe as well as a
somewhat surprising effect of volatile price structures. We add to prior research by showing
that even uncoordinated embargo pressures among multiple guilds could get medieval rulers
to offer high levels of property rights protection.

This paper presents to the English‐speaking reader a sample of material contained only in Schumpeter's first German edition (1911) of Theorie der wirtschaftlichen Entwicklung, material subsequently omitted from later German editions and from the English translation. The newly‐translated material, presented here for the first time in English, comprises a substantial part of the second chapter, only available in a completely rewritten version, and fully half of the famous seventh chapter, which has not been previously available at all in English. This material merits attention today because it contains remarkable and farsighted visions on economic theory that may inspire current efforts to devise models of economic and social evolution. In order to better appreciate the original text, we briefly introduce the "background" to Theorie and its revisions, briefly describing the social and intellectual environment of the time. We then discuss how the entrepreneur evolved over the three editions of Theorie (from 1911 to 1934) in view of the shift in Schumpeter's personal and intellectual life and outline the most important implications raised by the first German edition of 1911. Finally, we use Schumpeter's own statements to settle the obstinate confusion on the publication year of Theorie in favour of the year 1911.

Traditionally, routines have been perceived as a primary source of inertia, which slows down organizational change and hinders organizational adaptation. Advancing prior research on routine dynamics, this study examines how inertia in routines influences the process of organizational adaptation, both in the absence and presence of endogenous change of routines. Contrary to conventional wisdom, our analysis suggests an overlooked mechanism by which routine-level inertia may help, rather than hinder, organization-level adaptation. We demonstrate this mechanism by using a simple theoretical model in which the organization is characterized as a configuration of interdependent routines and study the process by which this configuration adapts to cope with its task environment. We find that inertia in routines may engender potentially useful variation in the process of organizational adaptation because reduced rates of routine-level changes may lead to temporal reordering when these changes are implemented. In our nuanced perspective, inertia is not only a consequence of adaptation or selection as perceived in prior research, but also a source of variation that turns out to be useful for adaptation. This logic is helpful to better understand why apparently inertial organizations keep surviving and from time to time exhibit outstanding performance. We conclude by discussing how this advanced understanding of the role of routines in organizational adaptation helps elaborate the theory of economic evolution.