Gaming Theory

Organizational ecology (OE) is a sociological theory of what happens to and within

populations of organizations. OE has produced an impressive and still rapidly increasing

number of empirical studies (Baum, 1996). For example, the number of studies that have

tested density-dependence hypotheses reaches infinity. No doubt, the empirical tradition that

has been established by OE, is an important enrichment of organization sciences. In recent

years, a cry for increased theoretical precision has emerged, however. For example, Baum

(1996: 107-108) concludes his impressive review of OE with a plea for such precision with

reference to the need for "asking new kinds of research questions that develop links with other

streams in organization theory". We believe that the organizational subdisciplines within

economics are specifically promising in this respect. Here we fully agree with Amburgey &

Rao (1996: 1280), who in a recent special issue of the Academy of Management Journal

observe that organizational economics is one area of overlap with OE that remains to be

explored. This is precisely what this paper does. In effect, we merge OE with the dominant

subbranche of industrial organization (IO): game theory. We strongly believe that the

mathematical tools of game theory are particularly applicable to OE-issues. That is, the very

nature of game theory makes this modeling technique well-suited to explore the impact of

between-firm (or between-population) differences in inertia on direct competition and

ultimately on firm performance and survival.

Thematically, this paper confronts the standard 'flexibility and efficiency favor selection'

logic with OE-reasoning. Carroll & Harrison (1993: 92) summarize the efficiency-favorssurvival

story line by arguing that "[t]his logic holds, first, that when an organizational form

emerges and spreads, it is because of the form's efficiency and, secondly, that when an

organizational form disappears, it is because of its inefficiency" (Carroll & Harrison, 1993: 92).

In a similar vein, advocates of the strategic choice theory argue that