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Simple Indicators of Adaptation versus Rigidity in History-Dependent Firm Activities and Decision Rules.

  • Mathematics


Evolutionary theory suggests that firms' activities and decision rules are history-dependent: firms tend to do what they have done in the past. This paper proposes some simple indicators of adaptation versus rigidity in the amount of effort that a firm devotes to a history-dependent activity, as well as in a decision rule that specifies alterations in the amount of activity. Without requiring complex statistical procedures, runs tests in combination with some simple arithmetic measures of changes in firm behavior over time can help distinguish between rigidity and adaptation in firm behavior. As an illustration, the procedures are applied to data on oil industry R&D activities. Copyright 1998 by Oxford University Press.

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