Industry Evolution: Diversity, Selection and the Role of Learning

The purpose of this paper is to show how institutional and evolutionary economics provide better insights as to why some firms survive and others do not than does neoclassical economics. At the heart of the evolutionary theory is the view that new firms are a manifestation of diversity and that their subsequent survival is shaped by the selection process. Despite immense institutional and historical differences across these different economic systems such as those in North America, Japan and Europe, evolutionary economics explains the role that diversity, selection and learning plays in economic development. We use a Dutch data set and a model on who survives and who doesn't to explain this role.