The intellectually and practically relevant question in strategic management is the ebbing nature of competitive advantage. As Foster and Kaplan (2001: 41), two McKinsey consultants, conclude their massive research on the survival of large corporations ‘… the corporate equivalent of El Dorado – the golden company that continually outperforms the market – has never existed’.

The evolution of business organizations / models has traditionally been studied from three different angles, including (i) industrial organization/organizational ecology, (ii) the resource based view, and (iii) individual agency. Combining these three approaches, we see the focal analytical levels (society, firm/industry and individual actors) as intertwined in a complex manner in evolutionary processes that result in the survival and death of business organizations. Thus, we are primarily interested in the evolution of organizations as interplay between activities taking place at different analytical levels.

One of the most important empirical challenges in evolutionary research is the identification of why and how new business models emerge and mutate from the existing stock of organizations. In general, the emergence of business innovations in evolutionary discussion is usually explained either by the influence of a new generation of organizations or by radical entrepreneurial innovations from existing organizations.

In our project, we define the evolutionary mechanism as a process of variation, selection, and retention in which existing organizations produce new business innovations in interaction with their innovation environment. Abstaining from a narrow within-industry perspective and paying close attention to both existing stocks of organizations and new generations of organizations, our view of the innovation environment includes people and organizations in existing and emerging roles of consumers, producers, and competitors at different levels of “market eco-systems”, as well as the society in general.

Following an evolutionary logic, we see on the one hand that some organizations start variation in the characteristics of their business model as a consequence of changes in their resource base (‘action’). The variation usually involves the mutation of existing resources and capabilities. In addition, we are informed by another variation-producing mechanisms recognized in research on natural ecologies and evolution. That is, horizontal (gene) transfer and, particularly, hybridization.

This ‘organizational speciation’ view, where some organizations start to change their resource base, is complemented, on the other hand, with a dialectic logic that explains changes in resources and information as a product of interaction between multiple levels of analysis (‘the entire framework’). This process is characteristically cognitive in its nature. Similarly, we propose that business innovations (‘variation’) mutate from the existing stock of knowledge as a consequence of a long-term institutional arrangement between governments and economic interest groups.

In sum, the general principles of how our research is built on evolutionary ideas are as follows:

1. Industry is a necessary cause of firm performance.
   1. Each industry follows a specific life cycle. However, there are considerable similarities between industries.
2. Variation, selection and retention are key evolutionary mechanisms that operate in the industry context:
   1. Without variation cannot be selection (not retention)
   2. Without selection there would be no progress
   3. Without competition there would be variation, selection or learning (thus no progress or change)
3. A key strategic choice is the decision on market focus (narrow vs. wide).
4. Continuity is beneficial. Strategic consistency creates business opportunities, enhances learning, maintains legitimacy and reduces transaction costs (search, bargaining, protection)
5. Evolution is blind: logically, no firm / actor may have foresight