AN EVOLUTIONARY MODEL OF ORGANIZATIONAL PERFORMANCE

Organizations vary in how well they perform. This can be due to differ ences in their strategic positions and to differences in their competi tive abilities. We propose an evolutionary model in which there is a t rade-off between these two sources of advantage. In a naive evolutiona ry model, competition triggers both selection and learning-leaving org anizations with the capabilities to perform better. However, managers often buffer their organizations from the disciplining forces of selec tion by seeking out positional advantages in the market. We argue that when this is done using multiunit structures, market position improve s but organizational learning is retarded. Consistent with this view, we find that after controlling for selection, single-unit organization s benefit today from being exposed historically to competition-evidenc e of learning-while large, multiunit organizations do not. Multiunit o rganizations instead benefit from mutual forbearance, a positional adv antage. The findings come from a dynamic analysis of takeovers and per formance among retail banks in Illinois. Implications for the study of strategic evolution are discussed.