1

A Theory of the Firm and its Environment: An Autecological Approach

Abstract This paper provides an introduction to the first theory of the firm and its environment. It will be argued that the approach outlined is distinctive from all other theories of the firm due to its theoretical foundations and strict consideration of firms in an individualistic sense; including their environments as simultaneously defined. The uniqueness of this approach, firm autecology, will be explained with direct reference to the logic, nature, distinctiveness and actual need for this approach. This approach addresses the current situation whereby scholars have long accepted that firms can influence their environments, yet we have no theory of the firm designed to investigate how all types of firms might do so, and the outcomes of such behaviour. In addition to introducing the process of autecology, this paper also explains the importance of a firm’s operational environment and the adaptive process of environment modification. The paper concludes by reconnecting the primary ideas discussed here with more mainstream thinking in the organizational studies literature.

2

A Theory of the Firm and its Environment: An Autecological Approach Introduction Despite the many well-established theories of the firm and those that continue to

emerge (see Sautet, 2000; Casson, 2001; Nooteboom, 2009; Foss and Klein, 2012),

there exists at present, no theory of the firm enables the full range of reciprocal

relations between any individual firm and it's local environment to be studied and

understood. This paper provides an introduction to the first theory of the firm and its

environment. In doing so, the ideas presented here deliberately seek to avoid claiming

superiority over all other theories of the firm. For every theory of the firm serves a

particular purpose, which Alvarez (2003, p. 260) notes has been “developed to

address a particular set of characteristics and behaviours of interest” to the different

sub-domains of organizational research. Instead, the logic, nature, distinctiveness and

need for a new approach that focuses equally of firm and environment will be offered

for consideration.

A challenge in outlining this new approach, firm autecology, is too avoid lengthy

comparisons between it and all other theories of the firm. Therefore, this introduction

serves also to differentiate firm autecology in terms of its logic, nature, distinctiveness

and the actual need for such an approach. In the first instance, a set of syllogisms will

be used to direct focus to the uniqueness of each of these four aspects. Then, the

remainder of the paper will unpack each of these initial syllogisms.

The logic of firm autecology

In general, each theory of the firm tends to trade off precision for generalization, seeking to identify and explain patterns of firm behaviour and/or firm-related

3

outcomes, relying on a subset of all available data.

In reality, there is no consensus that any particular subset of data enables any particular theory of the firm to more effectively explain firm behaviour and/or firm-related outcomes. Therefore, an opportunity exists for a more expansive theory of the firm that is not restricted due to narrow assumptions and/or types of data. The nature of firm autecology

There exist two, recognized and mutually exclusive approaches to ecology, autecology (the study individual entities and their spatio-temporal relations) and synecology (the study of populations and/or communities and the entities ascribed membership within). Of the two approaches, only synecology has been developed in the social sciences. Therefore, an opportunity exists to develop an autecological theory of the firm through which to study the spatio-temporal relations of firms, and the environments they are operationally related to. The distinctiveness of firm autecology

All current theories of the firm aim to develop law-like generalizations about the subject matter they investigate. The development of law-like generalizations produce specific expectations of what reality is, and tends to lessen concern for the idiosyncratic behaviour of individual firms. Therefore, an opportunity exists for a theory of the firm to be guided by heuristic generalizations so as to stay focused on firms and their firm-specific interactions with their local environment. The need for firm autecology

At present, no theory of the firm investigates the reciprocal relations between individual firms and the specific local environments they sense, enact and modify. As such, no theory of the firm investigates the processes through which a firm deliberately (or non-deliberately) alters aspects of its local environment in ways that positively impact firm survival. Therefore, an opportunity exists for a theory of the firm and its environment to advance our understanding of the intricate essential relations that exist between

4

individual firms and the local environments they sense, enact and modify.

This introduction, although unconventional, has highlighted a very specific

opportunity that past contributions to the theory of the firm have left unaddressed. As

noted recently, although the theories of the firm are labelled as if they relate to “a

single organization, the … [theories] … actually … [say] … little about the activities

within a single organization” (Starbuck, Salgado and Mezias, 2006, p. 470). The firm

autecology approach presented here not only places the individual firm back centrally

in focus, but also the entrepreneur and the actions they attempt in order to match the

requirements of the local environment. Where other approaches continue to eliminate

the actors’ intentions regarding how selection forces may bear upon firms (see

Martinez and Aldrich, 2012), firm autecology adopts very different assumptions about

the reality of firm persistence. It is upon these different assumptions that this

explanation of firm autecology is formed. The remainder of this paper will now

consider in detail the logic, nature, distinctiveness of firm autecology and need for

such a new theory of the firm and its environment.

It is ironic that the most comprehensive work on firm autecology, titled, An

Autecological Theory of the Firm and its Environment (Jones and Walter, 2017)

almost mirrors the title originally proposed for Aldrich’s (1979) classic Organizations

and Environments. Aldrich had titled the preliminary manuscript The Organization

and its Environment, but changed to the eventual title to expressly recognize the

intended heterogeneity and diversity of his focus (Aldrich, 2007, p. xvii). Conversely,

Jones and Walter’s use of the definitive article (the) deliberately champions the

idiosyncratic behaviour of individual firms alongside the unique environmental

5

conditions unique to such behavior. In looking at individual firms and/or specific

types of firms, the scope of potential explanation widens along with the nature of data

that is required to make sense of their persistence. The first area of focus is the

underlying logic for firm autecology.

The Logic of Firm Autecology

The advent of open systems models for studying firms (Scott, 1987) has seen an

increased consideration of which environmental aspects affect firms. Despite the lack

of empirical attention, it has long been recognized that firms affect aspects of their

environment (see Winter, 1964; Popper, 1972; Starbuck, 1976; Aldrich, 1979; Scott,

1987, Winter, 1990, March, 1994), however, little if any empirical research has

identified the firm mechanisms responsible for such interaction. It has long been

recognized (McKenzie, 1934) that the primary difference between human ecology and

mainstream ecology is that humans are more capable of higher-level thinking during

the process of adaptation. Likewise, the significant ability of firms to ecologically

alter aspects of their direct environment vis-à-vis their sustenance activities has also

been recognized (Kasarda and Bidwell, 1984). Yet, the only major organizational

theory that is ecological in nature (Hannan and Freeman, 1977; 1989) is dismissive of

such claims, preferring to preference the influence of the broader environment over

the adaptive abilities of individual firms.

So, we are stuck in a situation where scholars seem to intuitively accept that

individual firms can, and do indeed, alter their form, structures, activities and

functions in order to persist over time, yet, historically we have had no ecological

approach at our disposal to investigate such internal change. It would also seem

6

patently obvious that firms can, and do indeed, alter aspects of their operating

environment (deliberately or otherwise), yet, historically we have had no ecological

approach at our disposal to investigate such interaction. Firm autecology on the other

hand deals with the environment in an entirely different manner, identifying carefully

environmental phenomena that a firm is operationally related to, and that

environmental phenomena it is not. In doing so, a vast treasure trove of data is at the

autecologist’s disposal. Metaphorically speaking, the autecologist creates something

close to a closed system (Zeleny, 2003) through the process of identifying the firm’s

operational environment, enabling autopoietic behaviour (see Maturana and Varela,

1980; Magalhaes and Sanchez, 2009) across the lifeline of each individual firm to be

observable.

In the nature sciences, the current renaissance in autecological thinking (see Walter

and Hengeveld, 2014) provides a “different way of looking at ecology as a whole.

Natural systems are given a new theoretical perspective, principally in terms of

individual organisms coping with the vicissitudes of their environment and with

reference to our understanding of the statistical consequences of their underlying

interactions”. As a result of this change in focus, popular ecological theories and

concepts related to density dependence and competition need rethinking. The same is

true in the social sciences where strong assumptions concerning the process of

competition have been made over the past 100 years (see Parks and Burgess, 1921;

Hawley, 1950; Hannan and Freeman, 1977; 1989). Looking beyond competition as a

constant force, present in all environments, enables the autecologist to start with the

ecological requirements and tolerance of the firm in question. Such insights are

derived from understanding the sustenance activities of individual firms, defined as

7

organized regular and enduring activities aimed at supporting firm survival (see Gibbs

and Martin, 1959).

Rather than being guided to specific data related to assumed processes (i.e. density

dependent factors), the autecologist is guided by heuristic generalizations. In this

sense, the autecologist is seeking to both see and understand (Sears, 1935) the

variance of ecological processes investigated. Further, firm autecology answers the

distant call from Bews (1935) to use autecology to advance the field of human

ecology, the antecedent of organizational ecology. In summary, no theory of the firm,

ecological or otherwise, seeks to explain the dynamic process through which all firms

can alter aspects of their form, structures, activities and functions and/or local

environment in order to persist through time. The very logic at the heart of firm

autecology draws attention to different research questions, and different forms of data

from which to investigate such questions.

The Nature of Firm Autecology

As noted in the introduction, there are two distinct approaches to ecology. One is

synecology, better understood in the social domain originally as human ecology

(Hawley, 1950) and more recently as organizational ecology (Hannan and Freeman,

1977), and the other is autecology, championed here as an alternative approach for the

study of firms. The two approaches are argued by Jones and Walter (2017) to be

mutually exclusive, due to the incompatible assumptions and philosophies upon

which they are developed. In layman’s terms the two can be compared in the

following statements, as articulated previously by Jones (2016).

8

Organizational Ecology: Firms exist in populations sharing a common environment

that has limited resources and therefore compete and this ultimately leads to the

differential selection of organizational forms with a better fit to the environment.

Firm Autecology: Firms exist in proximity to other firms, frequently sharing a

common external environment, but typically have their own distinct operational

environment maintaining their existence through solving problems in their operational

environment.

Immediately, it should be evident that there are major differences in the two

approaches. In firm autecology, firms are not assumed to be selected for or against

uniformly by the presence of a common environment, as assumed in organizational

ecology models (Hannan and Freeman, 1977). The existence of populations and/or

communities is not denied, however, firm autecology views such aggregations in the

spirit of Hengeveld and Walter (1999), as ephemeral epiphenomena; or, the transient

by-product of individual-level behaviors and are in reality more conceptual than real.

Significantly, the idea of a common environment is dismissed, subsequently rendering

reliance on the process of natural selection null and void, given that a common

environment is a prerequisite for the process of natural selection. Therefore, firm

autecology delves deeper to explain the presence of selection with reference to

stabilizing, directional and disruptive forms of selection.

There is also an absence of assumed (or relatively constant) competition in the firm

autecology statement, where it is assumed each firm is challenged to solve its own

unique problems. So it is the total behaviour of individual firms vis-à-vis their spatio-

9

temporal dynamics rather than just resource usage that influence the nature of

investigation. This careful consideration of the local environment leads the

autecologist to not automatically adopt many other common assumptions common to

other approaches to the theory of the firm.

For example, we would not routinely assume surviving firms to possess superior

resources and/or routines in comparison to other firms that have already failed, as

might be expected if studied from the perspectives of the dynamic capabilities

approach (Teece, Pisano and Shuen, 1997), resource based view of the firm

(Wernerfelt, 1984) and/or evolutionary economics (Nelson and Winter, 1982). The

reason being that for the firm autecologist, “adaptive improvement is relative to the

adaptive problem” encountered (Sahlins and Service, 1960, p. 15). Given that each

firm is permitted to relate to a unique operational environment, each firm will hold

unique environmental relations and therefore, experience different problems and

challenges.

Furthermore, the firm autecologist would not routinely assume individual firms would

conform to their industry’s assumed requirements, as expected in institutional theory

(DiMaggio and Powell, 1983). Instead, the firm autecologist would expect to observe

important variation within any given industry across the firms’ form, structures,

activities and functions. Such variation gives rise to the potential presence of a cryptic

firm complex, whereby distinctly different firms are not conflated into one study

group with their uniqueness removed through aggregation, as is common in our

organizational studies literature (see Freeman and Hannan, 1983). In biology, the

issue of species being conflated inappropriately is dealt with Paterson’s (1993) notion

10

of cryptic species complex. The firm autecologist applies the same process to

recognize the unique and identifiable ecology associated with morphological (form

and structure) and physiological (functions and activities) differences.

Finally, given the central assumption in firm autecology that all firms have the

potential to shape the nature of their operational environments, firm autecology is

opposed to the central assumptions of the resource dependence approach (Pfeffer and

Salancik, 1978). Further, firm autecology may also expect some firms that appear in

some respect to be less efficient than other firms that have already failed, to be more

efficient within the nature of their own local environment, again, opposite to the

central assumptions of transaction cost theory (Williamson, 1985). If it is true, that

ordinary simple firms do defy the logic of so many well-developed theories of the

firm, then an autecological theory of the firm and its environment has a role to play in

investigating such common resilience. In summary, firm autecology is an approach to

the study of the firm and its environment that is developed upon pure ecologic

thought. However, the intellectual foundations of firm autecology are not compatible

with existing ecological approaches to the study of the firm. Further, whilst firm-level

abilities such as learning are highly valued in firm autecology, the assumed

consequences of such behaviour is not necessarily consistent with the predictions of

most of theories of the firm.

The Uniqueness of Firm Autecology

It has previously been noted that good research will contribute to a scientific

discipline, have the potential to influence practice and demonstrate an intimate

understanding of the problems under consideration (Van de Ven, 1989). The first

11

ecologists were essentially autecologists; with the intimate understanding of

individual entities they studied (Clarke, 1967). Over time, greater interest in the

interrelations between species and groups of species gathered pace; this represented

that emergence of synecology (McIntosh, 1985). These events in the early 20th

century proved to be very influential on the development of human ecology in the

1920s. Synecology with its concern for interrelations occurring in the context of

communities and accompanying mathematical explanations obviously appealed to

American sociologists more than study of individual behaviour associated with

autecology. Despite the fact that major sociological works (see MacIver, 1917) at the

time championed the influence of the individual on its direct (and unique)

environment, such ideas where explicitly rejected by the founders of human ecology

(Jones and Walter, 2017).

It is instructive to consider the opinions of the highly influential Hawley (1950, p. 67)

on this issue. “The unit of observation, it should be emphasized, is not the individual

but the aggregate which is either organized or in process of becoming organized. The

individual enters into ecological studies, on the theoretical side, a postulate, and, on

the practical side as a unit of measurement. As something to be investigated in and of

itself, however, the individual is a subject matter for other disciplines. Ecology, as we

have described it, then, is virtually synonymous with what plant ecologists call

‘synecology – the study of interrelations among organisms. However, what plant

ecologists term ‘autecology’ – the study of the adaptations made by the individual

organism throughout its life history – is excluded from the conception as set forth in

these pages”. Hawley justified this ecological position on the grounds that it better

12

suited the sociological background of human ecology, the eventual intellectual

formula for organizational ecology.

Hawley’s reasoning was non-controversial at the time, individuals belonged in the

domain of biology, physiology and psychology; collective behaviour was the concern

of sociologists. However, the long-term consequences of the various scholars (Parks

and Burgess, 1921; Hawley, 1950; Hannan and Freeman, 1977; Hannan, Polos and

Carroll, 2007) holding onto these initial assumptions has impacted significantly the

process of generalizing about ecological processes in the social sciences. Laws are

deemed to exist whereby higher-level phenomena are always related eventually to

individual firms at lower-levels. For example, the process of elevating competition

over all other types of ecological interactions produces an over-reliance upon law-like

generalizations that are founded upon poor ecological logic (Hengeveld and Walter,

1999). As a result, very little of ecological research performed in the social sciences

could be expected to demonstrate both ecological and statistical significance.

As noted by Jones and Walter (2107), in firm autecology different methodological

approaches are required so as to avoid investigation developed around the existence

of already assumed ecological laws. From this perspective, the variance present in the

lifeline of any given firm must not be ignored; therefore precision is favored over

generalization. Consider the concerns of Møller and Jennions (2002) who highlight

six factors, also likely to prevent organizational ecologists from being able to

envisage, capture and explain all the variation in their studies. First, the contexts we

choose to study are not perfect; there are lags between events and selection and

between selection pressures and responses that precede eventual selection (for or

13

against). Second, there is inherent randomness is the contexts we study, no two towns,

cities or regions are the same. Third, there are so many possible responses that firms

can attempt in response to perceived environmental change, yet typically only a few

are focused upon. This leaves space for confounding variables to create sufficient

noise to blur the assumed relationship between other variables. Fourth, many firms’

actions vary considerably across time and space and are therefore difficult to measure.

Fifth, it is difficult to capture the evolutionary past of all firms being studied. Thus,

the capacity of each firm to respond differently is difficult to explain. Last, the actions

of one firm can alter (negatively or positively) the outcomes of other firms and their

environments, a difficult dynamic to observe.

For the autecologist, many different types of mechanisms mediate the interaction each

firm holds with its respective environment. Some mechanisms may be firm specific or

perhaps even industry-specific, some may be more common early in the firm’s

lifeline, other mechanisms may be more associated with survival at later times. What

matters is that the structure of the environment can be reconciled to the lifeline of any

given firm. Then, and only then, can we confidently say we understand the process of

environmental matching associated with a firm’s persistence. For these reasons, the

generalizations made about firms do not constitute law-like statements, but rather are

used in a heuristic manner. We would not expect individual firms to conform to such

statements. Whereas organizational ecology studies the laws it has established, firm

autecology uses heuristic generalizations to guide the investigation of the adaptive

mechanisms that underpin firm-environment interaction. Rather than seeking to draw

upon ever-present ecological processes that are assumed operative in social systems

(i.e. competition), firm autecology investigates the spatio-temporal unique to

14

particular firms in order to develop our understanding of how different types of firms

adapt to their environs across their lifeline.

The Need for Firm Autecology

At present, no theory of the firm investigates the dynamic and reciprocal relations

between individual firms and the specific local environments they sense, enact and

modify. This final section of the paper shines light on the assumed interpenetration of

firm and environment. While the ideas contained here are canvassed in far greater

detail elsewhere (see Jones and Walter, 2017), this section aims to highlight the

permanence of the dialogic relationship between any individual firm and its

operational environment. Outlining these ideas will also inform about the process

through which firms engage in environmental modification (Jones, 2016) to match the

requirements of their local environment. Outlining these ideas should provide

sufficient evidence that an opportunity exists for a theory of the firm and its

environment to advance our understanding of the intricate relations that exist between

individual firms and the local environments they sense, enact and modify.

The first challenge is to visually illustrate the nature of the proposed relationship

between the firm and its environment. This will be achieved using two schemas, each

of which will be represented as sub-dimension of the other. While this renders aspects

of each sub-dimension difficult to comprehend, it does clearly illustrate the

relationship of both schemas to one another. This is argued to be essential to

understanding the nature of interpenetration of firm and environment. To avoid

confusion both schemas are presented alongside one another to further highlight the

idea that both schemas form sub-dimensions of the other. Said another way, in trying

15

to illustrate a firm or an environment, it is not possible to do so autecologically

without direct reference to the other.

Figure 1: An autecological interpretation of the firm and its environments

Figure 2: The environments of a firm

16

Jones and Walter (2017, p. 24) define the firm autecologically as “a non-autonomous

entity, located in an operational environment, … [which] … is socially constructed,

goal-directed, boundary maintaining and maintained through sustenance activities”.

This definition includes reference to Aldrich’s (1999) three accepted common

elements (being socially constructed, goal-directed and boundary maintaining).

However, it also adds the ecological ideas of Mason and Langenheim (1957) to locate

the firm within a very specific context, that of its own operational environment.

Further, acknowledging that firms that exist through time must constantly engage in

activities that support survival, we enroll Gibbs and Martin’s (1959: 35) observation

that ‘organization for sustenance is one of man’s most effective ways of adjusting to

his environment’. While the central ideas in Figure 1 were originally proposed by

Jones (2005), the explicit addition of an operational environment updates those ideas

in an autecologically authentic way.

In essence, combinations of interaction elements that are delivered by humans and

technologies, actual products and services, and the identity of the firm, provide the

means to reconcile the firm’s operational environment in terms of operational

relations that are reconcilable via a baseline. Knudsen (2002) first proposed the idea

of a baseline to enable both sides of the selection–adaptation argument to be united.

As applied here, feedback from the firm’s interacting elements is available to decision

makers enabling the firm to replicate what works and modify, that which does not.

The ellipse in Figure 1 identifies the boundary constructed by the firm’s activities that

separate the firm’s operational environment from its broader external environment.

The baseline pinpoints the environmental space at which interaction and subsequent

feedback is possible.

17

Feedback enables perceptions and knowledge that are held in the firm, all considered

fallible (Langlois, 1997), to be altered through learning. This process of firm level

change is expected to be conditional upon misperceptions and trial-and-error learning

through which firms attempt to limit the degrees of maladjustment between

themselves and their operating environment. Rather than assuming the firm is bound

by inertia, firm autecology sees the process of replication as maintaining internal

order. At the same time however, the firm is also free to attempt to adjust its routines,

goals, boundaries, activity system and ultimately its interacting elements in order to

match the requirements of its environment. In an autopoietic sense (Rose, 1997), the

firm can both be and become simultaneously. Firm autecology does not assume firms

will master this process, only that they are capable of participation in the process. The

fact that firms persist through time experiencing different environment conditions

demonstrates that firms do master to some degree this process of adjustment. With

this albeit brief description of the firm, it now makes sense to consider the firm’s

relationship to its environments.

In Figure 2, the sub-dimension in Figure 1 has become the focal part of the schema.

Figure 2 enables the location of the firm to all of its environments to be clearly seen.

Jones and Walter (2017, p. 45) define the firm’s operational environment as “all

observable environmental phenomena that are operationally related, directed, timed,

ordered and spaced by and across the lifeline of a particular firm”. Drawing upon

Mason and Langenheim (1957), Spomer (1973) and Rose (1997) provide important

definitional components central to autecology. In Figure 2, the firm is labelled and its

detail illustrated in the sub-dimension that forms the focal part of Figure 1. Thus, this

18

is the definition of an environment for a specific firm (and it is readily adapted to any

specific type of firm), not an environment of firms (plural). Typical approaches to

defining the environment of firms assumes homogeneity (Hannan and Freeman, 1977)

and/or, where environmental textures are suggested (Emery and Trist, 1965), they are

still expected to be experienced by all firms in a population at any given moment.

Fundamental to firm autecology is the idea that firms will differ in terms of the form,

structures, functions and activities used to maintain their existence. Therefore, each

firms is assumed to maintain different operational relations with its unique operational

environment. Therefore, it is also expected that firms would experience different

types and degrees of dynamic environmental relations. The composition of such

operational environments, drawn from structured, but stochastically influenced and

unpredictable surrounds, defines the nature and existence of each firm.

In Figure 2, three specific environments are noted. Identifying the firm’s operational

environment establishes what environmental phenomena the firm is immediately and

directly operationally related to (the operational environment), not yet operationally

related to (the potential environment), or which phenomena it is not now or ever

likely to be related to (the external environment). The idea of an operational

environment was developed by Mason and Langenheim (1957). They specifically

included time as a factor through their labeling of a potential environment. These

ideas provide firm autecology with a firm-centered means of reconciling today’s

resource use with tomorrow’s similar or different resource use on a firm-by-firm

basis. It also draws attention to phenomena in the external environment that has the

potential to be operationalized by a firm. The key determinant in making these

judgments is to stay firm-centered and thus be freed from the confusion and

19

ambiguity that typically surrounds analyses that focus research attention at higher

levels of aggregation.

So, firm autecology sees the environment as firm directed. The firm’s lifeline is also

highlighted within Figure 2. It is assumed that each firm will make different demands

upon its environment as it matures naturally over time. These demands will be

influenced by both knowledge inside the firm and other factors (including changing

markets and geography) external to the firm. What matters from a firm autecology

perspective is recognition that any such adjustment of the firm’s relationship with its

operational environment will be timed, ordered and spaced by that firm and across the

lifeline of that firm. It is for these reasons that the environment is defined at the same

time as the firm is observed to ensure this is understood. The notion of a potential

environment is also important when firms are viewed as being capable of changing

their form, structure, functions and activities to a greater degree than an individual

animal or plant could within their respective lifelines. As a result, we need to be more

pragmatic in viewing the possibility of unrelated external phenomena subsequently

being conditioned by firms in the future as they react to environmental change and

stochastic events.

Linking the firm’s operational environment to the broader external environment via

the potential environment ensures a mindfulness of the external environment’s

temporal unrelatedness, but also its potential as a source of new resources for the

firm’s future operations. This does, however, require that we are specific about what

the external environment of the firm actually is. At all times, the operational

environment is a discrete subset of phenomena found in the external environment.

20

Movement of phenomena from the external environment to the operational

environment occurs through the firm’s potential environment. The potential

environment is just a potential future state of the operational environment, just as the

operational history depicted in Figure 2 represents past states of the firm’s

environmental relations. Having defined both the firm and its operational environment

with reference to each other, it is now time to consider the process of environmental

modification (Jones, 2016).

Defining the operational environment of a firm frees us from prior concerns that the

environment is too multifaceted to define with accuracy (Hawley, 1950), just a

creation or enactment of the entrepreneur’s mind (Penrose, 1959; Weick, 1979) or

simply a dispenser of blind selection and/or a source of new variation (Hannan and

Freeman, 1977). The idea of environmental modification (Jones, 2016) draws upon

the recent niche construction literature of Odling-Smee, Laland and Feldman (2003)

and the earlier observation of McKenzie (1924) that human ecology is distinctly

different from animal and plant ecology because of the cognitive abilities of man.

Specifically, the institutions created by humans are capable of higher levels of

adaptive behaviour. Such cognitive ability is present in varying degrees in each firm’s

activity system, which is ultimately the product of individual habits within the firm,

firm routines, and the firm’s goals. Together, these components produce interacting

elements (humans, technology, products, services and the identity of the firm) that

collectively are the features of the firm.

Therefore, the feature-factor relationship between the firm and its operational

environment can be envisaged to be changeable through firms altering aspects of their

21

features, firms altering factors in their operational environment, or from stochastic

change in the firm’s operational environment. Environmental modification occurs

when a firm alters the feature-factor relationship that exists between the firm and its

operational environment. It does so by changing one or more of the factors in its

operational environment either by physically modifying factors at its current location

in space and time, or by shifting its operations to a new space-time location, thereby

changing the composition of environmental factors to which it is now operationally

related. In doing so, each firm has the ability to alter the nature of the selection

pressures it experiences, both positively and negatively. Of particular note, through

such actions, the firm not only inherits knowledge, capabilities and ecological

relations from one time to the next, but also has the potential to influence the nature of

selection forces it inherits from one time period to the next.

There are four distinct ways in which we can view the actions of any given firm to

engage in the process of environmental modification. Firms can use internal

adjustment to deliberately change features of their activity system and/or interacting

elements in ways aimed at modifying factors in their operational environment. Or,

firms may use external adjustment to deliberately alter the location and/or time at

which they operate. In doing so, the firm is exposed to new environmental factors. In

both cases, the firm proactively aims to improve the nature of feature-factor relations.

Alternatively, firms can also be responsive to changes in their operational

environment. As noted by March (2010) and Langlois (1997), the search for

information, and interpretation of information is quite often imperfect. As such, firms

cannot rely entirely on their deliberate, proactive actions to ensure survival. It is

important that firms can eventually respond to changes in their operational

22

environment that may have originally been overlooked or misunderstood. Therefore,

firms may engage in a process of responsive internal adjustment, seeking to realign

their internal features to better match the nature of altered environmental factors.

Finally, firms can engage in responsive external adjustment whereby the firm

responds to a change in the operational environment by moving or repositioning their

activities. In summary, this section has outlined the need for an autecological theory

of the firm and its environment. Through defining the firm and its environment

together we can also envisage a process of environmental modification through which

adjustments are possible that will underwrite the persistence of firms. The final

section now offers some concluding remarks regarding the future development of firm

autecology.

Conclusion

Firm autecology is explicitly holistic in approach, drawing upon many potential

processes to explain ecological outcomes. As such, the foundations of the firm, its

learning abilities (Cyert and March, 1963), and the routines (Nelson and Winter,

1982) developed to facilitate standard operating procedures are of great interest. The

ability of firms to search (Gavetti and Levinthal, 2000) for clues about stability and

change in their operational environment, and the mechanisms used also are of

importance. Further, understanding the breadth and depth of knowledge each firm

has of all factors in their operational environment, and the degree of comprehension

regarding their interrelationships (Endsley and Jones, 2012) is also critically

important to the autecologist. Knowledge of these issues must be developed with

patience, emphasizing the firm-specificity of interaction between firm and

environment across the firm’s lifeline. Only through being guided by heuristic

23

generalizations can the researcher remain agnostic ex ante whilst deliberately seeking

to discern and confirm unique firm-specific ecological patterns associated with the

spatiotemporal dynamics of the firm/s in question. In this way, the autecologist

remains free to draw upon many different ecological tools to explain the patterns that

are perceived. As such, the “cogs and wheels” (Hernes, 1998, p. 74), their forward,

reverse and static motions may be sufficiently exposed, enabling the researcher to

understand the invisible interaction between human agency, firm activities and

selection processes. Mindful of all other theories of the firm, firm autecology actively

seeks to combine first-hand observations with an awareness of “bits of sometimes-

true theories” (Davis and Marquis, 2005, p. 340) to generate an explanation of firm

persistence using broad data sets. It is this sense; regarding what is discussed here that

firm autecology is a truly distinctive theory of the firm and its environment.

References

Aldrich, H. (1979), Organizations and Environments, Englewood Cliffs, NJ: Prentice-Hall. Aldrich, H. (1999), Organizations Evolving, London: Sage Publications. Aldrich, H. (2007), Organizations and Environments, Englewood Cliffs, NJ: Prentice-Hall. Alvarez, S. (2003), ‘Resources and hierarchies: Intersections between entrepreneurship and business strategy’, in Z. Acs and D. Audretsch (eds), Handbook of Entrepreneurship Research, London: Kluwer. Bews, J. (1935), Human Ecology, London: Oxford University Press. Casson, M. (2001), Information and Organization: A New Perspective of the Theory of the Firm, New York: Oxford University Press. Clarke, G. (1967), Elements of Ecology, New York: John Wiley & Sons. Cyert, R. and March, J. (1963), A Behavioral Theory of the Firm, New Jersey: Prentice-Hall.

24

Davis, G. and Marquis, C. (2005), ‘Prospects for organization theory in the early twenty-first century: Institutional fields and mechanisms’, Organization Science, 16 (4), 332–342. DiMaggio, P. and Powell, W. (1983), ‘The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields’, American Sociological Review, 48 (2), 147–160. Endsley, M. and Jones, D. (2012), Designing For Situation Awareness: An Approach to Human-Centered Design 2nd Ed, London: Taylor & Francis. Foss, N. and Klein, P. (2012), Organizing Entrepreneurial Judgment: A New Approach to the Firm, New York: Cambridge University Press. Freeman, J. and Hannan, M. (1983), ‘Niche width and the dynamics of organizational populations’, American Journal of Sociology, 88 (6), 1116–1145. Gavetti, G. and Levinthal, D. (2000), ‘Looking forward and looking backward: Cognitive and experiential search’, Administrative Science Quarterly, 45 (1), 113–137. Gibbs, J. and Martin, W. (1959), ‘Towards a theoretical system of human ecology’, Pacific Sociological Review, 2, 29–36. Hannan, M. and Freeman, J. (1977), ‘The population ecology of organizations’, American Journal of Sociology, 82 (5), 929–964. Hannan, M. and Freeman, J. (1989), Organizational Ecology, Cambridge, MA.: Harvard University Press. Hannan, M., Polos, L and Carroll, G. (2007), Logics of Organization Theory: Audiences, Codes and Ecologies, Princeton: Princeton University Press. Hawley, A. (1950), Human Ecology, New York: The Ronald Press Company. Hengeveld, Rob and G. Walter (1999), ‘The two coexisting ecological paradigms’, Acta Biotheoretica, 47 (2), 141–170. Hernes, G. (1998), ‘Virtual reality’, in P. Hedstrom and R. Swedberg (Eds), Social Mechanisms: An Analytical Approach to Social Theory, Cambridge, UK: Cambridge University Press. Jones, C. (2005), ‘Contemplating Knudsen’s baseline: Where small is not so beautiful’, Journal of Small Business and Entrepreneurship, 18 (3): 273–288. Jones, C. (2016), ‘An autecological interpretation of the firm and its environment’, Journal of Management & Governance, 20 (1), 69–87. Jones, C. and Walter, G. (2107), An Autecological Theory of the Firm and its Environment, Cheltenham, UK: Edward Elgar, In Press.

25

Kasarda, J. and Bidwell, C. (1984), ‘A human ecological theory of organizational structuring’, in M. Micklin and H. Choldin (Eds), Sociological Human Ecology, London: Westview Press. Langlois, R. (1997), ‘Cognition and capabilities: Opportunities seized and missed in the history of the computer industry’, in R. Garud., P. Nayyar, and Z. Shapira (Eds), Technological Innovation: Oversights and Foresights, New York: Cambridge University Press. MacIver, R. (1917), Community: A Sociological Study, London: Macmillan and Co. Magalhaes, R. and Sanchez, R. (2009), Autopoiesis in Organization Theory and Practice, Bingley: Emerald Publishing. March, J. (1994), ‘The evolution of evolution’, in J. Baum and J. Singh (Eds), The Evolutionary Dynamics of Organizations, New York: Oxford University Press. March, J. (2010), The Ambiguities of Experience, London: Cornell University Press. Martinez, M. and Aldrich, H. (2012), ‘Evolutionary theory’, in D. Hjorth (Ed), Handbook of Organisational Entrepreneurship, Cheltenham, UK: Edward Elgar. Mason, H. and Langenheim, H. (1957), ‘Language analysis and the concept “environment”’, Ecology, 38 (2), 325–340. Maturana, H. and Varela, F. (1980), Autopoiesis and Cognition: The Realization of the Living, London: Reidel Publishing Company. McIntosh, R. (1985), The Background of Ecology, New York: Cambridge University press. McKenzie, R. (1924), ‘The ecological approach to the study of the human community’. The American Journal of Sociology, 30 (3), 287–301. McKenzie, R. (1934), ‘The field and problems of demography, human geography and human ecology’, in L. Bernard (Ed), The Field and Methods of Sociology, New York: Ray Long & Richard R. Smith. Møller, A. and Jennions, M. (2001) ‘Testing and adjusting for publication bias’, Trends in Ecology and Evolution, 16 (10), 580–586. Nelson, R. and Winter, S. (1982), An Evolutionary Theory of Economic Change, Cambridge, MA: Harvard University Press. Nooteboom, B. (2009), A Cognitive Theory of the Firm: Learning, Governance and Dynamic Capabilities, Cheltenham, UK: Edward Elgar Odling-Smee, J., Laland, K. and Feldman, M. (2003), Niche Construction: The Neglected Process in Evolution, Oxford: Princeton University Press.

26

Paterson, H. (1983), Evolution and the Recognition Concept of Species, London: John Hopkins University Press. Penrose, E. (1959), The Theory of the Growth of the Firm, New York: John Wiley. Popper, K. (1972), Objective Knowledge: An Evolutionary Approach, Oxford, UK: Clarendon Press. Park, R. and Burgess, E. (1921), Introduction to the Science of Sociology, Chicago: University of Chicago Press. Pfeffer, J. and Salancik, G. (1978), The External Control of Organizations: A Resource Dependence Perspective, New York: Harper & Row. Rose, S. (1997), Lifelines: Biology Beyond Determination, Melbourne: Oxford University Press Sautet, F. (2002), An Entrepreneurial Theory of the Firm, London: Routledge. Sahlins, M. and Service, E. (1960), Evolution and Culture, Ann Arbor: University of Michigan Press. Scott, R. (1987), Organizations: Rational, Natural, and Open Systems, Englewood Cliffs, NJ.: Prentice-Hall. Sears, P. (1935), Deserts on the March, Norman: University of Oklahoma Press. Spomer, G. (1973), ‘The concept of “interaction” and “operational environment” in environmental analysis’, Ecology, 54 (1), 200–204. Starbuck, W. (1976), ‘Organizations and their environments’, in M. Dunnette (Ed), Handbook of Industrial and Organizational Psychology. Chicago: Rand McNally. Starbuck, W., Salgado, S. and Mezias, J. (2006), ‘The accuracy of manager’s perceptions: A dimension missing from theories about firms’, in W. Starbuck (Ed), Organizational Realities: Studies of Strategizing and Organizing, New York: Oxford University Press. Teece, D., Pisano, G. and Shuen, A. (1997), ‘Dynamic capabilities and strategic management’, Strategic Management Journal, 18 (7), 509–533. Van de Ven, A. (1989), ‘Nothing is quite so practical as a good theory’, Academy of Management Review, 14 (4), 486–489. Walter, Gimme and R. Hengeveld (2014), Autecology: Organisms, Interactions and Environmental Dynamics, Florida: CRC Press. Weick, K. (1979), The Social Psychology of Organizing, Reading, MA.: Addison-Wesley.

27

Wernerfelt, B. (1984), ‘A resource-based view of the firm’, Strategic Management Journal, 5 (2), 171-180. Williamson, O. (1985), The Economic Institutions of Capitalism, New York: Free Press. Winter, S. (1964), ‘Economic “natural selection” and the theory of the firm’, Yale Economic Essays, 4 (1), 225–272. Winter, S. (1990), ‘Survival, selection, and inheritance in evolutionary theories of organization’, in Jitendra Singh (Ed), Organizational Evolution. London: Sage. Zeleny, M. (2003). Knowledge and self-production in social systems’, in F. Parra-Luna (Ed.), Systems Sciences and Cybernetics, Encyclopedia of Life Support Systems. Oxford: Ecolss Publishers.