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Industrial and Corporate Change, Volume 12, Number 4, pp. 673-695
© 2003 Oxford University Press

Asymmetric selection among organizations

William P. Barnett, Aimee-Noelle Swanson and Olav Sorenson

W. P. Barnett, Graduate School of Business, Stanford University, Stanford, CA 94305, USA. Email: Barnett_William{at}gsb.stanford.edu.
A.-N. Swanson, University of California, Los Angeles, Los Angeles, CA 90095, USA. Email: aswanson{at}ucla.edu.
O. Sorenson, Anderson Graduate School of Management, University of California, Los Angeles, 110 Westwood Plaza, Box 951481, Los Angeles, CA 90095–1481, USA. Email: Olav.Sorenson{at}anderson.ucla.edu.

Abstract

We discuss the creation of organizations and their survival as distinct selection processes, and consider the significance of their divergence. In particular, to understand the implications of entrepreneurial booms, we propose the possibility of asymmetric selection, where entry selection and exit selection differ from each other in strength. An observed increase in founding rates hence may reveal a decline in the selection threshold for entry—implying lower average fitness among boom-time entrants. When such an expansion occurs, organizations born during these periods of heightened entry should suffer higher failure rates if the fitness threshold required for survival remains stable or becomes more stringent. We also discuss other processes that might educe founding waves, and explain the different implications of these accounts for our empirical model. Estimates of the model support our theory of asymmetric selection in two out of three markets using a comprehensive dataset describing organizations in the US computer industry.


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