Green to Gone? Regional Institutional Logics and Firm Survival in Moral Markets

A growing body of scholarship studies the emergence of moral markets—sectors offering market-based solutions to social and environmental issues. To date, researchers have largely focused on the drivers of firm entry into these values-laden sectors. However, we know comparatively little about postentry dynamics or the determinants of firm survival in moral markets. This study examines how regional institutional logics—spatially bound, socially constructed meaning systems that legitimize specific practices and goals within a community—shape firm survival in emerging moral markets. Using a unique panel of firms entering the first eight years of the U.S. green building supply industry, we find that (1) a regional market logic amplifies the impacts of market forces by increasing the positive impact of market adoption and the negative impact of localized competition on firm survival, (2) a regional proenvironmental logic dampens the impacts of adoption and competition on firm survival, and (3) institutional complexity—the co-occurrence of both market and proenvironmental logics in a region—negates the traditional advantages of de alio (diversifying incumbent) firms, creating an opportunity for de novo (entrepreneurial entrant) firms to compete more effectively. Our study integrates research on industry emergence, institutional logics, and firm survival to address important gaps in our knowledge regarding the evolution and growth of environmental entrepreneurship in moral markets.

Regional Path Breaking: The Role of Industry Switching, Industry Diversity, and New Knowledge in New Venture Exit

Regions with spatial concentrations of businesses create conditions that spawn new firms, but also undercut new venture survival. Localized competition puts pressure on new firms to exit. Adding to this pressure to exit is regional path dependence, which limits the ability of firms to respond strategically to hostile local conditions. We investigate the extent to which the pressure to exit created by localized competition is moderated by three “path breaking” factors—new knowledge, industry diversity, and industry switching. We test and find broad support for our hypotheses using data from 355 metropolitan statistical areas in the United States spanning 2002 to 2010.

Increasing growth rate slows adaptation when genotypes compete for diffusing resources

The rate at which a species responds to natural selection is a central predictor of the species’ ability to adapt to environmental change. It is well-known that spatially-structured environments slow the rate of adaptation due to increased intra-genotype competition. Here, we show that this effect magnifies over time as a species becomes better adapted and grows faster. Using a reaction-diffusion model, we demonstrate that growth rates are inextricably coupled with effective spatial scales, such that higher growth rates cause more localized competition. This has two effects: selection requires more generations for beneficial mutations to fix, and spatially-caused genetic drift increases. Together, these effects diminish the value of additional growth rate mutations in structured environments.Author SummaryWhat determines how quickly a beneficial mutation will spread through a population? The intuitive answer is that mutations that confer faster growth rates will spread at a rate that is relative to the size of the growth-rate benefit. Indeed, this is true in a well-mixed environment where all genotypes compete globally. But most organisms don’t live in a simple well-mixed environment. Many organisms, like bacteria, live in a structured environment, such as on the surface of a solid substrate. Does life on a surface change the expectation about the spread of faster-growing mutants? We developed a mathematical model to answer this question, and found that on a surface, the actual growth rates—not just the relative growth rates—were critical to determining how fast a faster-growing mutant spread through a population. When the simulated organisms grew slowly, competition was basically global and a faster-growing mutant could pre-empt resources from far-away competitors. In contrast, when organisms grew more quickly, competition became much more localized, and the faster-growing mutant could only steal resources from neighboring competitors. This result means that there are diminishing returns to series of mutations which confer growth-rate benefits. This idea will help us predict and understand future and past evolutionary trajectories.