A depletion of assets model of organizational learning*

I wish to thank the following persons for help, critique, and inspirations: Karen Bradley, Patrick Doreian, Christina Lienenlüke, James G. March, Suzanne Stout, and Xueguang Zhou.

This research investigates how population heterogeneity with respect to initial assets affects the rate of failure (or change) of organizations and social relationships. Organizations and social relationships are assumed to be endowed with initial assets which buffer against initial risks of failure. Failure is seen as the outcome of a process in which the assets are depleted and finally become exhausted. The core idea is that the assets of a unit become depleted through learning experiences which incur search costs and setbacks. Two settings are explored: A constant rate of depletion, and a declining rate of depletion of assets. The study explores additionally how the distribution of initial assets affects the failure rate of the population. It is found that the type of distribution of initial assets has a strong impact on the time dependence of the failure rate. A Normal distribution of initial assets leads to positive time dependence if the depletion rate is constant, and to negative time dependence if the depletion rate declines. The results show that population heterogeneity with respect to initial assets has effects on the time dependence of failure rates which are quite different from the popular case of population heterogeneity with respect to fit.

Key words::

• Population heterogeneity
• learning
• assets
• organizational failure
• social relationships
• time dependence of failure rates

Notes

I wish to thank the following persons for help, critique, and inspirations: Karen Bradley, Patrick Doreian, Christina Lienenlüke, James G. March, Suzanne Stout, and Xueguang Zhou.