competition

Competition is a general term denoting system processes that have the properties of a >VSR mechanism, without more specific assumptions on the mechanism of retention and reproduction. Competition emerges, when in a >population the resources are limited on which the actors need to draw to maintain their functions.

In EE, competition refers to the >market , in particular to the role of >novelty and innovation in the evolution of firms, technologies and products. In contrast to standard economics, in EE the problem of optimal allocation of resources among the competing members of a population is only secondary, because novelty will constantly change the conditions and constraints of competition. However, at the same time the very process of generating novelty also consumes resources, so that the viability of the entire system depends on the functional performance of this allocation process operating under fundamental uncertainty. One of the most important determinants of competition is therefore the institutional framework that coordinates innovative processes and enables the actors to cope with fundamental uncertainty. Hence, from the EE perspective the primary problem of competition is how to process >knowledge and how to deal with ignorance.

Competition is always multi-dimensional. In particular, in the market there is an interaction between performance and status criteria in the selection process, because competitive success may depend on efficiency as well as on >power relative to other competitors. Since status as a relational magnitude is a >frequency-dependent phenomenon, market competition cannot be analyzed by standard equilibrium concepts. Status is a property of market structure which translates into market power. In EE, the role of marker power is not simply viewed as a constraint to competition, but as a necessary complement of the innovation process. This is especially true for the Schumpeterian approach to competition.

This complex view implies that one important field of EE policy analysis is the institutional design of competition, as for example the design of innovation systems. On the normative level, EE focuses the political control of power relations in the market.

Basic References

A classic on the relation between knowledge and competition is
F.A. von Hayek, The Use of Knowledge in Society, in: American Economic Review, Vol. XXXV, No. 4, S. 519-530, 1945.

The multidimensional nature of competition has been firstly scrutinized by
Thorstein Veblen: The Instinct of Workmanship and the State of Industrial Arts, New Brunswick/London: Transaction, 1914/1990.

The role of status in competition has been elaborated in recent sociological theorizing:
Joel M. Podolny, A Status-based Model of Market Competition, in: American Journal of Sociology, Vol. 98, No. 4, S. 829-872, 1993.

Semantic Field
evolution
VSR-mechanism   power
competition   market