While earlier evolutionary thinking in economics interpreted selection as a competitive process driven by scarcity, akin to Charles Darwin’s idea of struggle for survival, modern evolutionary economics recognizes, as Darwin had noted, that selection also operates at the group level. By contrast, the idea of sexual selection, which Darwin used to explain why traits that are wasteful from the point of view of survival selection may nonetheless evolve, has thus far been overlooked. The chapter demonstrates how, within the group selection context of the firm, the causal logic of sexual selection is relevant, and why this provides a good reason to reject Milton Friedman’s claim that market efficiency implies that firms maximize profits. Specifically, it is likely that the bottom-up process of mutual preference selection between firms and their employees results in organizational cultures that overshoot their functionality in terms of efficiency in product markets.
Flore Bridoux and J. W. Stoelhorst
The strategic human capital literature has emphasized that a firm’s ability to generate rents often depends on human capital complementarities involving firm-specific or collective human capital resources. It has also been recognized that whenever such complementarities are central to rent generation, employing an economic rationale to govern employee relationships (i.e., using pecuniary benefits that appeal to employees’ self-interest as a motivational device) is likely to be suboptimal. What is less clear is what the alternatives might be. We build on relational models theory and relate it to the strategic human resource management literature to show that employing an economic rationale is but one of four possible ways to govern relationships with employees. Moreover, we discuss why the other three are more likely to motivate employees to invest in developing human capital complementarities.