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Notions of Darwinian selection have been implicit in economic theory for at least sixty years. Richard Nelson and Sidney Winter have argued that while evolutionary thinking was prevalent in prewar economics, the postwar Neoclassical school became almost entirely preoccupied with equilibrium conditions and their mathematical conditions. One of the problems with the economic interpretation of firm selection through competition has been a weak grasp on an incomplete scientific paradigm. As I.F. Price notes: “The biological metaphor has long lurked in the background of management theory largely because the message of ’survival of the fittest’ (usually wrongly attributed to Charles Darwin rather than Herbert Spencer) provides a seemingly natural model for market competition (e.g. Alchian 1950, Merrell 1984, Henderson 1989, Moore 1993), without seriously challenging the underlying paradigms of what an organisation is.” [1] In this paper we examine the application of dynamic fitness landscape models to economic theory, particularly the theory of technology substitution, drawing on recent work by Kauffman, Arthur, McKelvey, Nelson and Winter, and Windrum and Birchenhall. In particular we use Professor Post’s early work with John Holland on the genetic algorithm to explain some of the key differences between static and dynamic approaches to economic modeling.

The economies of Central and Eastern Europe (CEE) have been recognized as posing unique challenges to study. The scope and nature of their political and economic development processes vary widely across the region are characterized by substantial volatilities and are inherently complex. In this context, a renewed interest in the mechanisms of economic transition has arisen in order to explain the effects of Eastern European integration into the European Union as well as the consequent integration into global economic structures. This approach, which we shall refer to as “Transition Dynamics”, (TD), differs significantly from the more traditional macroeconomic and polotical science focus on purely internal processes of change. In this regard, the CEE transition to market can be described as a process characterized by out-of-equilibrium dynamics and a heterogeneous competitive landscape with high levels of complexity.

The paper explores strategies of adaptation to the environment as employed by multinational corporations in Central and Eastern Europe. Organizations are treated as adaptive systems that have to match the complexity of their environments. The justification of the research lies in the complex nature of the market institutions emerging from transition that emphasizes the need for new managerial frameworks. Adaptive approaches such as vertical integration and/or value-chain development, leveraging autonomy and integration, local knowledge acquisition, and embedding in the social and political environment are explored in their relationship to success in the region.