Transferring exploration and production activities within the UK's upstream oil and gas industry: a capabilities perspective

Following Richardson (1972), capabilities comprise tacit, personal, subjective and context-specific knowledge that may be shared in practice only with difficulty across small, task oriented groups within firms or other types of organisation, and are expressed in the form of activities. The definition has been influential, and its focus on tacit knowledge has, arguably, encouraged research activities in the form of studies adopting experimental and simulation techniques, while providing less impetus for complementary empirical inquiry. This paper presents an empirical inquiry into an aspect of the development of capabilities in the UK's upstream oil and gas industry promoted by the changing organisation of activities across oil companies and contracting and supply companies. The main argument is that researchers can gain partial and subjective access to capabilities – distinct from activities – because individuals involved in the industry articulate and codify understandings of capabilities through practical theorising and commercial experimenting. Such articulation and codification plays an important role in the development of capabilities in industrial contexts.     

Capitalism, profits and innovation in the new techno-economic paradigm

Innovative profits (of the kind conceptualized by Schumpeter) are today being increasingly created through international corporate networks for technological development. Such profits through innovation are encouraged by newer more flexible organizational forms, and further encouraged (unlike in the conventional perspective on profits and on the incentive to innovate) by knowledge flows between firms. Our empirical evidence, based on US patent data, shows that multinational companies are currently more likely to develop abroad technologies which are less science-based, and less dependent upon tacit knowledge. However, within the science-based industries firms may generate abroad some technologies which are heavily dependent on tacit knowledge, but normally in fields that lie outside their own core technological competencies. We find some evidence of a convergence in corporate technological diversification across large firms, facilitated by the now common spread in the use of information and communication technologies (ICT) as an integrator of formerly separate technological systems. This has led smaller firms to diversify, but giant firms to consolidate activity around those technologies that have become most interrelated.     

Knowledge of growth and the growth of knowledge

The central theme of this address is the complicated relationship between the growth of the economy and the growth of knowledge. This theme is explored with the help of a single concept “restless capitalism” which is used to capture the idea that capitalism in equilibrium is a contradiction in terms precisely because the growth of knowledge cannot be meaningfully formulated as the outcome of a constellation of equilibrating forces. This theme is explored through a discussion of growth accounting, the relationship between innovation, markets and institutions and, as an example, the development of innovation in the field of ophthalmology. We also discuss some pioneering contributions made by Simon Kuznets and Arthur Burns to the discussion of evolutionary growth. From this Schumpeterian perspective we see the economy as an ensemble not an aggregate entity and so see more clearly the importance of microdiversity in the relationship between growth of knowledge and growth of the economy.     

Debt, growth and inflation in large European economies: a vector auto-regression analysis

This paper attempts to empirically test the hypothesis that whether debt matters in the EU. This has been performed by examining the potential adverse effects of debt in large European economies on investment, inflation and growth. Using the hybrid cointegration and vector autoregressive models, the findings, based on the period 1970–97, suggest that debt causes significant adverse effects on investment, but its impact on growth is not clear-cut. Moreover, debt appears to be inflationary in most cases in the long run, though produces no clear short run pattern on inflation.     

A Schumpeterian model of equilibrium unemployment and labor turnover

This paper constructs a general equilibrium model of equilibrium unemployment by combining an endogenous growth model with a variant of equilibrium search theory. The analysis offers two explanations for the causes of widening wage gap between skilled and less-skilled labor, and rising unemployment rate among the less skilled: technological change in the form of an increase in the size of innovations or skilled labor saving technological change in R&D activity. In addition, the model identifies two distinct effects of faster technological progress on the aggregate unemployment rate. First, it increases the rate of labor turnover and therefore increases the aggregate unemployment rate – the creative destruction effect. Second, it creates R&D jobs, which offer workers complete job security, and consequently reduces the aggregate unemployment rate – the resource reallocation effect.     

Weber, Schumpeter and Knight on entrepreneurship and economic development

This paper interprets the discussion on entrepreneurship and economic development that started off with Weber's papers on the Protestant Ethic. Weber sought the reason for the relatively rapid growth of the Occident in the rational, Calvinist attitude to life. Calvinism – in his view – exactly suited a society of free labourers, who were not tied to master and soil by extra-economic considerations as in tribal and feudal societies. Schumpeter gave an alternative explanation, emphasizing the importance of innovation and entrepreneurship. Knight, who stressed neither rationality nor innovation but uncertainty and perceptiveness as the sole source of progress and profits, followed up German language writing on this subject. Only the investor who can detect hitherto hidden qualities in people can gain. The paper demonstrates how these three authors influenced each other. The debate between these three authors has raised many issues of governance and organization that feature contemporary thinking.     

Schumpeter and the revival of evolutionary economics: an appraisal of the literature

During the last two decades we have seen a revival of interest in the works of Joseph Schumpeter and “evolutionary” ideas in economics more generally. A professional society honouring Schumpeter's name has been founded, and linked to it we have had for more than fifteen years now a professional journal devoted to this stream of thought. However, it has been argued that, despite these developments, the link between Schumpeter's own work and the more recent contributions to evolutionary economics is in fact rather weak. This paper considers this claim. Based on an analysis of Schumpeter's contribution to economics the paper presents an overview and assessment of the more recent literature in this area. It is argued that although there are important differences between Schumpeter's work and some of the more recent contributions, there nevertheless remains a strong common core that clearly distinguishes the evolutionary stream from other approaches (such as, for instance, so-called “new growth theory”). RID="*" ID="*" Many people have contributed to this paper in various ways. Jon Hekland at the Norwegian Research Council started it all by asking me to make an overview of the contribution from “evolutionary economics” to our understanding of contemporary economies. Several people helped me on the way by supplying written material, comments and suggestions, and I am indebted to all of them. Brian Arthur, Stan Metcalfe, Keith Pavitt, Erik Reinert, Paolo Saviotti and Bart Verspagen may be particularly mentioned. A preliminary version was presented at the conference “Industrial R&D and Innovation Policy Learning – Evolutionary Perspectives and New Methods for Impact Assessment” organised by the Norwegian Research Council (“SAKI”) at Leangkollen, Asker, April 18–19.2002. I wish to thank the discussant, Tor Jakob Klette, and the participants at the conference for useful feedback. Moreover I have benefited from comments and suggestions from the editors and referees of this journal. The final responsibility is mine, however. Economic support from the Norwegian Research Council (“SAKI”) is gratefully acknowledged.     

The demand for distinction and the evolution of the prestige car

This paper studies the demand for a distinction good – the prestige car – and examines how this demand for distinction influences the evolution of the product. We focus on two very different sorts of distinction car: the Rolls Royce and the Ferrari. These two examples help us to articulate two polar approaches to the demand for distinction: distinction through antiquity and distinction through novelty. The paper sets out a model of the demand for distinction, and uses it to describe two trajectories along which the prestige car – and the demand for it – may evolve.     

Reflections on the perspectives of the global economy from the point of view of emerging economies

 Recently a number of emerging economies, with high inflation and various kinds of imbalances have experienced what has come to be referred to as dollarization– the phenomenon of currency substitution where the dollar gradually replaces the national currency in the performance of its fundamental functions. The phenomenon is most commonly encountered as a component of the exchange-rate-based stabilization programs implemented in a number of emerging economies in Latin America, Asia and the Middle East. The fundamental issue we want to explore is whether this process forces the monetary authorities of emerging economies to act with their hands tied, as if caught in a trap. It is argued that when the expansion of liquidity and domestic credit is determined by the quantity of foreign-exchange reserves, an independent monetary policy vanishes and national sovereignty itself is shackled. Since this scenario typically occurs in a world of increasing globalization of finance, this paper also discusses (with reference to emerging economies) the risks and implications of capital inflows for macroeconomic policy autonomy, economic instability, and vulnerability to external shocks.     

The old and the new: the evolution of polymer and biomedical clusters in Ohio and Sweden

This paper examines the rapid growth of the polymer-based and biomedical clusters in Ohio and Sweden – two regions of similar size and with similar traditions undergoing similar industrial restructuring. Two issues are addressed: First, why has growth been so strong in these particular clusters, i.e., can we identify the sources of the growth and dynamics in these sectors? Second, why do these two clusters differ in Ohio and Sweden in terms of size, level and type of activity, number and composition of actors, size structure of firms and growth patterns over the last couple of decades? In particular, what is the role of public policies as well as cultural, historical, and geographic factors? Our main conclusions are (1) that there is strong path dependence in both clusters in both countries, and (2) that the key to rapid development is a high absorptive capacity combined with rapid diffusion to new potential users. Our policy discussion addresses these issues.     

Knowledge growth, complexity and the returns to R&D

The introduction of a production function of technology embodying laws of returns to research and development (R&D) is now standard practice in growth theory. This paper offers a critical evaluation, in the light of a generalized N–K model, of some recent contributions suggesting foundations for the existence of laws of returns to R&D. It is argued that such contributions fail to analyze the way in which research and development activity in the technological and scientific domains affect the dimension, the hierarchic structure and the complexity of knowledge search spaces. In the attempt at moving some analytical steps in this direction, this paper considers the possibility that modularity effectively counters the rise in complexity which would follow from idea growth and the increasing number of potential interactions between component ideas. It is argued that the force of the modularity argument finds its limits in the face of radical innovations that are general purpose, but entail a deconstruction and reconstruction of the hierarchy of technological interactions. It is also suggested that niche creation and knowledge spillovers elicit the early development and subsequent diffusion of such radical innovations.

Darwinism in economics: from analogy to ontology

Several social scientists, including ‘evolutionary economists’, have expressed scepticism of ‘biological analogies’ and rejected the application of ‘Darwinism’ to socio-economic evolution. Among this group, some have argued that self-organisation is an alternative to biological analogies or Darwinism. Others have seen ‘artificial selection’ as an alternative to natural selection in the socio-economic sphere. Another objection is that Darwinism excludes human intentionality. It is shown that all these objections to ‘biological analogies’ and ‘Darwinism’ are ungrounded. Furthermore, Darwinism includes a broad theoretical framework for the analysis of the evolution of all open, complex systems, including socio-economic systems. Finally and crucially, Darwinism also involves a basic philosophical commitment to detailed, cumulative, causal explanations. For these reasons, Darwinism is fully relevant for economics and an adequate evolutionary economics must be Darwinian, at least in these fundamental senses. However, this does not undermine the need for auxiliary theories and explanations in the economic domain.     

Persistent unemployment and co-ordination issues: an evolutionary perspective

Abstract. In this paper we look at unemployment as a phenomenon which reflects the co-ordination problems that characterize out-of-equilibrium processes of adjustment. The analysis carried out shifts the focus from structural factors to the economic process. It shows that unemployment cannot be satisfactorily explained – and policy interventions devised – by focusing only on specific characters of the technology or confining the analysis to structural factors concerning the labour market. The co-ordination mechanisms of adjustment processes rather than the fundamentals of the economy appear, in this light, as the main determinants of differences in unemployment trends in different economies; and monetary policy comes back to the center of the stage as an essential element of the working of these mechanisms. RID="*" ID="*" We thank anonymous referees for their very useful comments, and Elena Lega for the helpful support to the simulation analysis carried out. Correspondence to: J.-L. Gaffard     

The hunt for S-shaped growth paths in technological innovation: a patent study*

Since the works by the business cycle theorists in the 1930s, no attempts have been made to study empirically the long term evolution paths of individual technologies starting with long time series. This is an empirical exploration and confirmation of the now almost assumed image or metaphor of the way technology develops; that it follows an S-shaped growth path which is commonly associated with a similar shaped diffusion function of entrepreneurial activity. The paper also confirms the diversity of technology dynamics and explores how technological cycle takeoffs appear to be clustered within certain historical epochs. The results have implications for our understanding of the evolution paths of individual technologies, and of the evolution of technological systems and waves of innovation. By use of computational statistics, logistic growth functions are fitted to US patent stocks, 1920–1990, at a detailed level of aggregation, including chemical, electrical/electronic, mechanical, transport and non-industrial technologies. Some practical considerations when developing an empirically testable model of innovation cycles are addressed in the paper as well.     

Where Schumpeter was nearly right – the Swedish model and Capitalism, Socialism and Democracy<--RID="*"-->

In Capitalism, Socialism and Democracy Joseph A. Schumpeter concluded that socialism would eventually displace capitalism in Western democracies. This would come about as a result of the superior performance of capitalism. We extract six “stylized” propositions that are essential elements of Schumpeter's prediction about the fate of capitalism. These propositions are confronted with the development of the Swedish economy. The three main results of the analysis are: (1) The evolution of the Swedish economy closely followed Schumpeter's predictions until about 1980: Large firms became increasingly predominant in production and innovative activity, ownership of firms became more and more concentrated, individual entrepreneurship waned in importance, the general public grew increasingly hostile towards capitalism, and by the late 1970s explicit proposals for a gradual transfer of ownership of firms from private hands were launched. (2) Design of tax and industrial policies fueled a development of the economy along the lines predicted by Schumpeter. In general, the policies discouraged private wealth accumulation. In particular, the policies favored concentration of firms and concentration of private ownership. (3) The turning point away from the path to socialism coincides with real world developments that disclosed two major flaws in Schumpeter's analysis. First, the ever more obvious failure of socialism in Eastern Europe went against Schumpeter's assertion that socialism can work. Second, Schumpeter, who thought that modern technology would make the giant corporation increasingly predominant, did not foresee the revival of entrepreneurship that took place in the Western countries around 1980.     

Political entrepreneurship and bidding for political monopoly

An analytical framework for dealing with political entrepreneurship and reform is proposed which is based on some new combinations of Schumpeterian political economy, an extended version of Tullock's model of democracy as franchise-bidding for natural monopoly and some basic elements of New Institutional Economics. It is shown that problems of insufficient award criteria and incomplete contracts which may arise in economic bidding schemes, also – and even more so – characterise political competition. At the same time, these conditions create leeway for Schumpeterian political entrepreneurship. The same is true for various barriers to entry in politics. These barriers affect a trade-off between political stability and political contestability which will be discussed with special emphasis on incentives and opportunities for political entrepreneurship in the sense of risking long-term investments in basic political reforms.     

The learning economy and embodied knowledge flows in Great Britain

This paper examines the `learning economy' from the perspective of occupational characteristics and changes in the British labour market between 1980 and 1992. Following a discussion of the learning and knowledge economy, cross-sectional employment data are analysed to ascertain which occupations can be classified as knowledge-based. Longitudinal career history data are then used to trace the flows of these `knowledge workers' over time. Sectoral shifts are examined, with a particular focus on the knowledge-intensive service sectors. The data come from the Employment in Britain survey: a large-scale employee survey from 1992. The approach used allows us to measure somewhat intangible aspects of economic behaviour such as learning and tacit knowledge and attempt to trace their flows. Shifts in knowledge from the manufacturing to the service sector are shown to be important and related to previous work which demonstrated the importance of knowledge intensive business services for both output and productivity in manufacturing.     

Religion and economic growth: was Weber right?

Evidence of falling wages in Catholic cities and rising wages in Protestant cities between 1500 and 1750, during the spread of literacy in the vernacular, is inconsistent with most theoretical models of economic growth. In The Protestant Ethic, Weber suggested an alternative explanation based on culture. Here, a theoretical model confirms that a small change in the subjective cost of cooperating with strangers can generate a profound transformation in trading networks. In explaining urban growth in early-modern Europe, specifications compatible with human-capital versions of the neoclassical model and endogenous-growth theory are rejected in favor of a “small-world” formulation based on the Weber thesis.     

Endogenous structural change and crisis in a multiple time-scales growth model

The slow and endogenous twist of economic macro-structure makes up an important evolutionary feature of capitalist economies, and may be at the root of structural crisis. In this line, a Goodwinian growth model with increasing returns and profit-sharing that tries to picture a simple scenario of the seventies crisis is considered. It is shown that the exhaustion of the Kaldor-Verdoorn “productivity law” can entail, in a nonlinear framework, a “catastrophic” bifurcation from a “high” to a “low” growth path. Slow/fast dynamical systems then allow one to formalize a multiple time-scales dynamics where the growth path is shaped by the structural framework in which it takes place, but has also a long -un feedback. Structural change and crisis appear as long term and endogenous outcomes.     

Capitalism and democracy in the 21st Century: from the managed to the entrepreneurial economy*

 This paper explains how and why the developed countries are undergoing a fundamental shift away from a managed economy and towards an entrepreneurial economy. This shift is shaping the development of western capitalism and has triggered a shift in government policies away from constraining the freedom of business to contract through regulation, public ownership and antitrust towards a new set of enabling policies which foster the creation and commercialization of new knowledge. The empirical evidence from a cross-section of countries over time suggests that those countries that have experienced a greater shift from the managed to the entrepreneurial economy have had lower levels of unemployment.