Table of Contents

National Competitiveness and Economic Growth

National Competitiveness and Economic Growth

The Changing Determinants of Economic Performance in the World Economy

New Horizons in Institutional and Evolutionary Economics series

Timo J. Hämäläinen

The current paradigm shift in the world economy is challenging the traditional competitiveness and growth theories with their few explanatory variables. This book offers a more holistic framework to synthesise the key findings of the various branches of competitiveness and growth research. The author illustrates this framework with a new long wave theory of socio-economic development. This theory emphasises the competitiveness and growth benefits of rapid structural adjustment in the rapidly changing techno-economic environment. Based on thorough analysis the author argues that both markets and governments have become less efficient due to the current transformation of the world economy. His empirical data from 22 OECD countries in the 1980s and 1990s illustrates that efficiency and growth-oriented governments have significantly contributed to their countries’ economic success.

Chapter 3: Analytical framework

Timo J. Hämäläinen

Subjects: economics and finance, institutional economics, international economics


In Chapter 1, we used the metaphor of ‘blind men’ and the ‘elephant’ to describe the narrow perspectives of previous competitiveness research. Today, such fragmented research approaches are neither theoretically nor politically satisfactory because modern economies are highly specialized and complex systems where ‘everything depends on everything else’. Such complex and highly interdependent economic systems should be approached from a more systemic and holistic perspective; one that incorporates all key determinants of economic competitiveness and growth. We introduce such a systemic framework in this chapter. 1 NATURE OF THE ECONOMIC SYSTEM Building a systemic framework of economic competitiveness and growth is not an easy task if one wants to stay within the paradigm of neoclassical economics. Its market-based and institution-free analysis has very little to offer for our purposes. Hence we must look to non-conventional economists such as Koopmans and Montias (1971), Pelikan (1987), Hollingsworth and Boyer (1997a) and Sabel (1997); or even further to sociologists and management scholars such as Talcott Parsons (1960, 1966, 1971) and Richard Whitley (1992a, 1992b), who have taken the systemic view of economy and society as their starting point. The works of these scholars suggest that economic systems are composed of the following main parts: 1. Different types of organizations at different levels of the system. 2. Specific input resources, productive technologies, organizational arrangements and output markets associated with each organization. 3. Different kinds of interaction and interdependencies among these organizations. 4. A differentiated and multi-level system of values and institutional norms which regulates...

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