The Changing Determinants of Economic Performance in the World Economy
New Horizons in Institutional and Evolutionary Economics series
Chapter 7: Productive resources
The accumulation of productive resources has been the cornerstone of economic growth theories since the days of Adam Smith. Despite fundamental structural changes in the economic systems of industrial countries over the past two centuries, the central role of resource accumulation in economic theories has prevailed (see e.g. Barro and Sala-i-Martin 1995). Although we challenge this simple approach in the following sections, the accumulation of resources will remain an important determinant of economic competitiveness and growth also in our framework. This chapter will examine the competitive value of different types of resources in modern economies. As our review of economic growth and international trade theories revealed, economists have traditionally divided productive resources into relatively broad classes. The classical economists devoted major parts of their works to analyzing the nature, origin and returns of three ‘agents of production’: land, labor and capital. Also the modern economists have tended to use relatively broad categories of resources in their analyses such as physical resources, capital resources, human resources, knowledge resources and infrastructure. Porter has criticized the broad classifications of resources for not being very helpful in explaining the competitive advantage in particular industries. He argues that a nation’s firms gain competitive advantage if they possess the specific resources that are significant to competitive advantage in a particular industry (Porter 1990, pp. 74–75). This leads him to propose a new hierarchy of resources which defines the characteristics that determine their significance to particular industries. Since Dunning has suggested a similar hierarchy of resources,...
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