Evolution and Economic Complexity

Evolution and Economic Complexity

Edited by J. Stanley Metcalfe and John Foster

Dedicated to the goal of furthering evolutionary economic analysis, this book provides a coherent scientific approach to deal with the real world of continual change in the economic system. Expansive in its scope, this book ranges from abstract discussions of ontology, analysis and theory to more practical discussions on how we can operationalize notions such as ‘capabilities’ from what we understand as ‘knowledge’. Simulation techniques and empirical case studies are also used.

Chapter 3: What do Firms Learn? Capabilities, Distribution and the Division of Labour

Paolo Ramazzotti

Subjects: economics and finance, evolutionary economics


3. What do firms learn? Capabilities, distribution and the division of labour1 Paolo Ramazzotti INTRODUCTION The aim of this chapter is to investigate the relation between the learning processes of firms and their industrial specialization.2 Its point of departure is recent research in the theory of the firm – namely the capabilities- (or competence-) based approach3 – which has stressed how codified and tacit knowledge jointly account for the existence of differences in individual and organizational capabilities within and among firms. Following this approach, the variety of capabilities accounts for inter- and intra-firm division of labour so that specialization – the activities that a firm becomes fit to carry out – would seem to be an almost natural outcome. The capabilities approach raises a range of issues, which will be discussed in the sections that follow. First, despite the many insights that the approach has provided, there still are some problems in defining and appropriately accounting for the origin of capabilities as well as in understanding the key features of the division of labour. Capabilities are often assumed to exist a priori or they are claimed to be part of an ongoing, yet not adequately outlined, process. As for the division of labour, it is treated as a technical issue rather than as a strategic variable. The chapter contends that this approach is unsatisfactory and it stresses that capabilities depend on the division of labour that management devises (see: ‘Whence capabilities?’, below). A related set of issues focuses on...

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