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Complexity and the Economy

Complexity and the Economy

Implications for Economic Policy

Edited by John Finch and Magali Orillard

The authors examine the causes and consequences of complexity among the broadly economic phenomena of firms, industries and socio-economic policy. The book makes a valuable contribution to the increasingly prominent subject of complexity, especially for those whose interests include evolutionary, behavioural, political and social approaches to understanding economics and economic phenomena.

Chapter 12: Technology Strategy and Knowledge Dynamics: The Case of Biotechnology

Lionel Nesta and Ludovic Dibiaggio

Subjects: economics and finance, evolutionary economics, institutional economics


Lionel Nesta and Ludovic Dibiaggio 1. INTRODUCTION Recently there has been increased interest in why firms differ, and how it matters (Nelson 1991). One of the central determinants of heterogeneity between firms is believed to be their technological profile, or core competencies (Prahalad and Hamel 1990). Firms race for technological leadership by specializing in a few technological fields. However, when we look at the technological profiles of firms, they appear to master similar technologies, even when focusing on a small range of products (Granstrand et al. 1997; Patel and Pavitt 1997). Thus it is not clear that technology is a source of differentiation between firms. In this chapter we look at the sources of firms’ technological differentiation in biotechnology-related industries. We investigate the extent to which competing firms may specialize in different technological fields. By specialization we do not mean the concentration of the firm’s competencies (Gambardella and Torrisi 1998). Although useful when studying the technological strategies within firms, this definition does not throw much light on the sources of heterogeneity between firms. Here we consider two types of technological specialization. On the one hand, firms may differ because they do develop competencies in different technologies. Thus, asymmetries in knowledge endowments may provide a sound basis for technological heterogeneity. On the other hand, firms may differ in the way they use technological knowledge, that is, in their specific exploitation of available bodies of knowledge. Building on Nelson (1998) and Pavitt (1998), we distinguish bodies of understanding – generalized...

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