Theory and Evidence of Industrial Dynamics
Edited by Jean-Luc Gaffard and Evens Salies
When we are looking for the determinants of innovation and growth, it is not appropriate to focus on the frrm in isolation. Economic growth is not only a matter of productivity gains and hence of institutions and rules that create incentives to R&D expenditures by frrms. It is, also and mainly, a matter of co-ordination between supply and demand decisions both at each moment and over time, and hence of relations which prevail among fIrms that interact with each other during innovation processes. Thus, in an echo of Adam Smith, it is worth drawing attention to the articulation between the division of labour and the extent of market as the real source of wealth creation. As should be well known, without an expansion of market size, there is no possibility for frrms to capture the productivity or the variety gains associated with a deeper division of labour. And hence, there is no real opportunity for frrms to invest in specifIc physical assets and to boost the growth process. In exploring the main implication of increasing returns, which are at the heart of industrial life, for economic growth, we can see that markets stand at the core of economic processes insofar as they are considered as 'instruments to transmitting impulses to economic change' (Kaldor 1972, p. 1240).1 Every re-organization or restructuring of productive activities is the source of further changes which can be characterized by permanent differences between supply and demand. As a matter of fact, supply does not...