Embracing the Knowledge Economy
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Embracing the Knowledge Economy

The Dynamic Transformation of the Finnish Innovation System

Edited by Gerd Schienstock

In an astonishingly short period of time, Finland has developed into one of the world’s leading knowledge societies whilst retaining a comprehensive welfare state. The book traces this rapid transformation from a resource-based to a knowledge-based society. The authors describe the country’s strengths and weaknesses in the new economy and demonstrate how Finland has been able to catch-up with the leading industrial countries by exploiting new techno-organizational opportunities. Experts from different fields provide rich empirical material on Finnish industries, firms, regions and institutions, and the role they have played in the transformation process. The book also details the business and economic restructuring which was required, and explores new trends in the country's science, technology and innovation policy.
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Chapter 2: Towards a theory of social innovation and structural change

Timo Hämäläinen


* Timo Hämäläinen 2.1 INTRODUCTION The world economy is currently undergoing a major techno-economic transformation that is comparable to the first and second industrial revolutions. The rapid advance and diffusion of information and communication technologies (ICTs), the increasing global specialization of value-adding systems, new cooperative and skill-intensive forms of organization as well as the growing differentiation of demand patterns have challenged the old economic and social structures of industrialized countries. In this rapidly changing environment, the performance of socio-economic systems at different levels of analysis – organizational sub-units (departments, divisions), organizations (private, public, third sector), organizational fields, sectors and clusters, geographical subregions, national economies and supranational governance structures (EU, NAFTA, etc.) – depends on their capacity to renew their socio-institutional structures. A rapidly and coherently changing system can develop complementarities and synergies among its core elements and those of the environment. The dynamic match between the system and its environment can produce learning, scale and external economies that lead to an ‘increasing returns’ regime characterized by rapid productivity growth and sustainable competitive advantage (Arthur 1994; Kogut and Parkinson 1993; Lipsey 1997). On the other hand, slow, partial or incoherent structural adjustment may lock the system into a ‘decreasing returns’ regime of slow productivity growth and eroding competitiveness.1 The importance of structural adjustment capacity for economic performance underlines the need to understand the nature of socio-institutional change processes. Unfortunately, such systemic change processes have not been the focus of any branch of social sciences in recent decades. The rather stable postwar...

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