Diversity in the Knowledge Economy and Society
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Diversity in the Knowledge Economy and Society

Heterogeneity, Innovation and Entrepreneurship

Edited by Elias G. Carayannis, Aris Kaloudis and Åge Mariussen

The key message of this book is that heterogeneity should be seen as an intrinsic and indispensable element of knowledge systems. The authors address the concept of heterogeneity in a multi-disciplinary fashion, including perspectives from evolutionary economics and innovation system studies, and relate this approach to existing theories in a broad range of fields.
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Chapter 8: Heterogeneity Interpreted and Identified as Changes in the Populations of Firms

Svein Olav Nås and Tore Sandven


8. Heterogeneity interpreted and identified as changes in the populations of firms Svein Olav Nås and Tore Sandven INTRODUCTION The term ‘heterogeneity’ refers to differences between units of observation, such as persons, organizations, routines or firms. The perspective concerns differences between firms, but the differences identified may originate in properties of components of the firms, including the composition of employees, industry, size, organization, routines or other capabilities. The aim of this chapter is to consider how one can identify, operationalize and describe the development over time of some aspects of heterogeneity of firm populations, and to consider if heterogeneity seems to increase or decrease over time. We argue that in a dynamic, evolutionary setting, the maintenance and reproduction of heterogeneity are necessary if incentives for change and growth are to be preserved. The work refers to previous analyses of persistent differences between industries and firms over time, for instance Schmalensee (1989) on intraindustry differences in profitability, or Jensen and McGuckin (1997) who utilize micro data to study heterogeneity at firm and plant level, doing away with the commonly used representative firm. The results show persistent differences in average profitability over time between industries, but with even larger differences between firms within industries. Schmalensee’s empirical observations challenged the dominant neo-classical general equilibrium theory, and contributed to paving the way for alternative approaches such as disequilibrium theories and evolutionary reasoning. The current analysis attempts to apply an evolutionary perspective, and...

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