Processes, Complexities and Ecological Similarities
Chapter 5: Reasons for business diversity and their economic importance
It was claimed in the previous chapter that it would have been helpful if Schumpeter had given greater attention to the role of diversity in influencing the performance of economic systems. This is particularly important in relation to the presence and characteristics of business diversity. The purpose of this chapter is to consider types of business diversity that are significant for economic performance and to indicate how and why they are important.1 Even in stationary (static) economic situations, some types of business diversity enhance economic performance. After pointing out that mainstream economic theory fails to give adequate attention to such business diversity (for example, because it focuses on representative firms or supposes that there is a uniform best business practice), types of business diversity that are efficient in a stationary economic state are identified. However, in dynamic economic situations, which according to Schumpeter’s vision (1954), and also that of Frank Knight (1921), are necessarily uncertain, business diversity assumes greater economic significance. It influences the evolution and long- term performance of industries in ways considered in Chapters 5, 6 and 7 of this book. In this chapter, types of business diversity that are relevant to economic performance in dynamic situations are identified. Clearly, not all possible diversity enhances economic performance.
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