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Edited by Cristiano Antonelli
3 Complexity in the theory of the developing firm Harry Bloch and Stan Metcalfe INTRODUCTION We begin this chapter with a straightforward question. What kind of theory of the firm is appropriate to the study of an evolving, complex, developing economy? A suitable answer clearly depends on what are considered to be the salient properties of an evolving, developing economy. To facilitate the following discussion we list them seriatim without further comment. ● ● ● ● ● ● An economy is a highly ordered system based on the division of labour within and between firms and industries. The division of labour is rendered productive and viable by the self organizing properties of the system, properties that make purposeful connections between the elements of the economic system. Modern economies are open systems, characterized by far from equilibrium, ordered states; they are necessarily self transforming as well as self organizing although the pattern of transformation is very uneven. The manner of self transformation is premised on the manner of self organization with the remarkable implication that the rules which facilitate the generation of order and stability are the same rules that render possible transformation of order and thus instability. The principal source of instability arises through innovation, the invasion of the prevailing system by novelties of which those in relation to technology and organization have proved particularly powerful, the theme encapsulated in Schumpeter’s notion of creative destruction. The firm is a principal locus of innovation but to innovate it must have adaptive capacity, while the wider consequences of...
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