DYNAMICS OF INDUSTRY AND INNOVATION: ORGANIZATIONS, NETWORKS AND SYSTEMS

I begin with a general question, ‘What kind of knowledge based economic system is modern capitalism?’ In giving an answer I will focus on the claim that capitalism’s principal organisational forms, firms and markets, provide jointly a unique instituted connection between the growth of knowledge and the transformation of economic relationships and activities over time. It is a self exciting system so designed as it were to encourage innovation and economic experimentation and so facilitate the adaptation to and the stimulation of new knowledge. Thus what distinguishes modern capitalism is the specific transmission process that is invoked to connect the evolution of knowledge to the development of the economy. Indeed, I shall argue that the relationship is two way, markets are social processes that facilitate and give incentives to the economic application of new knowledge and they also provide a context in which the development of new knowledge is embedded and contextualised. At the core of this argument lie the rules of the game which make capitalism a creative, experimental, restless system and which combine market and non-market processes to facilitate innovation and its diffusion.

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