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degree of embeddedness in networks is high as peripheral i rms have exited. This can lead
to over-embeddedness and 'lock-in' (Grabher, 1993). What is more, the repeated inter-
actions in the past might have increased the cognitive proximity between i rms, thereby
reducing the potential for innovation by recombination. In certain circumstances, this
can lead to an endogenous decline of the cluster (see also Menzel and Fornahl, 2009;
Staber, 2007). For a discussion of how positive lock-in can turn into negative lock-in,
see also Martin and Sunley (2006) and Hassink (Chapter 21). Institutions also play a
prominent part in this respect, a topic to which we turn now.
5. Institutions, co-evolution and economic geography
Since its early development, institutions have been part and parcel of evolutionary
economics. Veblen, one of its founding fathers, emphasised the importance of habits,
conventions and norms in economics (1898). He laid the foundations of what is now
called 'old' institutionalism, and which has ai nities with evolutionary economics as this
has developed since the 1980s. In the late 1970s, Nelson and Winter (1977) developed
their concept of 'natural trajectories', which were described as heuristics that guide the
innovation process (see also Rosenberg, 1976). These were often driven by the logic of
the mechanisation and standardisation of production, with the purpose of constraining
wages by codifying the tacit knowledge of employees. In this way, Nelson and Winter
gave their evolutionary theory a kind of Marxist l avour by referring to the overall
importance of capital-labour conl icts. In the 1980s, the so-called regulation theory
(Boyer, 1988) held a prominent place in the seminal contribution of Dosi et al. (1988) on
the foundations of evolutionary economics. Moreover, eminent evolutionary scholars
like Freeman and Perez (1988) developed the concept of structural crisis of adjustment,
in which they claimed that institutions need to be transformed to enable new industries
to develop fully and for old industries to be revived. And in the late 1980s, the innovation
system literature was initiated and developed by prominent evolutionary economists like
Freeman (1987), Lundvall (1992), Nelson (1993, 2002) and Malerba (2002, 2004) who
likewise emphasised the importance of national and sectoral institutions for the innova-
tion process.
Economic geographers have been keen to apply these ideas to their own discipline. In
the 1980s and 1990s, some adopted a regional approach to regulation theory, but this
was never fully developed (Martin, 2000). More successful has been the adoption of the
concept of innovation systems, which was explored in the early 1990s (see, for example,
Asheim and Gertler, 2005; Cooke, 1992, 2001; Cooke et al., 1998), and to which eco-
nomic geographers continue to contribute to this very day. Interestingly, evolutionary
economists introduced the concept of innovation systems by linking it to a particular
geographical scale right from the start, that is, the national dimension (Freeman, 1987;
Nelson, 1993). What economic geographers have added in the meantime is the view that
innovation processes are i rmly rooted in region-specii c institutions, most them of an
informal nature (e.g. local culture) that are dii cult to copy or imitate by actors in other
regions. Because of these intangible assets, regions are considered important drivers of
innovation, despite tendencies of globalisation (Belussi and Sammarra, 2005; Storper,
1992).
In their attempt to delineate an evolutionary approach in economic geography,
Boschma and Frenken (2006) made the observation that institutions have not always
