Geography Reference
In-Depth Information
Explaining the ways in which institutions and institutional change af ect the perform-
ance of economics over time is the broader and central objective of institutional econom-
ics. The concept of path dependence has also been established as a key concept in the
discussion about institutional change. Dynamic increasing returns, sunk costs, dynamic
learning ef ects, coordination ef ects, and self-reinforcing expectations are the main
mechanisms that lead to path dependence in both technological and institutional change
(Arthur, 1989; David, 1993; North, 1990).
Within economic geography, institutional approaches do not constitute a unii ed
paradigm (Essletzbichler and Rigby, 2007, and Chapter 2 in this topic).
2
Both institu-
tional and evolutionary approaches have found a way to explain economic development
and the uneven distribution of innovation at multiple territorial levels. In the following,
a narrow understanding of institutions is proposed by dei ning them as formal and infor-
mal rules guiding actors' perceptions and activities. Institutions should be dif erentiated
from (non-market) organizations (North, 1990). Institutions as the 'rules of the game'
are composed of what Scott (2001) named the 'three pillars': the regulative, normative
and cultural/cognitive. These depend on dif erent bases of compliance, evoke dif erent
logics of actions and of er multi-level bases of legitimacy (Scott, 2001).
For long-term dynamics of economic systems, the relationships between institutions,
institutional change and innovation play an important role. Evolutionary approaches
concerned with long-run economic development place emphasis on institutions or
institutional arrangements and their co-evolution with innovation as important social
phenomena on the meso or macro level to explain path-dependent developments and
disparities in the rate and direction of innovation performance. They provide insights
into the relationship between institutions and innovation leading to path-dependent
processes at dif erent spatial levels.
Institutions and innovation in a multi-level view
Innovation activities are distributed very unevenly in space both within and between
national economics. Despite the ongoing globalization of the economy, it has become
increasingly apparent that there are distinct dif erences between nations in rates and
types of industrial innovation and the variation of innovative sectors contributing to eco-
nomic performance. International empirical comparisons that use indicators like R&D,
patents, export specialization or international trade l ows, underline the relative stabil-
ity of specii c innovation proi les and the comparative innovation strength of national
economies over time. Furthermore, national specii cities in production and trade cor-
respond with distinct dif erences in the national knowledge base (Archibugi and Pianta,
1992; Guerrieri, 1999; Montobbio, 2004). It seems that the institutions that support the
innovation systems remain country-specii c, even the systems themselves are becoming
internationalized and more intertwined (Carlsson, 2006).
Approaches dealing with the interrelatedness of institutional settings, innovation and
competence building over time, such as the systems of innovation (
national
,
regional
,
sectoral
), and concepts in the political economy, like the 'varieties of capitalism' (VoC),
place emphasis on the stabilizing function of institutions in the connection between insti-
tutions and innovation. These strands of literature, even though developing relatively
independently and focusing on dif erent analysing units, have in common the view of
the co-evolutionary nature of innovation sometimes more implicitly than explicitly. It is
