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the i rms achieve a higher degree of l exibility and retain established elements of the
dominant path to advance knowledge bases. Hence innovation may not be the una-
voidable result of 'creative destruction' that underlies the breaking up of institutional
stability. Instead it can be the result of 'creative accumulation' (Malerba, 2006, p. 4)
and institutional dynamics in path-dependent development. In other words, it can be
argued that it is precisely the path-dependent development of the German innovation
system that has contributed to the genesis and the success of the customized business
software sector.
Evolutionary economic geography could signii cantly contribute to provide new
insights in long-term dynamics of economies in space and time by making institutions
an integral part of the analysis. Beyond the use of institutions to explain inertia and
stability, there is a need to specify institutions and institutional coni gurations in a more
systematic way and to analyse their impacts on the dynamic interplay between actors
and structures of the economic system in time and space. Geography itself does play an
important role in the exploration and exploitation of path plasticity through proximity
ef ects on processes of knowledge transfer and creation at the micro level. Additionally,
place- specii c institutional compositions provide a rich repertoire for variation that can
be used by actors to recombine and adapt pre-existing institutional components for new
requirements in order to achieve innovative solutions. These change processes may have
impacts on macro institutional coni gurations of a dominant path of innovation systems
by enabling the slow evolution of institutions and transformative change. How proc-
esses of institutional change and institutional dynamics are interrelated with innovation
processes at multi-level spatial scales is an important question with several methodo-
logical and conceptual challenges, but also opportunities for the developing evolutionary
economic geography.
Notes
1.
It is worth to mentioning that the understanding of institutions is also dif erentiated in the areas of evolu-
tionary and institutional economics.
2.
For a broader overview in economic geography see Martin (2000).
3.
The varieties of capitalism (VoC), national business systems (NBS) and social systems of production and
innovation (SSPI) approaches have strong commonalities even though they dif er slightly in their institu-
tional analysis. The following analysis concentrates on the VoC approach.
4.
An archetype of distinct institutional frameworks is that of the coordinated market economies (CME),
which characterize for example Germany, Sweden or Japan, or the liberal market economies (LME)
typical for the US, UK or Canada. These economic systems dif er substantially in their organization and
the governing of key institutional coni gurations: the i nancial system, the industrial relations system,
labour markets, the education and training system, and inter-company relations (Hall and Soskice, 2001;
Soskice, 1999; Whitley, 2002).
5.
In 2004, the RPA value for Germany (+16) was four times higher than the EU-15 average (+4) (BMBF,
2007, p. 45).
6.
The chapter is based on research supported by the VW-Foundation under the programme: 'Innovation
processes in economy and society', which is gratefully acknowledged. Background for the qualitative
analysis is built on empirical interviews with 21 software i rms and i rms from user branches and intermedi-
ary organizations of the IT industry. We are especially grateful for the assistance in the empirical analysis
from Benjamin Klement and Konstantin Schneider.
7.
Annotations: The software industry corresponds to NACE 72.2 (Rev. 1.1), 'all sectors' corresponds to
NACE A-O (Rev. 1.1) and the illustrated employees are employees subject to social security contribu-
tions.
8.
The terminology is not selective with regard to customized business software and the application software.
Sometimes they are used synonymously, sometimes customized business software is aggregated under
application software. In the following both terms are used synonymously.
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