Geography Reference
In-Depth Information
emerged. The research showed that innovation is critical to the evolution of the sectors.
Relatively localised networking between skilled labour, customers and suppliers was an
important factor for business transactions and product design. Legal i rms rated highly
the importance of customers as potential innovators demanding increasingly sophis-
ticated services. In contrast, banks, fund managers and insurance i rms rated comple-
mentary suppliers, similar to themselves, as driving innovation through competition. It
was also found that the larger the i rm the more it rated competition as a primary driver
of innovation particularly as i rms diversii ed their activities in order to compete for
(niche) market shares (City Corporation of London, 2003, p. 7). Networking provided
key avenues for knowledge spillovers that enabled i rms to learn what their customers
required and what their competitors were doing and therefore to be able to adapt their
routines and innovate ahead of them.
Competition was found to be one of the main drivers of innovation in the City of
London. Banks, and especially investment banks, formed the core sector in the City
and Canary Wharf. Their face-to-face meetings within the locality facilitated knowledge
spillovers that enabled their searches for innovative product dif erentiation and new
market shares. A City location and networking were particularly important for banks.
Both appeared to make important contributions to their abilities to innovate and to
adapt their routine behaviours through strategic reorientation and the development of
new organisational structures (City Corporation of London, 2003, p. 47).
Another feature of networking in the City was that it enabled the assembly of multi-
disciplinary teams on a 'pick and mix' basis in order to meet customer needs. Frequently
these do not appear as pure legal or pure i nancing requirements. In these circumstances
the ability to bring together complementary expertise to produce novel and bespoke
solutions to customers' needs is an important form of incremental innovation in services.
While each solution is unlikely to represent a breakthrough innovation, nevertheless,
the recombination of previous knowledge and information into new combinations does
move the services provided along existing forms of knowledge trajectories.
9. Summary and conclusions
Evolutionary economics of ers possibilities for overcoming some of the limitations of the
underlying assumptions of neoclassical economics. In particular it addresses the issues
of the limitations of the information provided to i rms by markets, the role of innova-
tion in driving i rms away from equilibrium, and the problems of imperfect knowledge
and bounded rationality. In contrast to neoclassical theory, evolutionary theory starts
from the proposition that i rms normally follow established routines. Over time these
can lead to path dependence and lock-in to increasingly outdated practices. The process
of searching for adaptations and new routines is the way in which i rms can acquire new
knowledge and adapt their routines. Selection takes place as searches interact with inter-
nal routines and the external environment. Those i rms that are best able to adapt their
routines to external demands tend to survive more often than those that are less able to
deal with change.
The social and spatial divisions of knowledge labour have become much more
important with the paradigm shift to post-industrial capitalism or the 'information
society'. This is rel ected most obviously in the high proportions of services in advanced
economies. In these circumstances a main task of evolutionary economic geography is
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