Geography Reference
In-Depth Information
From what has briefly been discussed so far here it emerges that dif-
ferent understandings of knowledge, innovation and technology underlie
different theories of the firm's growth. Yet, in contrast to other theoretical
frameworks, evolutionary economics has found extensive applications
both in the theory of the MNE and in the economic geography arena. This
underlies our choice to favour - although not in an exclusive sense - such
a perspective in considering the interdependence between the micro level
of the firm - both MNEs and domestic firms - and the meso level of the
industry and the spatial system, particularly when looking at the changes
imposed by the globalization of technology and innovation sources.
4.3 TECHNOLOGICAL COMPETENCE,
CAPABILITIES AND LEARNING
4.3.1
The Nature of Technological Progress
Innovation is a crucial source of profits and growth. Profits derive from
continual advances in production, as wage increases tend to lag behind
productivity increases. This is usually achieved by adapting the resources
and expertise of the firm to the changing economic circumstances, often
also drawing on the complementary skills and resources of other firms,
organizations and institutions. The degree of firms' technological compe-
tence therefore affects both the unit production costs and also the output
product range or quality. As such, advanced technological competence
increases the profit margins of advantaged firms relative to other firms in
the same industry, and thereby affects their market shares. It also facili-
tates the entry of firms producing at low unit costs or with high quality
outputs into new or related fields of activity.
The conceptualization of technological competence suggests that its
dissimilarities and uneven distribution are a consequence of the nature
of technology and the way in which it develops. The central proposition
on this issue is first clearly articulated in Nelson and Winter's theoretical
framework, although it was already implicit in Penrose's thinking of the
firm's growth (1959) and in Rosenberg's history of technology (Rosenberg
1969). The basic principles are that technological knowledge is partially
tacit, is specific to the context in which it has been created, used or
adapted, and is dependent upon the learning and skills of those that have
developed and operate it. Technology is a product of a steady search for
improvements and a learning process in any particular firm.
As pointed out by Penrose, two elements of technology should be
distinguished: (1) potentially public knowledge, including information
