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demand-pull. Innovative learning instead gathers together cumulative and
incremental processes that interact with, but are not driven by, the devel-
opment of either science or market demand. Technology affects science
and demand as much as the other way round.
The dynamic capabilities framework has evolved from initially consid-
ering that the competitive advantage of firms is explained by the accu-
mulation of specific assets, to the inclusion of organizational aspects and
managerial processes which also promote learning. From the typical inter-
nal (to the firm) learning processes such as learning by doing, learning by
using, learning by carrying out R&D, the emphasis has shifted to external
learning processes, such as learning from spillovers, learning from inter-
acting, and learning from science (Malerba 1992). Therefore, in the next
section we will briefly consider the body of literature which proposes that
the generation and diffusion of economically useful knowledge involves
the systemic arrangement of a series of actors and institutions beyond the
individual firm (Nelson 1992, 1993; Lundvall 1992). Industry structures,
linkages between firms and other organizations, and also institutions and
specific government policies, all have an impact on the sources of inno-
vation available to firms, thereby giving rise to the notion that there are
indeed systems of innovation.
4.4
SECTORAL PATTERNS OF INNOVATION
4.4.1
Industry Dynamics and Diversity
The emphasis on firm heterogeneity which is central to both the evolu-
tionary economics of technological change and the resource based view
literatures, has challenged both orthodox industrial economics and also
strategy studies in stressing that firms are indeed different beyond industry
boundaries. In both orthodox industrial economics and strategy studies,
firms are regarded as being different because of industries, whilst variety
in the patterns of firm behaviour within the same industry are basically
not emphasized, neither in a traditional industrial organization setting
(Bain 1956; Sutton 1991) nor in the competitiveness framework proposed
by Porter (1980). Yet, the observation that much of the cross-sectional
and temporal variation in the characteristics, behaviour and performance
of firms is within the same industries, is not at odds with the recogni-
tion of sector-specific properties. These properties actually influence the
intra-industry heterogeneity and its persistence over time. The fact that
high/low innovators at time t have, ceteris paribus , a higher probability
of being high/low innovators at time t 1 1 , is explained on the basis of
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