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1. Introduction
This special issue of Industrial and Corporate Change brings together diverse
streams of analysis on the determinants and characteristics of growth and
development. (Here and throughout we accept the distinction between the
two put forward in Nelson's article, in this volume, whereby 'growth' is that
idealization of economic dynamics in which 'things simply get bigger or
smaller or stay the same size', while 'in development, a lot of qualitative
changes are also happening'. Needless to say, in this definition, development
analyses are by no means confined to less developed countries.)
2 Despite the variety of the perspectives represented in this volume, most of
- the articles display at least two unifying themes. The first one is the emphasis
| on development as a multifaceted process that demands the investigation of
z
the conditions allowing it to take off and to be self-sustained. The second
"2 theme is the importance of technological change, of firms' characteristics and
| behaviours and of institutions, in shaping specific development patterns.
These two themes, by themselves, set also a huge research agenda for
1
> • This paper, ai well as that by G. Dosi, S. Fabiam, R. Aveni and M. Meacci in thu same issue of
| ICC, draws on Dosi a at. (1993)- The list of'stylized facts' is enriched by some drawn from K. Arrow and
J G. Dosi, 'A few stylized facts and puzzles for economic analysis', unpublished communication, Santa Fe
1 Institute, Santa Fe, NM. Earlier versions containing some of these ideas as well as initial explorations of
.5 the model of Dosi—Fabiani—Aversi—Meacci's paper appear in Pasinetti and Solow (1994) and Soete and
I Silrerberg (1994).
i © Oxford University Press 1994
The Process of Economic Development
which the contributions that follow can only be considered as sparse elements
of a much larger picture still awaiting to be drawn. Indeed, an important
achievement would already be to show how the different pieces of the puzzle
could in principle hold together.
Until recently, technologies, firms and institutions had all three been
strikingly absent from the core of the economists' explanation of growth
patterns. (Development theories followed a somewhat different course but in
so far as they relied on the analytic apparatus of the economist, they, too,
often referred back to variants of the standard growth model—in a
shorthand, of the Solow-type.) On the contrary, the view underlying the
contributions to this volume—a view held by many other scholars in
different quarters of social sciences—is that the interpretation of growth and
development requires a detailed understanding of how technological innova-
tions are generated and diffused; of the incentive structure facing economic
actors; of the internal organization, competences and strategies of business
firms; of the institutions in which agents are embedded and which constrain
and guide both microeconomic coordination and change. It seems to us that
the neglect of these variables, as once Richard Nelson put it, would be like
trying to write a detective story without the detective, the murder, the
murderer . . .
breed) that promise to capture some of the spirit of what we know about
corporate growth and industrial dynamics. Amsden and Hikino add impor-
tant insights to the latter by examining the role of conglomerates in late
industrializing countries. Stiglitz discusses the complementarity between
lato sensu technological factors (such as 'local' learning and externalities) and
organizational ones (including the structure of business firms and the nature
of financial institutions). Silverberg and Verspagen and Dosi et al. present
two evolutionary models where dynamics explicitly rests on the interactions
among heterogeneous, continuously learning, agents. Conversely, Greenan
and Guellec try to bridge some of the gap between equilibrium models and
micro evidence by incorporating finer organizational specifications into a
'new growth' perspective.
The role of institutions is the last—and enormously complex—topic. It is
probably where economic theory (in both neoclassical and evolutionary
modes) is at its weakest. Many historians—as well as sociologists, political
scientists, economic anthropologists—would put agood part of the explanatory
burden of 'why growth and development patterns differ' on the particular
forms of 'embeddedness' of economic behaviors into broader networks of
social interactions and institutions (on the notion of embeddedness, see
Granovetter (1985); on the general point cf. Zysman's article in this
volume). Conversely the inclination of mainstream economists would be to
claim that if institutions matter at all, their effect would simply show up in
the parametrizations of some functionally invariant model that they propose.
Evolutionary economists do go further, generally put forward an institu-
tionally rich 'appreciative theory' and are ready to acknowledge the embedded-
ness of whatever form of learning and selection they model into specific
institutional set-ups. However, modeling of institutions—as, in this volume,
Zysman urges and Nelson admits—is still at a highly rudimentary stage.
Relatedly, the greater the emphasis of the explanation on specific institutional
arrangements, the greater of course also the importance of history in the
selection of particular development trajectories (although path-dependency is
likely to emerge even in absence of explicit institutional inertia: see Durlauf s
article, and the discussion below).
Clearly, convergence/divergence in development patterns is only one of
the numerous areas where the varying degrees of attention to technical
change, organizational characteristics and institutions do make a profound
difference in terms of the proposed theoretical interpretation. Indeed, to set
the stage for the analyses that follow it might be useful to highlight a long,
albeit by no means exhaustive, series of empirical regularities which ought to
be explained by the theory (or at least the observational implications of the
theory should not be in open conflict with them).
5
The Process of Economic Development
Let us start with the broad historical picture. Consider the last three centuries as
the unit of observation. What is striking is indeed the explosion of diverging
patterns, starting from quite similar pre-industrial levels of per capita
incomes. Table 1, from Bairoch (1981) presents estimates showing that
before the Industrial Revolution 'the income gap between the poorest and the
richest country was certainly smaller than the ratio 1.0 to 2.0 and probably
of the order of only 1.0 to 1.5' (p. 5). The dominant pattern after the
industrial revolution is one with fast increasing differentiation among coun-
tries and overall divergence (see Table 2). Even in the post-World War II
period, commonly regarded as an era of growing uniformity, the hypothesis
of 'global' convergence (that is convergence of the whole population of
countries toward increasingly similar income levels) does not find support
from the evidence (De Long, 1988; Easterly et a/., 1991; Verspagen, 1991a,
1991b; Soete and Verspagen, 1992). Rather, one finds some—although not
overwhelming—evidence of local convergence, i.e. within subsets of coun-
tries grouped according to some initial characteristics such as income levels
(Durlauf and Johnson, 1992) or geographical location. Still, across-groups
differences in growth performances appear to be strikingly high (clearly,
convergence in the end-period levels of income ought to show up in inverse
correlation between rates of growth and initial levels but the evidence does
not support this proposition). For some recent regional data see Tables 3
and 4.
Fully acknowledging a 'post-selection bias' (De Long, 1988), the perform-
ance of OECD countries displays much stronger convergent characteristics.
It is well known that after World War II, one observes a strong catching-up
process by other OECD countries in per capita incomes and labour produc-
tivity vis-a-vis the USA (Maddison, 1982; Abramovitz, 1989). At least since
1870 the OECD followers have become increasingly homogeneous, in the
sense that the standard deviations of their relative gaps compared to the USA
have steadily fallen. However, the mean gap itself has increased until World
War II and fallen thereafter (Abramovitz, 1989, Table 7.1, p. 226).
An interesting phenomenon concerns the persistence of relative growth
performances over time. Historical evidence regarding specific countries
seems to suggest the persistence of above/below-average growth rates at least
within particular phases of development: compare for example the below-
average performance of Japan, Germany and Italy. However, long-term
6
The Process of Economic Development
TABLE 2. Estimates of Trends in Per Capita GNP (1960 US$ and Prices, 1750-1977)
1965-80 1980-89
East Asia* 7.3 7.9
South Asia 3.9 5.1
Africa (sub-Sahara) 4.0 2 1
Latin America 5.8 1.6
1965-80 1980-89
1
The analysis of 'East Asia' concentrate* on the 'four tigen'—S Korea, Taiwan, Singapore and Hong
Kong—but alto occasionally refers to the so-called 'second tier' of Thailand, Malaysia, Indonesia,
Philippines and to mainland China. 'Latin America' refers mainly to the largest and most industrialized
countries: Brazil, Mexico, Argentina and Venezuela but occasionally also to the smaller and less developed
economies or the entire continent including the Caribbean.
8
The Process of Economic Development
TABLE 5. Rates of Catching Up in the Per Capita GDP Levels telative to the USA, 1913-
1989 (annual average compound rates of growth)
per capita incomes generally were much higher in Latin America. However,
already by the 1970s, despite this lower starting point in terms of indus-
trialization, the four tigers of East Asia were generally being bracketed with
Brazil, Mexico and Venezuela as newly industrializing countries (NICs).
They all enjoyed growth rates well above those of the USA and Europe for
quite a long period so that catching up seemed a feasible prospect for them if
not yet for the great majority of less developed countries. However, in the
1980s there was a very sharp process of differentiation between the Latin
American NICs and the East Asian NICs. Whereas the East Asian countries
continued their rapid growth and even accelerated it, the Latin American
countries slowed down or declined (Table 3). Now the contrast was increas-
ingly between rather sharply defined geographical regions. Whereas real per
capita incomes were actually falling over the past decade in Africa and Latin
America, they were rising quite fast in South Asia and very rapidly in East
Asia (Table 4).
Let us summarize some general 'stylized facts' (SF) concerning the inter-
national patterns of growth.
9
The Process of Economic Development
SF1. Economies have grown over the past two centuries probably faster
than during any previous period in recorded history.
SF2. They have grown at different and variable rates (sometimes negative
for particular periods and particular countries—Argentina, a few less devel-
oped countries, USSR, etc.—or for many countries for particular periods—
i.e. deep recessions).
SF3. The long-term patterns for the whole set of countries show an
increasing differentiation, highlighted by a secular increase in the variance in
per capita income.
SF4. Catching up with forging ahead has been relatively rare (Britain
overtaking Holland in the 18th century; the USA, Germany and others
overtaking Britain in the late 19th and 20th centuries; Japan overtaking
almost everyone in the late 20th century).
SF6. Falling behind has been a rather frequent phenomenon, too (many
less developed countries in the 1970s and 1980s; a few countries falling
behind after a considerable 'spurt' of catching up—compare the 1950s with
the 1980s in Latin America and Eastern Europe; Britain experiencing a long-
term relative decline).
The historian David Landes, in his reconstruction of the process by which the
'modern Prometheus' of innovation and entrepreneurship arose and was
diffused through the industrialized world, points to the cumulative and self-
propelling advance of technology as a sort of primus inter pares within the
menu of ingredients of economic development that come under the heading
of'modernization' and include, for example, general education, mobility of
finance, industrial entrepreneurship, urbanization (Landes, 1969).
Together with the Industrial Revolution came an impressive differentiation
in the technological capabilities among countries, starting from a rather
homogeneous distribution, at least between Europe, China and the Arab
world. Findlay (1992) argues, for example, that most of the technologies
involved in European voyages of discovery came from China and the Arab
world but the picture dramatically changes after the Industrial Revolution.
Table 7 provides a highly impressionistic but still revealing picture of the
international distribution of innovations from 1750. Although there is
probably some Anglo-American bias in Streit's (1949) data, a similar pattern
is revealed by long-term patenting activities (see Dosi et a/., 1990): inno-
vation appears to be highly concentrated in a small group of industrialized
countries (Table 8).
Of course, technological learning involves many more elements than
simply inventive discovery and patenting: as discussed at length elsewhere
(Freeman, 1982, 1987; Dosi, 1988) equally important activities are imitation,
reverse engineering, adoption of capital-embodied innovations, learning by
doing and learning by using. And, of course, most often technological
change goes together with organizational innovation. Still, it is important to
11
The Process of Economic Development
Country 1883 1890 1900 1913 1929 1938 1950 1958 1965 1973 1979 1986
Australia 1.11 1.20 2.33 1.97 1.96 1.18 1.54 0.60 0.94 0.92 1.12 1.14
Austria 2.62 3.37 3.36 3.99 2.47 2.91 0.48 1.12 1.16 1.02 1.19 1.09 ^
Belgium 1.59 0.86 1.35 1.28 1.30 1.23 1.07 1.14 1.50 1 23 0.98 0.74 S~
Canada 19.94 17.63 10.54 13.22 10.25 6.35 11.16 7.99 7.00 6.20 4.56 4.01 J
Denmark 0.56 0.38 0.46 0.67 0.71 0.71 1.36 0.74 0.74 0.70 0.56 0.56 |
France 14.22 8.46 9.79 8.07 9.76 923 15.54 10.36 10.90 9.38 8.46 7.22 S
Germany 18.67 21.47 30.72 34.02 32.36 38.18 0.57 25.60 26.40 24.25 2387 20.80 ^,
Italy 0.24 0.29 0.92 1.31 1.19 1.43 0.86 3.02 3.38 3.39 3.14 3.05 J?
Japan 0.16 0.10 0 03 0.45 1.40 1.51 0.03 1.93 7.43 22.10 27.69 40.35 a
Netherlands 0.24 0.29 0.75 0.47 1.57 338 8.10 5.71 4.15 303 2.80 2.20 |
J?
Norway 0.32 0.14 0.49 0.74 0.71 0.54 0.95 0.61 0.42 0.42 0.43 0.25 "
Sweden 0.95 1.52 1.32 2 07 3.19 .3.13 6.67 4.64 4.50 340 3.02 2.70 5
Switzerland 1.75 2.66 2.27 3.11 4.46 3.72 973 8.80 6.97 5.79 5.40 3.70 *.
United Kingdom 34.55 36.15 30.52 23.29 22.23 22.70 36.00 23.45 20.62 12.56 10.07 7.37 "f
Eastern Europe 0.40 0.67 1.49 1.19 1.62 1.61 1.23 0.55 0.89 2.53 2.76 1.13 |
including USSR **
NICs 0.40 1.19 1.12 1.21 1.03 0.90 1.41 1.31 1.71 1.36 1.45 150
Others 3.28 3.62 2.54 2.94 3 07 1.29 3.28 2.43 1.29 1.72 2.50 2.19
TABLE 9. Correlation Coefficients between Levels of Innovative Activity and GDP Per
Capita
1890-1913
g 1.00 0.6Ot 0.60t -0.22 -0.18
y 1.00 0.20 0.05 -0.66*
PTC 1.00 -0.6lf 0.22
P<< 1.00 -0.67*
Y 1.00
1913-1929
g 1.00 0.76* -0.12 0.66* -0.41
y 1.00 -1.21 0.67* -0.62+
PTC 1.00 -0.55+ 0.38
pt< 1.00 -0.43
Y 1.00
1929-1950
g 1.00 0.82* 0.31 0.66* 0.37
y 1.00 0.41 0.58+ 0.40
PTC 1.00 0.22 0.56+
P'< 1.00 0.67*
Y 1.00
1950-1970
g 1.00 0.75* 0.38 0.89* -0.76*
y 1.00 0.40 0.71* -0.76*
PTt 1.00 -0.48 0.63+
P'c 1.00 - 0 84*
Y 1.00
1970-1977
g 1.00 0.91* -0.67* 0.29 -0.47
y 1.00 -0.60+ 0.16 -0.48
PTC 1.00 -0.28 0.66*
P>c 1.00 -1.16
Y 1.00
influences on trade flows. In his classic work on Industrial Growth and World
Trade (1963), Alfred Maizels examined in great depth the changing patterns
of world commodity trade in relation to industrialization and growth of per
capita incomes. He concluded that:
Since exports sales are also an important part of total demand for final
output in most industrial countries, a change in competitive power—which
15
The Process of Economic Development
His analysis pointed to the importance of both relative export price move-
ments and non-price factors, especially technological progress, quality,
design, delivery and marketing, in the competitive process. To fall behind in
design and technology may render products less saleable or even unsaleable
on the world market, while a fall behind in process technology may render
them uncompetitive in terms of price. More recent work (e.g. Dosi et a/.,
1990; Amendola et a/., 1993) has confirmed this view of the dynamic
interdependence of technical change with trade and growth performance. It
shows that in most industrial sectors, 'disembodied innovations'—as proxied
by patenting activity—and innovations embodied in capital investment, are
the main determinants of national export performances—measured by per
capita exports or shares on the world markets.
Moreover, different commodities and sectors are likely to be associated
with different levels of opportunities for innovation and different income
elasticities of demand. Hence, the national patterns of technological and
production specialization may feed back on the long term dynamism of each
economy. (The Kaldorian hypothesis of 'manufacturing as an engine of
growth' as well as the possible conflict between 'static' and 'dynamic' effi-
ciencies of particular patterns of resource allocation belong to this domain of
analysis.)
In order to illustrate the coupled dynamics between technical change,
exports and growth, let us compare again East Asia with Latin America. The
high growth rates achieved by the East Asian countries were associated with
an even more impressive achievement in export performance. All the four
tigers surpassed the leading Latin American countries (Brazil and Mexico) in
their share of world merchandise exports and far surpassed them in world
manufacturing exports (Table 11). Manufacturing exports were growing
much more rapidly than primary commodity exports in the 1980s. More
generally, Maizels (1963, Chapter 3) shows that all industrializing countries
had a rising ratio of manufacturing to total exports from 1899 to 1959 so
that this is the continuation of a persistent long-term trend, only partly
obscured by oil price movements in the 1970s. Manufacturing accounted on
average for about 70% of total world merchandise exports in 1990 but, with
2
For a recent turvey on the relationship between trade and growth in developing countries, tee
Edwards (1993).
The Process of Economic Development •
One of the major points to emerge from the analysis by Maizels of the
long-term trends in world exports of manufactures was the huge change in
the commodity composition. Whereas the share of textiles and clothing
declined from over 40% in 1899 to about 1 1 % in 1959, the share of
machinery and transport equipment increased from 12% to 42% (Table 12).
As he anticipated, the share of machinery and transport equipment increased
even further, although much more slowly. The share of chemicals in value
terms remained relatively stable.
The original success of Britain in growth and trade in the Industrial
Revolution was of course based on the leadership in the mechanization of the
textile industries and in enormous textile exports. Even at the end of the
19th century, textiles and clothing still accounted for over 50% of all British
exports of manufactures, while Britain still accounted for 30% of all world
exports. But machinery, transport equipment and chemicals played an in-
creasingly important part in British growth during the 19th century and
17
The Process of Economic Development
Machinery 8 14 25 36
Transport equipment 4 10 17 15
Chemicals 8 9 12 13
Textiles and clothing 41 29 11 9
Metals, metal goods and other 39 38 35 27
those countries which were overtaking Britain, especially Germany and the
USA, showed an even greater concentration of exports in these new faster
growing commodity groups. By 1929 machinery, transport equipment and
chemicals accounted for over 70% of USA manufacturing exports and for
70% of German manufacturing exports but for only 40% of British. Britain
had been the leader in railway equipment and steam engines but in electrical
machinery and other types of electrical products German and USA firms
forged ahead of their British competitors.
Many historical accounts (e.g. Ashby, 1969; Landes, 1969; Maddison,
1982; Freeman, 1987) point to the importance of institutional innovations
in both Germany and the USA which facilitated their catching up and
forging ahead of Britain. Particularly important were specialized institutions
for the education of graduate engineers and the lags in engineering education
and vocational training in Britain. The social innovation of the in-house
industrial R&D department in the chemical and electrical industries of
Germany and the USA from the 1970s onwards was also of major importance
in the introduction, exploitation and diffusion of the new technologies.
Britain continued to perform relatively well in the older industries and
technologies but did not really catch up in the new ones until much later and
in some cases not at all (Lewis, 1978).
Thus, while textiles and clothing still play an important role in the early
stages of industrialization in many countries, some capability in the manu-
facture and export of capital goods has become increasingly important in the
20th century in the later stages of industrialization and catching up. The
Asian tigers have done extremely well both in the export of clothing and of
capital goods. Hong Kong was by far the largest exporter of clothing in the
world in 1989, accounting for 15% of total world exports. S Korea was the
third largest exporter, accounting for 10% of world exports, while China and
Taiwan were respectively fourth and sixth. Together they accounted for 35 %
18
The Process of Economic Development
of all world clothing exports and for 25 % of textile exports. In the far larger
category of machinery and transport equipment their share is of course
smaller (8% of world exports in 1989) but nevertheless all four tigers figure
in the top 15 world exporters and their total capital goods exports are now
much larger than their total textile and clothing exports.
However, within the category of 'machinery and transport equipment'
there has been an extremely important shift in the second half of the 20th
century which has played a crucial role in the relative success of the East
Asian countries and especially Japan. The major change in technology in this
period has been the increasingly pervasive influence of information and
communication technology throughout all industries and services, amount-
ing to a change of 'techno-economic paradigm' (Perez, 1983). Just as at the
close of the 19th century and the early 20th century leadership in electrical
technology was critical for countries such as the USA, Germany, Switzerland
and Sweden, which were catching up and forging ahead, so today it is
information and communication technology. Reflecting this change, elec-
tronic capital goods, electronic components, telecommunication equipment
and a wide variety of other electronic products, including instruments and
durable consumer goods have now become the fastest growing category in
world exports (Table 13).
As a result of its extraordinary rapid growth, this category now alone
accounts for over 12% of all world exports of manufactures, i.e. much more
than textiles and clothing combined and about as much as chemicals. Even
so, the classification understates the influence of competence in information
and communication technology, since it is not merely a question of particular
categories of capital goods and consumer goods, but of a technology which
affects all services as well as manufactures. It is more important to be able to
use this technology in every sector of the economy than to manufacture
specific products or components. Nevertheless, relative performance in world
trade in this commodity group does provide a clear indication of long-term
shifts in competitiveness in the fastest growing commodities. What emerges
from an analysis which separates out this category in world trade is the
extraordinary strength of Japan but also of the other East Asian countries and
of their intra-industry trade in this category (Table 14).
The combined exports of the four tigers in 1989 were greater than those of
the USA in this commodity group and nearly as large as those of Japan,
although in 1980 they still had been only about half of the exports of either
of those countries. No Latin American country appears at all in the first 15
exporters in this category and nor do they appear in the first 15 exporters in
the entire category of'machinery and transport equipment'. However, Brazil
and Mexico do figure, along with Korea, in the subcategory of the 15 largest
19
The Process of Economic Development
Share of product in
Value Share in Average economy's merchandise
world <reports annual change Exports Imports
1980 1989 1980 1989 1980-1988 1980 1989 1989
Period
of which
1963-1971 1971-1989 1979-1989
SF11. Within the group of major innovators one observes secular changes
in the relative rankings: forging ahead tends to be associated with leadership
in new technologies and competence in basic science (although not necessarily
leadership in basic science). It is also associated with institutional changes in
the generation and diffusion of new pervasive technologies and with the rapid
expansion of education and training.
* According to Mosej Abramovitz, '[in] the twentieth century. . . . the sources of growth were
different. And the differences apply both to the proximate sources of advance—the per capita growth of
22
Tbe Process of Economic Development
SF17. Regarding factors' returns, the available evidence does not suggest
any systematic correlation between profit rates and levels of development,
either cross-sectionally or over time. Conversely, robust correlations exist
between wage rates, levels of labor productivity and levels of per capita
income.
labour, of capital and of their productivity—and to the deeper causes that governed all three' (Abramovitz,
1989, p- 1). On the different 'phases' and 'regimes of growth' see also Maddison (1991) and Boyer
(1988a, 1988b). We shall briefly come back to this issue below.
23
The Process of Economic Development
Clearly, the theory counterparts of these 'stylized facts' are a long list of
questions and 'puzzles' concerning, e.g. the 'causes' of growth; the processes
which trigger it and, under some circumstances, make it self-sustained; the
origins of persistent international differences in incomes and wages; the
relationships between technical change and growth; the international diffu-
sion of technological knowledge; the links between international trade,
growth and factors' returns; and many others.
Other 'stylized facts' refer to some finer macroeconomic properties of each
country.
SF23. 'Markets' in reality display a relatively high variety in the ways they
are organized and in the ways they function (e.g. some rely on decentralized
interactions while others centralize transactions; some mainly rely on quantity
adjustments and others mainly on price changes, etc.). Equally important,
markets differ in their degree of international openness (compare, for ex-
ample, the labor market with the market for finance) and in the institutional
rules governing them.
24
The Process of Economic Development
SF24. Firms are the main locus of technological accumulation. The rates
and directions at which firms learn depend on the richness of unexploited
opportunities which they face and on the incentives that they perceive to do
so—including of course appropriability conditions. However, at least
equally important, technological learning depends on firm-specific abilities.
Learning tends to be 'local' in the sense that it generally occurs in the neigh-
borhood of those activities which the firm is already mastering.
SF29. Most innovations are industry-specific (despite the fact that a few of
them exert in the longer term their impact across diverse activities via
intersectoral flows of innovative commodities and production knowledge).
Therefore, innovative shocks as such are an unlikely candidate for the
explanation of economy-wide fluctuations. (What adds to the puzzle is that
the economy-wide component appears to be relatively more important than
the sectoral one even for the fluctuations of individual sectors.)
. . . where was the evidence of diminishing returns which that theory would
have led one to expect? Could growth feed upon itself? Could there be
increasing returns, so that the marginal return to investment actually
increased as the economy grew? Or was there something about technical
progress which meant that its pace increased as the marginal product of
capital decreased? (Stiglitz, 1992, p. 1).
Here, to use the terminology of Nelson and Winter (1982) (see also Nelson
in this volume), one must still draw heavily on the insights stemming from
'appreciative theories'—that is, inductive generalizations grounded in
detailed historical accounts. As a sort of illustrative example on the nature of
and relationship among these 'deeper processes' let us briefly compare the
somewhat archetypical dynamics of East Asian and Latin American coun-
tries. (Much more detailed accounts can be found in Amsden, 1989; Gereffi
and Wyman, 1990.)
Literacy (%) 22 89 99
Middle school (12-14 years) (%) 21 53 99
High school (15-17 years) (%) 12 29 83
College/university (%) 3 9 26
Scientists/engineers (No.) 4157 65 687 361 920
Corporate R&D laboratories (No.) - 1 455
Researchers (No.)
Governments RJs _ 2477 9184
Universities _ 1918 17 415
Private industry - 925 26 104
Total - 5320 52 783
R&D/GNP(%) 0.1 0.3 1.9
typically at 20—30% of the total or even less. The results of empirical studies
in this area are clear-cut both for Third World countries and for the former
communist countries of eastern Europe: it is essential to develop the compe-
tence for technology acquisition and technical innovation within the enter-
prises themselves. As firms progress in their learning activities this will
increasingly involve in-house research and development. However, it is by
no means only a question of R&D. It is also a question of a wide range of
scientific and technical services (STS) which reinforce and interact with R&D
and in the early stages can often substitute for it. They include design,
testing, quality control, production engineering, technical information ser-
vices, market research and, of course, a range of training activities (Bell,
199D-
30
The Process of Economic Development
Brazil 6 10
Colombia 7 21
Malaysia 7 32
Korea 24 77
Singapore 34 235
UK 39 166
Japan 39 315
Former W Germany 46 306
USA 53 389
Source: KJSDI, 1990.
34
The Process of Economic Development
issues. That is, one focuses—loosely speaking—on the process driving the
A(t) dynamics of Solow's function, assuming that whatever pattern of
resource allocation emerges it is, too, a highly imperfect outcome of innova-
tion, imitation and diffusion. At least three major 'building blocks' charac-
terize the evolutionary approach, namely (i) the microfoundations rest on
boundedly rational agents; (ii) the general presumption is that interactions
occur away from equilibrium; (iii) markets and other institutions perform as
selection mechanisms among heterogeneous agents and technologies.
The evolutionary research programme links up, to a large extent, with the
spirit of other unorthodox perspectives and, in particular, with models of
Kaldorian and Goodwinian inspiration (Kaldor and Mirlees, 1962; Goodwin,
1967, 1990; Kaldor, 1985) and with the (mainly French) institutionalist
approach known as the 'Regulation School' (Aglietta, 1982; Boyer, 1988a,
1988b). These approaches have in common with the evolutionary one the
abandonment of standard microfoundations (implicit or explicit rational
agents, market equilibria, etc.) and also an emphasis on technical change and
institutional specificities as crucial explanatory variables. Evolutionary models,
however, attempt to nest the dynamics on the alternative microfoundations
briefly mentioned above. Conversely, e.g. Kaldorian or 'Regulation'-type
models start at a higher level of generality and attempt to identify robust
functional relationships among aggregate variables—for example the in-
creasing return loop linking output growth and productivity growth known
as the 'Verdoorn—Kaldor law'; or the quasi-Marxian relationship between
profits, accumulation and employment in Goodwinian models. One then
studies the dynamics entailed by particular aggregate relationships.4 The
'Regulation' research project is more ambitious and aims at the analysis of
the interactions among the patterns of technical change and the institutional
forms of governance of the major markets (of labor, finance and goods)
which make up particular regimes of growth—specific of different countries
and different historical periods. 5
If one accepts the number of'stylized facts' that a model can account for as
a criterion for judging its robustness, then unorthodox models—in our
admittedly biased view—have not fared too badly. For example, in an
evolutionary perspective, Nelson and Winter (1982) easily generate the
macro-regularities accounted by standard neoclassical growth models (grow-
4
A lurvey of the non-microfounded models ij in Boldrin (1988). See IIJO Silverberg (1988) and Day
and Chen (1993)- A thorough companion between 'old', 'new' and 'Cambridge' growth model! is in
Bertola(I994).
' The notion of'Regulation', in this approach, stands for the 'socio-economic tuning'among institutional
set-ups shaping accumulation, wage formation, income distribution, demand patterns, etc.: see Boyer
(1988a). For a stimulating attempt to embed this perspective into a Kaldor/Goodwin dynamics, cf.
Lordon(1993).
39
The Process of Economic Development
Some Conclusions
As this (incomplete) overview of recent theoretical developments shows,
growth theories are starting to explore previously untouched domains. The
'theoretical stories' and the 'appreciative stories' told by historians have come
somewhat nearer each other and new empirical phenomena have been addressed.
For example, on theoretical grounds, the proposition that 'history matters' is
now acknowledged even near the mainstream of economic theory—in the
form of dependence of trajectories on initial conditions, multiplicity of
growth paths, etc. The research on the institutional architecture of national
economic systems has drawn strength—on the theory side—from
asymmetric-information and transaction-cost models and—on the empirical
side—from a richer understanding of how institutions and corporate organ-
izations work. The appreciative evidence on technical change is slowly start-
ing to percolate into modeling efforts. However, one is certainly still far
from a successful account of the role of technical change, organizations and
institutions in growth and development. Relatedly, only a small subset of
the stylized facts discussed above finds adequate theoretical interpretations.
40
The Process of Economic Development
With respect to both issues, one of the aims of the collection of articles that
follow is also to foster an interdisciplinary dialogue and a dialogue within the
economic discipline among different theoretical approaches which—
notwithstanding conflicting assumptions—have come increasingly to talk
about similar things.
Acknowledgements
This research, at different stages, has benefitted from the support from the
Alfred P. Sloan Foundation, through the Consortium on Competitiveness
and Cooperation, University of California at Berkeley; the Italian National
Research Council (CNR); the International Institution of Applied System
Analysis (IIASA), Laxenburg, Austria. We gratefully acknowledge the com-
ments by M. Abramovitz, S. Durlauf, W. Kwasnicki and the participants in
the seminars at the Santa Fe Institute, Santa Fe and at CEPREMAP, Paris;
D. Mandeng helped in accessing the CAN Data Bank (CEPAL, Santiago,
Chile) on trade flows.
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