Geography, Entrepreneurship, and Innovation

Abstract

Throughout his voluminous writings, Marx insisted on the notion of capitalism as a turbulent scene of production and exchange, gripped by the forces of competition in an endless process of self-transformation. In these circumstances, every firm faces a stark choice between the continual need to upgrade its process and product configurations or eventually going out of business. The result is what Schumpeter (1942), in an explicit invocation of Marx, called ‘creative destruction’, that is, the periodic abandonment of old equipment, production methods, and product designs in favour of newer and more economically performative assets. At the same time, as both Marx and Schumpeter recognized, creative destruction is inscribed within an ever-expanding sphere of economic activity due to the growth of existing firms, the extension of entrepreneurship, and the appearance of new products on final markets. Capitalism, in brief, is a complex Weld of forces spurring constant qualitative and quantitative readjustments across all its multiple dimensions of operation (cf. Baumol 2002). Sometimes these readjustments are of cataclysmic proportions, as when steam replaced water-power in the nineteenth century; more often than not, as Rosenberg (1982) points out, they take the form of small, incremental steps, many of which may be minuscule, but which collectively produce the incessant instability descried by Marx and Schumpeter. Of late years, there has been a considerable outpouring of literature devoted to these themes, much of it partaking of institutionalist and evolutionary economic theory (e.g. Archibugi et al. 1999; Arthur 1990; David 1985; Edquist 1997; Foray and Lundvall 1996; Freeman 1995; Lundvall and Johnson 1994; Nelson 1993; Von Hippel 1988). An important aspect of this literature is the emphasis that much of it assigns to geography—and above all to the region—as an active force in moulding industrial performance qua new firm formation, learning, invention, and growth (cf. Acs et al. 2002; Antonelli 2003; Audretsch and Feldman 1996; Cooke and Morgan 1998; Feldman 1994; Howells 1999; Maskell and Malmberg 1999; Oinas and Malecki 1999; Simmie 2003; Storper 1995).