Geography, Entrepreneurship, and Innovation

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).

Geography and the Division of Labour

The concept of the division of labour in production has a long genealogy stretching back to the seventeenth century and before, and it recurs repeatedly in the writings of economists and other social theorists down to the present time. In economics, the concept plays a major role in studies of industrial organization, productivity, and trade. In sociology, it has been of major significance as the linchpin of the distinction Wrst proposed by Durkheim (1893) between mechanical and organic solidarity in society. More recently, sociologists have also made considerable use of the concept in studies of the ways in which the division of labour is intertwined with phenomena like race, class, and gender (e.g. Mies 1998; Waldinger and Bozorgmehr 1996). Over the last couple of decades, geographers, too, have made numerous forays into questions of the division of labour and much research has been accomplished on how it ramifies with various kinds of spatial and locational outcomes (Massey 1984; Sayer and Walker 1992). In brief, the concept is of much importance in a wide range of investigations of social structure and dynamics, and it appears to be enjoying something of a renaissance at the present time as social scientists discover or rediscover how profoundly it ramifies with all aspects of modern life. For geographers, the division of labour has special interest and meaning because, in its role as a mechanism of economic and social differentiation, it is also a fundamental factor in moulding the economic landscape. A peasant society with only weakly developed divisions of labour is not likely to evince much in the way of spatial differentiation except as a function of dissimilarities from place to place in agricultural potentials (themselves related to such variables as soil, climate, and topography). By contrast, economically advanced societies with deep and wide divisions of labour, as in the case of the United States today, exhibit enormous degrees of spatial variation. With the passage of time, moreover, less and less of this variation seems to bear any relationship whatever to underlying conditions of physical geography.

Geography and Development

Theories of regional development and growth have hitherto focused for the most part on situations in the more developed countries of the world. There is no reason in principle, however, why these theories should not also apply—with suitable adjustments— to cases in less developed countries. Certainly, economic theorists of late have increasingly sought to deny that we need radically different approaches for dealing with less as opposed to more advanced economies (cf. Bloom and Sachs 1998; Sachs and Warner 1997). In recent years, indeed, a growing body of empirical work has demonstrated that very similar kinds of regional development and growth processes to those found in North America, Western Europe, and Japan are observable in much of the rest of the world. These processes are manifest in localized industrial systems that range from the purely incipient to largescale productive regions with global reach. In the present chapter, I attempt to systematize some of the main theoretical issues that are encountered in any attempt to understand the logic and dynamics of regional production complexes in less developed countries. In addition, I offer a brief review of some of the empirical work that has been undertaken on this question in Asia, Latin America, and Africa, together with some comments on the dilemmas that policy-makers in these areas must face up to in any attempt to promote development. I proceed at the outset by drawing both explicitly and implicitly on three major strands of thought. The first of these is what Krugman (1996) has called High Development Theory, with its central focus on virtuous circles of cumulative causation and balanced growth. The second is the so-called new growth theory, which emphasizes the pervasiveness of dynamic increasing returns effects in the modern economy (Lucas 1988; Romer 1986). The third is contemporary economic geography, where a long tradition of research has underscored the important role of regional clusters of production and work as motors of economic expansion and social progress (cf. Scott and Storper 2003).