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Applied Evolutionary Economics and Economic Geography

Koen Frenken (editor)

Edward Elgar, Cheltenham, UK. 326 pages, £85.00 (hardback).

Reviewed by Simon Turner, London School of Hygiene & Tropical Medicine.

This edited book of thirteen chapters is an output from the fourth European Meeting on Applied Evolutionary Economics held at Utrecht University in 2005. In keeping with the theme of previous meetings, the book ‘aims to advance empirical methodologies in evolutionary economics, but with a special emphasis on geography and firm location’.

In the introductory chapter, Boschma and Frenken distil two ‘conflicting’ theories in economic geography, one with neoclassical foundations and the other institutional, and suggest evolutionary economics as a ‘third approach’ to understanding the geography of economic activity. In keeping with institutional economics, such an approach rejects the rationality assumptions of neoclassical economics, but claims to occupy new ground in explaining the uneven distribution of economic activities, ‘not primarily by referring to different institutions, but from differences in the history of firms and industries residing in a territory’.

Rather than build a sustained case for an evolutionary theory of economic development processes, Boschma and Frenken suggest that the distinctiveness of an evolutionary approach lies in the variety of research methodologies that can be applied to test evolutionary principles. In the present volume, this ranges from case-study research charting the endogenous growth of a cluster of high-tech firms centred on the University of Cambridge (Garnsey and Hefferman); social network analysis of the heterogeneous performance of firms based in wine clusters within Italy and Chile (Giuliani); and the use of spatial econometrics to analyse the relationship between economic growth, stability and diversity in the United States using regional employment data (Essletzbichler).     

The book is organised according to a spatial logic, that examines economic development processes at the micro (firms), meso (industries and networks), and macro scales (cities, regions or countries). Following this structure, Part I on entrepreneurship speaks to the evolutionary claim made in the introductory chapter that firms possess path-dependent routines and competences that develop over time. The two chapters in this section use case-study methods to explore cluster development processes around the University of Cambridge and the Sophia-Antipolis science park. While the development of the Cambridge cluster depended on endogenous processes (notably the founding of companies by members of the university and the development of a local ‘high-tech’ labour pool) the development of the Sophia-Antipolis experiment relied on the injection of exogenous resources into the region, via public funding that attracted the R&D divisions of international firms to locate in the area. However, particularly with regard to the chapter on Sophia-Antipolis, it is not clear that the processes described can be ascribed to evolutionary processes taking place within individual firms, but appear instead to reflect institutional change at the regional level.          

Part II, on industrial dynamics, responds to the argument made by Boschma and Frenken in the introduction that, according to an evolutionary perspective, the agglomeration of industries evolves through the inheritance of routines in particular spatial contexts, often embodied in spin-offs from parent firms. Klepper’s chapter, on the evolution of the television receiver, automobile and tyre industries in the United States, confirms this theory by highlighting the role of ‘pre-industry experience’ developed in industries related to those under study that spearheaded the growth of agglomeration economies (Klepper demonstrates, for example, the influence of diversifying radio producers from New York, Chicago, and Los Angeles on the location of the emerging television receiver industry in the 1940s). However, the other two chapters in this section deal with quite different themes: the role of the environmental movement in generating opportunities for renewable energy entrepreneurs in the US electrical power industry in the 1980s (Lee and Sine); and the influence of foreign investment and local absorptive capacities on labour productivity growth within Indonesian manufacturing plants across five industries (Jacob and Los). While the chapters represent detailed case studies of the development of contrasting industries, it is not obvious that they make use of concepts from evolutionary economics that add to current understanding of industrial development processes. For instance, Lee and Sine conclude that their work on social movement organisations actually advances the ‘institutional approach’ within economic geography by showing that social movement organisations ‘constructed the cultural and regulatory infrastructure for entrepreneurs’.

The third part of the book focuses on networks which, it is claimed, act a vehicle for ‘knowledge spillovers’. Drawing on the seminal work of Nelson and Winter, Sorenson et al interpret innovation ‘as a search for new recipes’ and argue that the likelihood of related invention by others depends on access to the original recipe or template, particularly for ‘moderately complex’ knowledge. Using US utility patent data, the authors show that chains of innovation (i.e. patent citations) are more likely than not to be wedded to a variety of social networks – organisational (218%), regional (160%), and technological community (238%). Interestingly, individuals who share a community of practice are more likely to develop related innovations than members of the same organisation or geographical region. This finding is also supported by Giuliani, who, in the following chapter, shows that producers of high-quality wine within clusters in Italy and Chile benefit from participation in exclusive ‘communities of knowledge’ based on the mutual strength of their knowledge bases. Lastly, in what appears a more conspicuous contribution to a book on evolutionary economics, Birke uses social network analysis to chart the effect of peer groupings on consumption choices made by a class of university students.

The final thematic part of the book explores macro-level processes within ‘spatial systems’ such as the economies of regions or countries. Essletzbichler examines employment growth and economic diversity within regional production systems in the United States using the evolutionary concepts of ‘adaptive efficiency’ (encouraging short-term growth) and ‘adaptability’ (supporting longer-term resilience). The findings challenge regional policy that is predicated on growth through specialisation and the accumulation of local skills, suggesting that this is at the cost of longer-term economic stability secured through regional diversity. Next, Maggioni and Uberti identify regional disparities among five European countries based on inter-regional knowledge flows (linked to internet use, research networks, co-patents, and Erasmus student exchange). Using gravity equations based on the geographic and relational distance between regions, the authors show that geographical proximity remains as important for interaction as the common technological and sectoral composition of different European regions. Bonaccorsi et al then explore a similar theme. They link regional inequalities in ICT adoption across Italy to differences in existing technological endowments and absorptive capacities.  

The concluding ‘policy’ chapter of the book applies an evolutionary approach to city transportation planning in Amsterdam. Echoing the chapter by Essletzbichler, Bertolini identifies the importance of the concepts of resilience and adaptability in the evolution of Amsterdam’s transport network from 1946 to 1999, but goes further in highlighting  the interplay of ‘path dependency’ and ‘unpredictability’ in managerial decision-making that emerges as ‘an often-painful process of trial and error’.  

There appear to be resonances of the process described by Bertolini with the construction of this edited volume on evolutionary economics and economic geography. The book does contain some valuable insights into the historical development of industries and regions, as well as a theoretically informed exploration of social networks and innovation, but it does not offer an adequate account of the principles of evolutionary economics to make a convincing case for a ‘third approach’ in economic geography. In particular, other than the reference to the micro-practices of decision-making in the chapter just discussed, there is an absence of micro theory that might push the reader beyond an elementary understanding of the firm as a bundle of routines, such as an appreciation of the collective nature of cognition within firms or the knowledge governance issues associated with leveraging distributed routines. In my opinion, the first part of the book on entrepreneurship actually strikes at the meso level and this volume is therefore better branded as a collection of industrial case studies that would appeal to economic geographers of a quantitative bent as what it lacks in thematic engagement is compensated by a swell of methodological invention.

(Added 06 January 2009)