Industrial policy, competence blocs and the role of science in economic development
Government is studied as supporter of science and of the transformation of scientific discoveries into new technology and firm formation. The importance of scientific discovery outside academe is recognized as is the experimental nature of the transformat
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Abstract. Government is studied as supporter of science and of the
transformation of scientific discoveries into new technology and firm formation. The importance of scientific discovery outside academe is recognized as is the experimental nature of the transformation process entailing frequent business failure. Competence bloc theory is used to understand the minimum set of actors with competence needed for the incentive structure to be complete and the risk of losing the winners minimized. Competence bloc analysis also helps clarify the theoretical foundations of industrial policy and useful roles for science parks. I find that to succeed as a catalyst for industrial competitiveness park management should be less concerned with science and technology and more with the economics of the transformation process. Key words: Competence bloc - Experimentally organized economy -
Spillovers - New industry formation - Organization of production Industrial policy - Science parks
JEL-classification: D2, L6, L8, 012, 014, 03, M13
1 The problem
Alfred Marshall (1890, 1919) had a great intellectual problem with the Walrasian model which he had contributed to developing and for which he Paper presented at the 1998 World Conference of the International Joseph A. Schumpeter Society, Vienna, June 13-16, 1998.
* Earlier versions of parts of this paper were presented at two OECD meetings OECDj CERI in Tokyo Nov. 11-12, 1997 and in Paris May 14-15, 1998.
D. C. Mueller et al. (eds.), Capitalism and Democracy in the 21st Century © Springer-Verlag Berlin Heidelberg 2001
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G. Eliasson
for a long time had been a prominent academic representative (Laestadius, 1999). The evidence of increasing returns was everywhere visible, but accepting them shattered the very foundation of the then established Walrasian model. The profession was not pleased with Marshall's preoccupation. Marshall's book Industry and Trade (1919), where this problem was explored in depth as a problem of reality/ was not even reviewed in some major economic journals. 2 To solve his problem Marshall (1919) created the concept of an "industrial district" within which firms suffered decreasing returns individually, but the district as a whole functioned as an "externality", creating large total factor productivity gains within the district. This was, however, too radical a proposition to be absorbed by the most conservative of all professions. 3 In 1944 Frank Knight came back to the same problem suggesting that observed increasing returns must depend on some invisible (unmeasured) factor of production that he called "knowledge". This proposition I take as the first cornerstone for my analysis. Romer (1986) and Lucas (1988), unaware of the fact that Marshall had said it much better already in 1919, made the Marshall knowledge externality the foundation of what they almost 60 years later called the "new growth theory". In this paper I identify the role of science and the policy maker in creating Marshallian knowledge externalities through the spontaneous or designed
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