Innovative Enterprise and Historical Transformation

Abstract

The social conditions that affect innovation change over time and vary across productive activities. Hence theoretical analysis of the innovative enterprise must be integrated with historical study through the use of what I call a historical-transformation methodology —a methodology that stands in sharp contrast to, but can nonetheless be complemented by, the constrained-optimization methodology favored by conventional economists. In surveying some major attempts to analyze the role of the business enterprise in generating superior economic performance in the advanced economies, including the works of Oliver Williamson, Alfred Chandler, Edith Penrose, and resource-based theorists, I explain what a historical-transformation methodology is and why such a methodology is needed for understanding how and under what conditions business enterprises can in fact be innovative enterprises.