The Associational Economy: Firms, Regions, and Innovation

Abstract

Proposes a model for economic development, the associational model, as a third way between state planning and market-driven approaches to development. The associational model correlates high capabilities in social interaction and communication, particularly in the forms of high trust, learning capacity, and networking competence, with the economic and social success of a firm. As the process of innovation becomes increasingly collaborative, this social capital can be decisive to the outcome. Because much collaboration involves tacit knowledge, that is, knowledge that has not been put into a tradeable or expressible form, successful collaboration requires personal interaction and shared experiences. Accordingly, the importance of less hierarchical corporate governance forms and local and regional milieux emerge. The consequence of these trends is the ascendancy of the region as the locus of learning and collaboration that drive innovation. Four regional case studies are presented: Baden-Wurttemberg, Emilia-Romagna, Wales, and the Basque Country. The final chapter traces the intellectual roots of the authors' study - the ideas of Schumpeter, Veblen, Marx, and Hayek - and concludes with a sketch of how an associational approach may be implemented by policy makers. (CAR)