This is the first post in a series that will investigate the network of organisations that enables the economic agents in an economy to master new technology and to prosper.
In every economy, there are organisations that emerge to address all kinds of market, structural and organisational failures. We call these organisations Meso Organisations, and they perform meso functions aimed at improving the economic performance and prosperity of the micro-level. While some meso functions may be more about creating a regulatory framework and others about education or technological services, in essence, all meso functions are about disseminating knowledge between economic actors.
Diversity (or variety) of options is a prerequisite for evolution to work. In natural evolution, variety is created by random mutations in DNA, while variations in the economy are created through an ongoing process of self-discovery at different levels, involving different segments of the society (Hausmann and Rodrik, 2003). Rodrik (2000) states that this process can be called a meta-institution. He argues that if it is democratic and participatory, this kind of arrangement typically results in higher-quality growth. This discovery process draws heavily on the ability of groups of organised people in business, government and civil society to conduct a process of combining existing ideas with new ideas in novel designs. It involves both reflecting on the status quo, and imagining alternative arrangements.
Nelson (2003:20) stresses that “some of our most difficult problems involve discovering, inventing and developing the social technologies needed to make new physical technologies effective”. The more distributed this kind of search is, the better the variety created and the stronger the resilience of the system becomes.
Businesses that are able to generate or recognise modules that work better and that can be repeated elsewhere by drawing on their past experiences have a huge advantage over businesses that are not able to do so (Dosi and Nelson, 2010; Beinhocker, 2006; Nelson and Winter, 1982). Schumpeter already argued some time ago that innovation consists of “the carrying out of new combinations”, with many of these combinations depending on past knowledge or understanding of physical, social or economic properties (Schumpeter, 1934:65-66). Dosi and Nelson (2010:103) argue that the ability of firms to learn, adapt and innovate is generally highly heterogeneous, idiosyncratic and unevenly spread.
Not all the knowledge needed to conduct ongoing discovery processes is available within a single individual or organisation. Hence social infrastructure, technology, education and business networks are essential in connecting organisations into broader networks of knowledge (Hidalgo, 2015). This is where the diversity, adaptability and resilience of the network of meso organisations and their functions play a critical role.
The factors within firms and beyond firms, including the landscape of meso organisations collectively describe the technological capability of an industry, country or a sub-national region. The dynamic of how these factors influence each other is the essence of the innovation system of a country, industry (sector) or a location. The innovation system is not so much about the presence of any given organisations, as their ability to network and cooperate in disseminating and adapting knowledge.
Now to connect this concept of technological capability back to the meso organisations. Meso organisations and their functions are critical in disseminating technological knowledge in a society, industry or a region. The process by which these organisations emerge and adjust is unique and depends on the context. I am genuinely intrigued by how these institutions emerge, adapt and change over time to form modern organisations that can respond to, anticipate and adjust to structural change and patterns of economic or innovative underperformance in the economy.
BEINHOCKER, E.D. 2006. The Origin of Wealth: Evolution, Complexity, and the Radical Remaking of Economics. Boston, MA: Harvard Business School Press.
DOSI, G. and NELSON, R.R. 2010. Technical change and industrial dynamics as evolutionary processes. In Handbook of the Economics of Innovation. Bronwyn, H.H. and Nathan, R. (Eds.), Amsterdam: North-Holland, pp. 51-127.
HAUSMANN, R. and RODRIK, D. 2003. Economic development as self-discovery. Journal of Development Economics, Vol. 72(2) pp. 603-633.
HIDALGO, C.S.A. 2015. Why Information Grows: the Evolution of Order, from Atoms to Economies. New York: Basic Books.
NELSON, R.R. 2003. Physical and Social Technologies and their Evolution. Piza, Italy: Laboratory of Economics and Management, Sant’Anna School of Advanced Studies.
NELSON, R.R. and WINTER, S.G. 1982. An Evolutionary Theory of Economic Change. Cambridge, MA: Belknap Press of Harvard University Press.
RODRIK, D. 2000. Institutions for high-quality growth: What they are and how to acquire them. Studies in Comparative International Development, Vol. 35(3) pp. 3-31.
SCHUMPETER, J. 1934. The Theory of Economic Development. Harvard, MA: Harvard University Press.