Localised Learning and Industrial Competitiveness

Unites the role that knowledge-creation plays in firm competitiveness with the importance of localized capabilities. The authors begin with the thesis that firms increasingly compete on innovation and generation of entrepreneurial rents than on cost-reduction. Essential to the ability to innovate are skills in knowledge-creation and dissemination within a firm. The path-dependent nature of knowledge creation, that is, the fact that earlier obtained knowledge influences current knowledge-creation, is explored as is the role of the entrepreneur is converting unused or unusable knowledge into a usable form. Noting that tacit knowledge, defined as knowledge that has not been put into a transmissible, symbolic form, suffers from imperfect markets and obstacles to trade, the authors contend that embedded tacit knowledge will serve as the innovative firm's competitive edge. One important facilitator of knowledge-creation is a region's institutional endowment, or the transmission in time of an accumulated stock of knowledge. Firms in industries particularly favored by a region's institutional endowment will find competitive advantages by locating there; this in turn will prompt agglomerations of related firms. However, the authors note that empirical data on this point is in conflict and call for further research. Imitation of localized capabilities is problematic due to asset mass efficiencies, time compression diseconomies, and the inter-connectedness of regional asset stocks. The ability of regions to transmit localized capabilities over time and impede their transmission over space sustains continuous regional competitiveness. Finally the cause of regional decline is considered. Asset erosion, and particularly, obsolescence, when combined with reluctance to adapt to new technologies or market lead to regional lock-in. This demonstrates that "unlearning" plays a key role in facilitating knowledge-creation and preserving firm and regional competitiveness. (CAR)