Evolutionary and Institutional Economics
Lecture 3 Applying Evolutionary and Institutional Theories
Postgraduate Lecture Series
Xiamen University
The School of Economics
April 2007
Dr Zhen Ye
The University of Hertfordshire
Business School
Why is it difficult to hire a taxi between
5:00-5:30 in Xiamen?
• What do you think of this phenonmenon?
• What are the roles of individual habit and organisational
routines underlying this problem?
• What could have induced a change in individual habit and
organisational routines?
• Is there any other ways that this problem could be resolved?
• What does this problem tell us about similar problems
confronting reformers who are eager to change or re-design
the existing institutions?
Structure of presentation
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ABB
The Indian software industry
Global outsourcing of services
Evolving business model: outsourcing to insourcing
Technology and organisation
Industrial upgrading and evolution
The case of creative industry
ABB in China and Poland
• Importance of routines – how does it matter?
• Same firm, different countries, what are the outcomes and
implications for economic development?
• Contesting different assumptions about the role of Foreign
Direct Investment (FDI) on economic development
• ‘Firm bending’ institutions and embeddedness
• Key dimensions of embeddedness
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Cultural
Political
Cognitive
Structural
Indian software industry
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Dynamic capabilities enhancement
Human capital investment
External economies of Bengalore
Export promoption
Import substitution
Telecom revolution
– A story from Ferrarra in the Emile Rogmania region of Italy
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Rapidly evolving business models
– From outsourcing to insourcing
Evolution: global outsourcing of services
Source: WTO, WTR 2005
Evolution: global outsourcing of services
Source: WTO, WTR 2005
Business model: outsourcing → insourcing
• The process starts with an accountant in the US
scanning your tax returns into a computer server,
which is physically located in California…The
accountants in India call up all the raw information
directly from the server in America, and they complete
tax return. In 2005, the number (of tax return done in
India) was 100,000 (Friedman, 2005:p. 142-3).
Business model: outsourcing → insourcing
• If (your Toshiba laptop breaks) you call Toshiba to
have it repaired, Toshiba will tell you to drop it off at
a UPS store and have it shipped it to Toshiba, and it
will get repaired and shipped back to you. But here’s
what they don’t tell you: UPS doesn’t just pick up
and deliver your Toshiba laptop. UPS actually
repairs the computer in its own UPS-run workshop.
It’s now possible to send your Toshiba laptop in one
day, get it repaired the next, and have it back the
third day…(Toshiba’s) customer complaints went
down dramatically. (ibid.)
Business model: outsourcing → insourcing
• “Ford’s problem was that they lose track of what was
in inventory. UPS engineers redesigned Ford’s entire
North American delivery network, streamlining
everything.” As a result, UPS cut the time it takes
autos to arrive at dealer lots by 40 %. That saved
Ford millions in working capital each year and makes
it easy for its 6,500 dealers to track down the models
most in demand.” (ibid.).
Technology and Organisation
• Adam Smith (1776): ten men could
make 48,000 pins a day, or almost
5,000 per person per day.
• Karl Marx (1867): one woman or
girl could supervise four machines,
each making 145,000 pins per day,
for almost 600,000 per person per
day.
• Pratten (1980): one person could
supervise 24 machines, each
making 500 pins a minute, or
about 6 million pins per person per
day. (Source: Langlois)
Division of
Labour
Specialisation
Co-ordination
Market
Organisation
Evolution of ideas
Visible hand
Vanishing hand
1990
1880
Invisible hand
Source: Langlois, 2003
Thickness of markets
Dynamic industrial upgrading
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Information and tacit knowledge
The role of the state
Cumulative causation
Kaldorian process
Catch up and industrial upgrading
Endogenous growth
Creative thinking - redefining the industry
The case of creative industry
Upgrading: developing and transition countries
Upgrading: developing manufacturing export
What kind of export?
Creative industry
• The creative sector (ONS, 2006) is a term used by the Office
of National Statistics (ONS) in the UK to describe a collection
of cultural clusters and its representation as economic linkages
within the 123 x 123 industry input output table. Also known as
‘creative industries’ as defined by the UK Department of
Culture, Media and Sports (DCMS, 2006).
• The creative sector is one of the fastest growing export sectors
within the UK economy (UKTI, 2005). In 2004, the creative
sector shared on average 10.3 per cent of total export (ONS,
2006). Between 1993 and 2004, it has grown on average close
to 8 per cent per annum.
• Re-defining industry and national competitiveness
Source:
Office of
National
Statistics
(ONS)
2006
Conclusion
• Evolutionary and institutional theories as “a general
theory” on “how to develop specific and varied
analyses of specific phenomena” (Hodgson, 1998)
• 不合理的经济‘制序’之所以存在有其合理的客观和主观
原因。不能简单的用‘交易成本’的大小和是否合乎理性
原则来衡量某种制序的优劣。
• 演化和制序经济学的分析方法主张通过对特定‘制序’形
成的主观和客观原因进行多层次的具体分析。这其中包
括对历史演进过程在宏观层面的结构分析及在微观层面
上对习惯因素和规范形成的研究及其差异分析。