Skip to main content

The theory of the experimentally organized economy and competence blocs: an introduction

Abstract

This article presents the theory of the experimentally organized economy and competence blocs. The theory assumes that information is immense and that economic actors are boundedly rational. This makes practically all economic activities to some extent uncertain and unpredictable; they become experimental in nature. Economic growth is, hence, viewed as an evolutionary process of the discovery, use and selection of knowledge. So-called competence blocs—the minimum set of agents with different, but complementary competencies required to generate and commercialize new combinations—are identified as necessary for efficient resource allocation. The incentives given by the institutions to the actors in the competence bloc are crucial for economic performance.

This is a preview of subscription content, access via your institution.

Fig. 1

Notes

  1. 1.

    It is beyond the scope of this essay to compare or to evaluate the theory of the EOE and competence blocs with other economic theories, e.g. endogenous growth theory (e.g. Romer 1986; Lucas 1988; Aghion and Howitt 1998), neoclassical general equilibrium theory (e.g. Walras 1874; Solow 1957), national systems of innovation (e.g. Lundvall 1992; Edquist and McKelvey 2000) or technological systems (e.g. Carlsson and Stankiewicz 1991; Carlsson 1997).

  2. 2.

    Knowledge consists of the two subsets: information, the codable and communicable part of knowledge, and tacit knowledge, the non-codable part of knowledge (Eliasson 1996, p. 18). Competence is defined as the ability to use knowledge for a particular purpose (Johansson 2001, p. 16).

  3. 3.

    According to the Viking mythology, Särimner was a pig in Valhalla, the dwelling of Gods and dead warriors. The warriors slaughtered and ate Särimner. The next day he returned, once again to be slaughtered and eaten.

  4. 4.

    Note the similarities with the actors inventors, entrepreneurs and creditors in Schumpeterian theory. I have extended the original definition of the competence bloc to include inventors and skilled labor.

  5. 5.

    In Schumpeterian theory, innovators and entrepreneurs are synonymous, as they carry out the same function. That is not the case in the theory of the EOE and competence blocs.

  6. 6.

    Cf., for example, Lazerson and Lorenzoni (1999) who conclude that no industrial district in Italy has been promoted by active industrial policy. The industrial revolution in England involved no public activities (Mathias 1969), except institutional changes protecting private property rights and promoting private entrepreneurship (North and Thomas 1973).

  7. 7.

    This suggests that the total tax level may influence economic growth.

  8. 8.

    Observe that another competence is added, namely the competence to use the political system to redistribute private wealth. Hence, redistribution implies that unproductive competence controls a larger share of total resources (cf. Bhagwati 1982; Baumol 1990; Tollison 1997). This effect is not explicit in the current version of the theory of the EOE and competence blocs.

  9. 9.

    Transformation costs are the costs incurred when physically transforming inputs (land, capital, labor etc.) into outputs, while transactions costs define the costs incurred when transferring property rights from one actor to another.

  10. 10.

    Information costs have also been found to be large. Wallis and North (1986) estimate them to be at least 45% of the U.S. GDP. Eliasson (1985, p. 86) estimates them to be at least 50% of total costs in large Swedish manufacturing firms and much higher at the GDP level.

  11. 11.

    These four operational tasks are identified as the information activities of both the firm and the entire economy and are called the statistical accounts of the knowledge-based information economy (Eliasson 1990b). They are estimated to have covered more than 50% of the resource input into the average Swedish manufacturing firm in the late 1980s (Eliasson 1990a).

  12. 12.

    Eliasson (1996) calls these four activities the four growth mechanisms. In Eliasson (2001), he changed the title to the four mechanisms of Schumpeterian creative destruction and growth.

  13. 13.

    A common explanation of the positive effects on firm growth of many firms and entrepreneurs, suggested by, e.g., Davidsson et al. (1994), is that existing entrepreneurs are positive role models for “to-be” entrepreneurs. The theory of the EOE and competence blocs does not dispute this particular effect but advances a few additional explanations related to competence and knowledge.

  14. 14.

    The theory of the EOE and competence bloc shares this emphasis on the fundamental importance of heterogeneity in the knowledge base of economic actors with other traditions stressing evolution and complexity (cf., for instance, Dopfer and Potts 2004 and Pyka and Hanusch 2006).

  15. 15.

    Small firms might also function as a cost-efficient mechanism to identify, select and develop entrepreneurial and managerial talents. Mistakes can be fewer and learning costs lower in small firms because small values are at stake (Lucas 1978; Davis and Henrekson 1997).

  16. 16.

    The only thing that can protect a firm is a monopoly that reduces competition, guaranteed and enforced by government. Superior products, organization, technology, etc. creating a private monopoly are not a problem in the same way since monopoly profits sooner or later will be eroded by new entry (if allowed).

References

  1. Aghion P, Howitt P (1998) Endogenous growth theory. MIT, Cambridge

    Google Scholar 

  2. Åkerman J (1939, 1944) Ekonomisk teori: del 1 och 2 (Economic theory: part 1 and 2). Gleerup, Lund

  3. Alchian A (1950) Uncertainty, evolution and economic theory. J Polit Econ 58:211–221

    Article  Google Scholar 

  4. Baumol W (1990) Entrepreneurship: productive, unproductive, and destructive. J Polit Econ 98:893–921

    Article  Google Scholar 

  5. Bergström F (1998) Essays on the political economy of industrial policy. Doctoral thesis, Stockholm School of Economics, Stockholm

  6. Bergström F (2000) Capital subsidies and the performance of firms. Small Bus Econ 14:183–193

    Article  Google Scholar 

  7. Bhagwati J (1982) Directly-unproductive profit-seeking (DUP) activities. J Polit Econ 90:988–1002

    Article  Google Scholar 

  8. Carlsson B (1983) Industrial subsidies in Sweden: macroeconomic effects and an international comparison. J Ind Econ 32:1–23

    Article  Google Scholar 

  9. Carlsson B (ed) (1997) Technological systems: cases, analyses, comparisons. Kluwer, Dordrecht

    Google Scholar 

  10. Carlsson B, Stankiewicz R (1991) On the nature, function, and composition of technological systems. J Evol Econ 1:93–118

    Article  Google Scholar 

  11. Coase R (1937) The nature of the firm. Economica 4:386–405

    Article  Google Scholar 

  12. Dahlman C (1979) The problem of externality. J Law Econ 22:141–162

    Article  Google Scholar 

  13. Dahmén E (1950) Svensk industriell företagarverksamhet: kausalanalys av den industriella utvecklingen 1919–1939, volume I and II. IUI, Stockholm. Translated (volume I) by Leijonhufvud A (1970) Entrepreneurial activity and the development of Swedish industry 1919–1939. Irwin, Homewood

  14. Davidsson P, Lindmark L, Olofsson C (1994) Dynamiken i svenskt näringsliv (The dynamics of Swedish industry). Studentlitteratur, Lund

    Google Scholar 

  15. Davis S, Henrekson M (1997) Industrial policy, employer size and economic performance in Sweden, pp 353–397. In: Freeman R, Swedenborg B, Topel R (eds) The welfare state in transition. Chicago University Press, Chicago

    Google Scholar 

  16. Dopfer K, Potts J (2004) Principles of evolutionary economics. Routledge, London

    Google Scholar 

  17. Edquist C, McKelvey M (eds) (2000) Systems of innovation: growth competitiveness and employment. Edward Elgar, Cheltenham

    Google Scholar 

  18. Eliasson G (1984) Micro heterogeneity of firms and the stability and the stability of industrial growth. J Econ Behav Organ 5:249–274

    Article  Google Scholar 

  19. Eliasson G (1985) The firm and financial markets in the Swedish micro-to-macro model: theory, model and verification. Almkvist & Wiksell International, Stockholm

    Google Scholar 

  20. Eliasson G (1987) Technological competition and trade in the experimentally organised economy. Research report no. 32. IUI, Stockholm

  21. Eliasson G (1990a) The firm as a competent team. J Econ Behav Organ 13:275–298

    Article  Google Scholar 

  22. Eliasson G (1990b) The knowledge based information economy. In: Eliasson G, Fölster S, Lindberg T, Pousette T, Taymaz E (eds) The knowledge based information economy. IUI, Stockholm

    Google Scholar 

  23. Eliasson G (1991a) Deregulation, innovative entry and structural diversity as a source of stable and rapid economic growth. J Evol Econ 1:49–63

    Article  Google Scholar 

  24. Eliasson G (1991b) Modeling the experimentally organized economy: dynamics in an empirical micro-macro model of endogenous economic growth. J Econ Behav Organ 16:153–182

    Article  Google Scholar 

  25. Eliasson G (1995) Teknologigenerator eller nationellt prestigeprojekt? Exemplet svensk flygindustri. City University Press, Stockholm

    Google Scholar 

  26. Eliasson G (1996) Firm objectives, controls and organization. The use of information and the transfer of knowledge within the firm. Kluwer, Dordrecht

    Google Scholar 

  27. Eliasson G (1998a) From plan to markets. J Econ Behav Organ 34:49–68

    Article  Google Scholar 

  28. Eliasson G (1998b) Svensk datorindustri—en kompetensblocksanalys av dess framväxt och försvinnande. In: Heum P (ed) Kompetense og verdiskaping, SNF årbok. Fagbokforlaget, Bergen

    Google Scholar 

  29. Eliasson G (2000) Industrial policy, competence blocs and the role of science in economic development. J Evol Econ 10:217–241

    Article  Google Scholar 

  30. Eliasson G (2001) The role of knowledge in economic growth. In: Helliwell J (ed) The contribution of human and social capital to sustained economic growth and well-being. OECD, Paris, pp 42–63

    Google Scholar 

  31. Eliasson G (2003) The venture capitalist as a competent outsider. In: Alho K, Lassila J, Ylä-Anttila P (eds) Talouden tutkimus ja päätöksenteko—kirjoituksia rakennemuutoksesta, kasvusta ja talouspolitiikasta (Economic research and decision making—essays on structural change, growth and economic policy). Taloustieto Oy, Helsingfors, pp 111–142

    Google Scholar 

  32. Eliasson G, Eliasson U (1997) Företagandets konst: om konstproduktionen i renässansens Florens. City University Press, Stockholm

    Google Scholar 

  33. Eliasson G, Eliasson Å (1996) The biotechnical competence bloc. Rev. Econ. Ind. 78:7–26

    Google Scholar 

  34. Eliasson G, Vikersjö K (1999) Recruiting in a European company. Vocat Train 12:14–19

    Google Scholar 

  35. Eliasson G, Wihlborg C (2003) On the macroeconomic effects of establishing tradability in weak property rights. J Evol Econ 13:607–632

    Article  Google Scholar 

  36. Eliasson G, Johansson D, Taymaz (2005) Firm turnover and the rate of macro economic growth - simulating the macroeconomic effects of Schumpeterian creative destruction. In: Eliasson G (ed) The birth, the life and death of firms in a growing and experimentally organized economy: studies in Schumpeterian creative destruction. Ratio, Stockholm, pp 305–356

    Google Scholar 

  37. Erixon L (2005) Combining Keyenes and Schumpeter. Ingvar Svennilson’s contribution to the Swedish growth school and modern economics. J Evol Econ 15:187–210

    Article  Google Scholar 

  38. Fridh A-C (2002) Dynamic and growth: the health care industry. Doctoral thesis, Department of Industrial Economics and Management, Royal Institute of Technology, Stockholm

  39. Hayek F (1937) Economics and knowledge. Economica 4:33–54

    Article  Google Scholar 

  40. Hayek F (1945) The use of knowledge in society. Am Econ Rev 35:21–30

    Google Scholar 

  41. Hayek F (1978) Competition as a discovery procedure. In: Nishiyami C, Leube K (ed) The essence of Hayek. Hoover Institution Press, Stanford, pp 255–265

    Google Scholar 

  42. Henrekson M, Johansson D (2009) Competencies and institutions fostering high-growth firms. Foundations and Trends in Entrepreneurship 5:1–80

    Article  Google Scholar 

  43. Johansson D (2000) Den experimentellt organiserade ekonomin, kompetensblock och ekonomisk tillväxt (The experimentally organized economy, competence blocs and economic growth). Ekon Debatt 28:655–668

    Google Scholar 

  44. Johansson D (2001) The dynamics of firm and industry growth: the Swedish computing and communications industry. Doctoral thesis, Department of Industrial Economics and Management, Royal Institute of Technology, Stockholm

  45. Johansson D (2005) The turnover of firms and industry growth. Small Bus Econ 24:487–495

    Article  Google Scholar 

  46. Johansson D, Karlson N (2002) Den svenska tillväxtskolan—om den ekonomiska utvecklingens kreativa förstörelse (The Swedish growth school—on the creative destruction of economic development). Ratio, Stockholm

    Google Scholar 

  47. Jonasson A (2001) Innovative pricing. Doctorate thesis, Department of Industrial Economics and Management, Royal Institute of Technology, Stockholm.

  48. Lazerson M, Lorenzoni G (1999) The firms that feed industrial districts: a return to the Italian source. Ind Corp Change 8:235–266

    Article  Google Scholar 

  49. Lucas R (1978) On the size distribution of firms. Bell J Econ 9:508–523

    Article  Google Scholar 

  50. Lucas R (1988) On the mechanics of economic development. J Monet Econ 22:2–41

    Article  Google Scholar 

  51. Lundvall B-Å (ed) (1992) National systems of innovation: towards a theory of innovation and interactive learning. Printer Press, London

    Google Scholar 

  52. Luukkonen T, Palmberg C (2006) The different dynamics of the biotechnology and ICT sectors in Finland. In: Carayannis E, Campbell D (eds) Knowledge creation, diffusion and use in innovative networks and clusters: a comparative systems approach across the United States, Europe and Asia. Praeger and Greenwood Press, Westport, pp 158–182

    Google Scholar 

  53. Mathias P (1969) The first industrial nation: an economic history of Britain 1700–1914. Methuen, London

    Google Scholar 

  54. Moe T (1997) The positive theory of public bureaucracy. In: Mueller D (ed) Perspectives on public choice: a handbook. Cambridge University Press, Cambridge, pp 455–480

    Google Scholar 

  55. Nelson R, Winter S (1982) An evolutionary theory of economic change. Harvard University Press, Cambridge

    Google Scholar 

  56. North D (1990) Institutional change and economic performance. Cambridge University Press, Cambridge

    Google Scholar 

  57. North D, Thomas R (1973) The rise of the Western World, a new economic history. Cambridge University Press, Cambridge

    Google Scholar 

  58. North D, Wallis J (1994) Integrating institutional change and technical change in economic history: a transaction cost approach. J Inst Theor Econ 150:609–624

    Google Scholar 

  59. Paldam M (1997) Political business cycles. In: Mueller D (ed) Perspectives on public choice: a handbook. Cambridge University Press, Cambridge, pp 342–370

    Google Scholar 

  60. Pelikan P (1993) Ownership of firms and efficiency: the competence argument. Const Polit Econ 4:349–392

    Article  Google Scholar 

  61. Polanyi M (1967) The tacit dimension. Routledge, London

    Google Scholar 

  62. Pyka A, Hanusch H (2006) Applied evolutionary economics and the knowledge-based economy. Edward Elgar, Cheltenham

    Google Scholar 

  63. Romer P (1986) Increasing returns and long-run growth. J Polit Econ 94:1002–1037

    Article  Google Scholar 

  64. Salter W (1960) Productivity and technical change. Cambridge University Press, Cambridge

    Google Scholar 

  65. Sandgren S (2005) Learning and earning: studies on a cohort of Swedish men. Doctoral thesis, Department of Industrial Economics and Management, Royal Institute of Technology, Stockholm

  66. Schumpeter J (1934) The theory of economic development. Transaction, London

    Google Scholar 

  67. Simon H (1955) A behavioral model of rational choice. Q J Econ 69:99–118

    Article  Google Scholar 

  68. Simon H (1990) Invariants of human behavior. Annu Rev Psychol 41:1–19

    Article  Google Scholar 

  69. Solow R (1957) Technical change and the aggregate production function. Rev Econ Stat 39:312–320

    Article  Google Scholar 

  70. Smith A (1776) An inquiry into the nature and causes of the wealth of nations. Basil

  71. Tollison R (1997) Rent seeking. In: Mueller D (ed) Perspectives on public choice: a handbook. Cambridge University Press, Cambridge, pp 506–525

    Google Scholar 

  72. Wallis J, North D (1986) Measuring the transaction sector in the American economy. In: Engerman S, Gallman R (eds) Long-term factors in American economic growth. Chicago University Press, Chicago, pp 95–148

    Google Scholar 

  73. Walras L (1874) Éléments d’économie politique pure ou théorie de la richesse sociale (Elements of pure economics or the theory of social wealth). Lausanne

  74. Wicksell K (1898) Geldzins und güterpreise: eine studie über die den tauschwert des geldes bestimmenden ursachen (Interest and prices: a study of the causes regulating the value of money). Jena

  75. Wintrobe R (1997) Modern bureaucratic theory. In: Mueller D (ed) Perspectives on public choice: a handbook. Cambridge University Press, Cambridge, pp 429–454

    Google Scholar 

Download references

Acknowledgement

I am grateful for comments from Niclas Berggren, Gunnar Eliasson and participants at seminars at The Ratio Institute and The Royal Institute of Technology. Financial support from Sparbanksstiftelsen Alfa is gratefully acknowledged.

Author information

Affiliations

Authors

Corresponding author

Correspondence to Dan Johansson.

Rights and permissions

Reprints and Permissions

About this article

Cite this article

Johansson, D. The theory of the experimentally organized economy and competence blocs: an introduction. J Evol Econ 20, 185–201 (2010). https://doi.org/10.1007/s00191-009-0149-5

Download citation

Keywords

  • Experimentally organized economy
  • Competence blocs
  • Evolutionary theory
  • Competent team
  • The Swedish growth school

JEL Classification

  • B52