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Firms as the source of innovation and growth: the evolution of technological competence

  • John Cantwell


    (Economics Department, University of Reading, PO Box 218, Whiteknights, Reading RG6 6AA, UK)

  • Felicia Fai


    (School of Management, University of Bath, Claverton Down, Bath BA2 7AY, UK)

It is argued that the firm is the principal source of innovation and growth, a device for the establishment of technological competence, and for its continued development over time. Markets, products and background knowledge may change quite dramatically over time. Yet as a result of the cumulative nature of learning in the production processes of firms, the profile of corporate technological competence will tend to persist over quite long periods, provided there is institutional continuity. Within the same firm, competence may evolve into related areas, but the firm's technological origins will remain identifiable in its subsequent trajectories. However, if the institution itself changes more dramatically, this technological persistence may be disrupted. Supporting evidence is provided from data on the patenting of 30 large US and European companies, which have been continuously active since the interwar period. The science and the knowledge base, and the composition of products and markets may shift quite radically, but the firm's productive and technological system itself is potentially more stable. The firm provides a vehicle for potential institutional continuity and a device for managing transitions within the economic system.

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Article provided by Springer in its journal Journal of Evolutionary Economics.

Volume (Year): 9 (1999)
Issue (Month): 3 ()
Pages: 331-366

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Handle: RePEc:spr:joevec:v:9:y:1999:i:3:p:331-366
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