History Matters: Path dependence and innovation in British city ...

Figure 5: Path dependence, local innovation systems and absorptive capacity
Economic
development
Path dependence
Path creation
Absorptive
capacity
Knowledge:
Identification
Assimilation
Exploitation
Local innovation
system
Knowledge:
Creation
Adoption
Commercialisation
pathways. Patel and Pavitt (1997) argue that
the main innovation actors – firms – develop
most of their new technologies in-house by
modifying processes alongside contributions
from other firms and the science base. Most
of the time firms build and improve upon their
existing technological base. Patel and Pavitt
call this technological accumulation.
Branching out of existing industries into new
but technologically related activities can
also create new pathways. Some firms, for
example 3M, are well known for pursuing such
a strategy. Over the years it has developed its
basic adhesive technology from producing sand
paper and Post-It notes to plasma screens.
The British motor sport industry has also
developed close to areas with generic skills in
the mass production car industries, particularly
Birmingham, Coventry and Oxford (Pinch and
Henry, 1999).
New pathways can also be created by
upgrading existing industries. In this scenario,
existing industries are revitalised and enhanced
by the infusion of new technologies or the
introduction of new products and services.
This evolution is not easy. Some of the few
remaining furniture manufacturers in High
Wycombe have achieved such change by
adding the organisation of the furnishing of
entire office blocks to their manufacturing
activities. Generally, however, firms can do only
a few things well at any one time; their learning
capabilities are equally constrained (Nelson
1995, p. 79).
1.3 The application of long-term
historic analysis to understanding the
development of city-regional economies
The analysis of the long-term development of
city-region economies requires an analysis of
three interrelated phenomena. These are the
structural evolution of the economy, including
the decline or maintenance of old sectors
and the creation of new ones; the capacity to
identify, assimilate and exploit new knowledge;
and the indigenous creation, adoption and
commercialisation of new knowledge. Each of
these phenomena has its own conceptual and
measurement problems. The overall structure of
the analysis is illustrated in Figure 5.
Economic development
Unless development takes place in previously
underdeveloped localities, such as North West
England before the Industrial Revolution or
Santa Clara County before the ICT revolution,
then their economic pathways are highly
dependent on their previous economic
histories. The structural characteristics of
previous eras determine many of the possible
directions of future development, making many
local economic changes path dependent.
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