Search

The old question ‘How is wealth created from knowledge?’ captures with great force and clarity one of the most important problems in any economy, but it subsumes a far more particular and very modern instantiation, a simpler and more direct question, ‘How should universities interact with business in the promotion of economic progress?’ Like many seemingly simple questions they preclude any simple answers, yet it turns out that by focusing on the role of universities in the innovation process we can identify some of the deeper complexities of our knowledge based economies. In so doing, we may better understand the design of university-business relationships in pursuit of economic progress and provide surer guidance for policy initiatives in this area. The discussion is centred on three interrelated ideas: the division of labour in the production and use of knowledge; processes of knowledge accumulation; and, innovation systems. We conclude that, critics of the role of universities and firms in respect to their performance in supporting wealth creation should reflect first on the fact that the division of labour between profit seeking business corporations and universities reflects both the quite distinct roles that these organisations fulfil, and, the complementarity between those roles. We can all understand that it would be as unwise to expect firms to behave like universities as it would be to expect universities to behave like firms. The division of labour is there for a purpose, it should be respected.

Like Nelson (2002), I make a case for bringing institutions into evolutionary economics. But unlike Nelson, who defines institutions as social technologies consisting of rules-routines, I define them in agreement with North (1990) as humanly devised rules-constraints — such as formal law and informal social norms — but also view them, to accommodate most of Nelson's approach, as constraining the variety of rules-routines employable by agents. I show that this definition has advantages for communicating with modern institutional analysis, for clarifying how institutions can influence, and be influenced by, changes in physical and social technologies, and for producing policy implications.

The paper does not have an abstract, however it derives supply relationships for single parameter changes to the demand curve facing a monopoly.

No abstract