Economic geography and the evolution of networks

An evolutionary perspective on economic geography requires adynamic understanding of change in networks. This article explorestheories of network evolution for their use in geography anddevelops the conceptual framework of geographical network trajectories.It specifically assesses how tie selection constitutes the evolutionaryprocess of retention and variation in network structure andhow geography affects these mechanisms. Finally, a typologyof regional network formations is used to discuss opportunitiesfor innovation in and across regions.     

Exploring evolutionary economic geographies

Evolutionary approaches in economics have gathered increasingsupport over the last 25 years. Despite an impressive body ofliterature, economists are still far from formulating a coherentresearch paradigm. The multitude of approaches in evolutionaryeconomics poses problems for the development of an evolutionaryeconomic geography. For the most part, evolutionary economicgeography imports selective concepts from evolutionary biologyand economics and applies those concepts to specific problemswithin economic geography. We discuss a number of problems withthis approach and suggest that a more powerful and appealingalternative requires the development of theoretically consistentmodels of evolutionary processes. This article outlines thecontours of an evolutionary model of economic dynamics whereeconomic agents are located in different geographical spaces.We seek to show how competition between those agents, basedon the core evolutionary principles of variety, selection andretention, may produce distinct economic regions sharing propertiesthat differentiate them from competitors elsewhere. These argumentsare extended to illustrate how the emergent properties of economicagents and places co-evolve and lead to different trajectoriesof economic development over space.     

Myopia, knowledge development and cluster evolution

This article aims to show how processes of knowledge developmentand their institutional underpinnings make up the core of evolutionaryeconomic geography. We argue that micro level concepts—notablyinnovation, selection and retention—provide insights thatcan be helpful also when investigating evolutionary processesof knowledge creation at the aggregate levels of cities, regionsor nations. We investigate the linkage between drivers, mechanismsand barriers to knowledge creation and acquisition at the micro-level,and the development over time and across spatial settings ofhigher-order phenomena of localized institutions and other capabilities.We apply this distinction on the analysis of the rise, growth,decline and possible rejuvenation of spatial clusters of similarand complementary economic activity.     

Spatial diversity in invention: evidence from the early R&D labs

This article uses historical data on inventor and firm researchand development (R&D) lab locations to examine the technologicaland geographic structure of corporate knowledge capital accumulationduring a formative period in the organization of United Statesinnovation. Despite the localization of inventive activity aroundthe labs, one-quarter of inventors lived outside a 30 mile commutingradius of the nearest facility of the firm they assigned theirpatents to. A strong positive effect of distance from a labon technological importance is identified, especially for inventorsfrom large cities that were geographically separated from afirm's; labs. A patent case–control method helps explainspatial sourcing by showing that the average quality of externallyavailable inventions was high. Firms selected complementary,not substitute, inventions from non-lab urban locations, suggestinga link between the organization and the geography of innovation.     

Re-engaging with rationality in economic geography: behavioural approaches and the importance of context in decision-making

Behavioural approaches have become mainstream in economics,supported by the research of cognitive scientists and psychologists,yet their findings have attracted little attention from geographers.This article argues for a renewed behavioural economic geographythat builds on research in behavioural economics but also addressesone of its main shortcomings: a lack of engagement with thesocial context of decision-making. I outline a research agendathat bridges the gap between the disciplines in the area ofpension decision-making, using the example of choice in UK occupationalplans to argue for a mixed methodological approach to meet thechallenge of taking context seriously.     

The territorial dynamics of innovation: a Europe United States comparative analysis

The United States and European Union differ significantly interms of their innovative capacity: the former have been ableto gain and maintain world leadership in innovation and technologywhile the latter continues to lag. Notwithstanding the magnitudeof this innovation gap and the political emphasis placed uponit on both sides of the Atlantic, very little systematic comparativeanalysis has been carried out on its causes. The empirical literaturehas emphasized the structural differences between the two continentsin the quantity and quality of the major ‘inputs’to innovation: R&D investments and human capital. The verydifferent spatial organization of innovative activities in theEU and the US—as suggested by a variety of contributionsin the field of economic geography—could also influenceinnovative output. This article analyses and compares a wideset of territorial processes that influence innovation in Europeand the United States. The higher mobility of capital, populationand knowledge in the US not only promotes the agglomerationof research activity in specific areas of the country but alsoenables a variety of territorial mechanisms to fully exploitlocal innovative activities and (informational) synergies. Inthe European Union, in contrast, imperfect market integrationand institutional and cultural barriers across the continentprevent innovative agents from maximizing the benefits fromexternal economies and localized interactions, but compensatoryforms of geographical process may be emerging in concert withfurther European integration.     

Complexity thinking and evolutionary economic geography

Thus far, most of the work towards the construction of an evolutionaryeconomic geography has drawn upon a particular version of evolutionaryeconomics, namely the Nelson-Winter framework, which blendsDarwinian concepts and metaphors (especially variety, selection,novelty and inheritance) and elements of a behavioural theoryof the firm. Much less attention has been directed to an alternativeconception based on complexity theory, yet in recent years complexitytheory has increasingly been concerned with the general attributesof evolutionary natural and social systems. In this articlewe explore the idea of the economic landscape as a complex adaptivesystem. We identify several key notions of what is being calledthe new ‘complexity economics’, and examine whetherand in what ways these can be used to help inform an evolutionaryperspective for understanding the uneven development and adaptivetransformation of the economic landscape.     

Coevolution and coordination: a systemic analysis of the Taiwanese information technology industry

The ‘evolutionary turn’ in economic geography hasled to increasing emphasis on coevolution among technologies,organizations and territories. The weakness of this approach,however, is a focus on broad coevolutionary pictures that payslittle attention to coordination processes that guide interdependentactions on the ground. Using the Taiwanese information technologyindustry as an example, this article suggests an industrialsystem analysis that gives a structural coherence to a seriesof intentional, collective actions. Such a systemic measurehas the potential to extend the evolutionary analysis beyondbroad coevolutions to the strategic transformations of industrialorganizations.     

Host economy impacts of transnational retail: the research agenda

The last decade has witnessed an acceleration of retail foreigndirect investment into a range of emerging markets across EastAsia, Central and Eastern Europe and Latin America, led by asmall cohort of food and general merchandise retailers fromWestern Europe, and to a lesser extent, North America. Whilethese investment flows have had profound developmental impactsin host economies, research in this area is still in its infancy.This article therefore maps out a detailed research agenda withrespect to the host economy impacts of transnational retailing.After setting the scene empirically and conceptually, the articleconsiders different dimensions of these impacts on retail competitiveness,supply chain dynamics, consumption practices and consumer/civilsociety, institutional and regulatory frameworks and, reciprocally,on the retail transnational corporations themselves. It concludesby calling for a concerted interdisciplinary research effortinto this important and understudied aspect of economic globalization.     

A theoretical framework for evolutionary economic geography: industrial dynamics and urban growth as a branching process

We propose a framework that specifies the process of economicdevelopment as an evolutionary branching process of productinnovations. Each product innovation provides a growth opportunityfor an existing firm or a new firm, and for an existing cityor a new city. One can then obtain both firm size and city sizedistributions as two aggregates resulting from a single evolutionaryprocess. Gains from variety at the firm level (economies ofscope) and the urban level (Jacobs externalities) provide thecentral feedback mechanism in economic development generatingstrong path dependencies in the spatial concentration of industriesand the specialization of cities. Gains from size are also expected,yet these are ultimately bounded by increasing wages. The contributionof our framework lies in providing a micro-foundation of economicgeography in terms of the interplay between industrial dynamicsand urban growth. The framework is sufficiently general to investigatesystematically a number of stylized facts in economic geography,while at the same time it is sufficiently flexible to be extendedsuch as to become applicable in more specific micro-contexts.A number of extensions related to the concepts of knowledgespillover and lock-in, are also discussed.     

Global sourcing: insights from the global clothing industry the case of Zara, a fast fashion retailer

Until recently, Zara, a major international clothing retailerand pioneer of ‘fast fashion’ principles, kept almosthalf of its production in Spain and Portugal, earning the reputationof being one of the exceptions to globalization. Since the 1980s,the existence of such exceptions has been fueling an expectationthat the production of high-quality fashion garments and tailoredsuits would remain in the industrialized core. Here I revisitthis expectation in the light of the current seminal changein the culture of fashion from ready-to-wear to fast fashion,and report that the increased variety and fashionability associatedwith fast fashion, represented by Zara, have tilted the balanceof competitive advantage towards, rather than away from, firmsin partially industrialized countries. As a number of supplierfirms in countries such as Morocco, India and Turkey have gainedthe competence to manufacture intricately worked high-qualitygarments with the required flexibility and speed, Zara has turnedto sourcing from these countries. It appears that instead ofZara changing the geography of jobs, the geography of competenciesand jobs has changed Zara.     

On the origins of border effects: insights from the Habsburg Empire

What are the origins of border effects on trade and why do borderscontinue to matter in periods of increasing economic integration?We explore the hypothesis that border effects emerged as a resultof asymmetric economic integration in the unique historicalsetting of the multi-national Habsburg Empire prior to the FirstWorld War. While markets tended to integrate mainly due to improvedinfrastructure, ethno-linguistic networks had persistent tradediverting effects. We find that the political borders whichseparated the empire's successor states after the First WorldWar became visible in the economy from the mid-1880s onwards,already 25–30 years before the First World War. This effectof a ‘border before a border’ cannot be explainedby factors such as administrative barriers, physical geography,changes in infrastructure or patterns of integration with neighbouringregions outside of the Habsburg customs and monetary union.However, controlling for the changing ethno-linguistic compositionof the population across the regional capital cities of theempire does explain most of the estimated border effects.     

Urban growth drivers in a Europe of sticky people and implicit boundaries

We investigate urban GDP per capita growth across the EU12 usingdata for functionally defined cities—rather than administrativeregions. We test hypotheses on the role of human capital, EUintegration and fragmentation of urban government and explorespatial dependence and mechanisms of spatial interaction. Resultsare acceptable on standard econometric tests without measuresof spatial interaction but there is spatial dependence. If variablesreflecting spatial adjustment are included, they are statisticallysignificant and eliminate spatial dependence. Not only do theresults now provide consistent estimates of parameters, butthey also support relevant theoretical insights and show nationalborders are still significant barriers to economic adjustment.People in Europe are sticky so it is unreasonable to assumespatial disparities will disappear. Our findings also implythat cities in Europe form national rather than a single continentalsystem.     

An analytically solvable core-periphery model

We develop an analytically solvable version of the central modelof ‘new economic geography’, the so called core-peripherymodel by Krugman. While the modified model reproduces all theappealing features of the original one, it also allows us toobtain additional analytical results that are out of reach inKrugman's set-up. First, we are able to assess the exact numberof equilibria and their global stability properties. Second,we are able to investigate the implications of exogenous asymmetriesbetween countries. This is achieved by introducing heterogeneitybetween high-skill mobile and low-skill immobile workers, whichmay also be an empirically attractive property.     

Accessing global value chains? The role of business state relations in the private clothing industry in Vietnam

This article deals with the access to global markets via inclusionin global value chains for private clothing producers in Vietnam.It argues that ‘chain entry barriers’ are not onlyconstructed by global buyers as it is often suggested, but alsoby political–economic processes in Vietnam. The marketorientations of four segments of private enterprise owners isexamined and shown to correspond to their ethnicity, originand location in northern or southern Vietnam. It is argued thatthis is mostly because these factors influence access to thestate system, where export-related resources are found.     

Global production networks and the extractive sector: governing resource-based development

This article explores the opportunities a GPN approach providesfor understanding the network configurations and regional developmentimpacts associated with extractive industries. The article elaboratestwo core claims: (i) that the application of the GPN analyticalframework provides a way to make progress in a stalled policydebate regarding the linkages between resource extraction andsocio-economic development (popularly known as the ‘resourcecurse thesis’); and (ii) that the encounter between GPNand a natural resource-based sector introduces distinctive issues—associatedwith the materiality and territoriality of extractive commodities—that,to date, GPN has not considered fully. The article examinesthe global production network for oil as an empirical case ofhow extractive industries can provide (limited) opportunitiesfor socio-economic development.     

Value chains, networks and clusters: reframing the global automotive industry

In this article, we apply global value chain (GVC) analysisto recent trends in the global automotive industry, with specialattention paid to the case of North America. We use the threemain elements of the GVC framework—firm-level chain governance,power and institutions—to highlight some of the definingcharacteristics of this important industry. First, nationalpolitical institutions create pressure for local content, whichdrives production close to end markets, where it tends to beorganized nationally or regionally. Second, in terms of GVCgovernance, rising product complexity combined with low codifiabilityand a paucity of industry-level standards has driven buyer–supplierlinkages toward the relational form, a governance mode thatis more compatible with Japanese than American supplier relations.The outsourcing boom of the 1990s exacerbated this situation.As work shifted to the supply base, lead firms and supplierswere forced to develop relational linkages to support the exchangeof complex uncodified information and tacit knowledge. Finally,the small number of hugely powerful lead firms that drive theautomotive industry helps to explain why it has been so difficultto develop and set the industry-level standards that could underpina more loosely articulated spatial architecture. This case studyunderlines the need for an open, scalable approach to the studyof global industries.     

Oligopoly and the structural paradox of retail TNCs: an assessment of Carrefour and Wal-Mart in Japan

This research focuses on the case of international chains facingsignificant competition from domestic chains in advanced industrializedeconomies. In this article, I question the assumptions behindthe perceived, simultaneous process of globalization and retailconcentration by taking the cases of the world's two largestretailers, Wal-Mart and Carrefour, entering the Japanese marketin the early 2000s. Both retail TNCs have so far failed to meetinitial high expectations for their performance. I argue thatthere is a structural paradox inherent among retail TNCs, whichis expressed as contradictory forces between standardizationand localization. Empirical evidence is provided on how theseforces complicate retail TNCs’ front-end (store-front)and back-end (distribution) operations in the case of Japan.Emphasis is placed on the role of oligopoly in the retail sectorand how its absence affects retail TNCs’ operation inforeign markets.     

Agents of casualization? The temporary staffing industry and labour market restructuring in Australia

This article presents a study of the Australian temporary staffingindustry. It explores how temporary staffing markets are manufacturedthrough the interactions between industrial relations and regulatorysystems, on the one hand, and the structures and strategiesof domestic and transnational temporary staffing agencies onthe other. The article draws on secondary datasets and semi-structuredinterviews with government departments, labour unions, staffingagencies and their trade bodies to analyse the size, structureand characteristics of the Australian temporary staffing market.It argues that the Australian market differs in important waysfrom those other ‘neoliberal’ labour market regimes—suchas those in Canada, UK and USA—with which it is oftencompared. The article argues for an approach that seeks to explorethe (often gradual) mutual transformation of temporary staffingorganizations and the institutional and regulatory systems inwhich they are embedded, rather than privileging one at theexpense of the other.     

Rethinking the regional knowledge production function

The knowledge production function is a questionable device foridentifying the determinants of commercial patenting. Adaptedfrom firm level analysis, it implicitly assumes that some mechanismexists to transfer research and development inputs across institutionsto maximize invention output. Augmenting the approach with regionalstructure variables risks confounding causes and effects, becausethese conditions determine research and development in the firstplace. We contrast a knowledge production function and a regionalstructure model to identify the determinants of commercial patentingin US states in the period 2002–2004. Results show thathuman capital, specialized knowledge flows, urbanization andindustry dominance in technical advance drive commercial patenting.