The economy: A system as a whole

Complementing the aforementioned, we have the second property formulated by Foster (2005), which is that such complex an economic system

is a whole in itself, as well as being a component part of some systems and oppositional to others—it is the connections that are forged between systems that permit the emergence of organised complexity at higher levels of aggregation.

(p. 875)

Indeed, as already suggested, firms are embedded in networks, industries and sectors, which make technological and organizational innovations dense and highly interdependent and complementary phenomena.

For instance, “case studies of the role of research in innovation reveal an extremely complex process in which research is an important element of the process but not the only important element. Everything is connected to everything else” (National Research Council 2011, p. 12). Innovation is referred to as an “ecosystem,” in which “all things flow in different ways at different times depending on who is looking when and where in the process” (ibid.). They continue by saying that “in a complex system such as the innovation ecosystem, there is no reason to believe that optimizing the performance of any one part of the system will optimize or even necessarily improve the performance of the system as a whole” (ibid.), implying that research cannot be treated as an independent variable.

But the notion of system interconnection goes beyond the technology- industry level and penetrates the realm of politics. As West et al. (in Chesbrough et al. 2006) point out in their analysis of the Open innovation paradigm, innovation is practiced within a context of certain “political and economic institutions.” Chang (2002) convincingly makes the case of a program for an Institutional Political Economy (IPE) that conceives market and other institutions as a result of conscious political deliberation. This program draws attention to the institutional complexity' of markets by arguing that the form that they take is conditional of the set of rights and obligations (explicitly or implicitly) accepted by the members of a given society.This is, sociocultural and contextual processes and interactions do play a central role in the form markets and economic systems take.

For the just mentioned reasons, Chang (2002) argues that this very institutional complexity makes it impossible to define a definitive boundary between markets and the state. In fact, there is a large institutional variety besides markets and state intervention through which economic activities can be organized. In some countries or industries what looks like market failure for some, can look like organizational success for others (Lazonick 2002).

The historical dimension of economic evolution

The third property of complex economic systems has to do with the need to place them in an explicit historical time dimension (Foster 2005).Theoretical questions concerning the emergence of institutions, innovation diffusion, selection and system maintenance do not happen in a-historical contexts. We already discussed the importance of historic specificity from a methodological perspective in Chapter 1. Rather, in this section we will examine the implications of assuming historic specificity as a property' of complex economic systems. But before going into this, we will add few complementary comments on the methodological side as a point of departure for the subsequent analysis.

Several authors have argued against the a-historical nature of modern mainstream economic theories. For instance, Flodgson (2001) illustrates in a magisterial fashion how the problem of “historical specificity” was ignored by the mainstream economics that emerged after World War II. He argues that “all socio-economic systems are necessarily combinations of dissimilar elements. These combinations will in turn depend on historical and local circumstances” (ibid., p. 44). To acknowledge the importance of historic specific phenomena leads to the need of creating theoretical devices that match the given context.

The contributions to solve this problem date from the fifteenth century with the works of, for example, Antonio Serra and Giovanni Botero. Another significant contribution to the theoretical exploration of the historical specificity came in the nineteenth century from Marx on the one side; and from the German historical school (List, Sombart, Weber) on the other. According to Hodgson (2001), Marx and the German historical schools emphasized that the premises of the study of economic systems “must be based on a real object, rather than being arbitrary assumptions” (ibid., p. 60). These explorations exerted a big influence in the further development of the American institutional school (Veblen, Common, Ayers).

To avoid any misunderstanding, it should be observed that to call attention to historical specificity does not mean to reject the importance of general statements when studying the functioning of economic systems. The present study is not advocating any post-modernistic17 or extreme relativistic view on the social sciences at all. On the contrary, our point of departure is that explanatory unifications and general frameworks that explain real causal mechanisms are unavoidably central purposes of science. As Hodgson (2001) also points out, “science cannot proceed without some general or universal statements and principles” (p. 54). He also makes clear that to be able to deal “with complex (socio-economic) systems, we require a combination of general concepts, statements and theories, with particular concepts, statements and theories, relating to particular types of system or subsystem” (p. 55).

In fact, the paramount objective of the present study is to prove that the mechanisms behind the functioning of a specific institutional framework (Cuban biotechnology industry) fit very well the set of mechanisms described by more general (and historically informed) theoretical frameworks (e.g. national and sectoral system of innovation perspectives, theory of the innovative firm). Even if these specific mechanisms differ from the ones employed by other countries, a much closer evaluation might be telling us that what actually matters in the understanding of economic systems is the developmental function played by the institution and not only the historic specific form of that developmental institution.

For example, a general framework could be that there exists strong historical evidence about the systematic use of industrial policies to advance economic development, but to understand the development of a given economic system; we cannot merely say that. Actually we would need to know the historic specific institutions and type of organizations that shape that system, if we are to be able to make sound explanations and reasonable policy recommendations. To make use of some cross-country evidence in historical perspective is aimed precisely at looking for more encompassing general mechanisms, which might be expressed in very different and specific institutional frameworks. In this sense Chang (2003) talks about “persistent historical patterns” (p. 6) and Reinert (in Cimoli et al. 2009) refers to “mandatory passage point[s] in human history”

(p. 100).

 
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