This paper presents a fully specified model of long-run growth in which knowledge is assumed to be an input in production that has increasing marginal productivity. It is essentially a competitive equilibrium model with endogenous technological change. In contrast to models based on diminishing returns, growth rates can be increasing over time, the effects of small disturbances can be amplified by the actions of private agents, and large countries may always grow faster than small countries. Long-run evidence is offered in support of the empirical relevance of these possibilities.

/pdf/increasing-returns-and-long-run-growth-1wijc940aq.pdf

Increasing Returns and Long-Run Growth

Given assumptions about the characteristics of knowledge and the knowledge requirements of production, the firm is conceptualized as an institution for integrating knowledge. The primary contribution of the paper is in exploring the coordination mechanisms through which firms integrate the specialist knowledge of their members. In contrast to earlier literature, knowledge is viewed as residing within the individual, and the primary role of the organization is knowledge application rather than knowledge creation. The resulting theory has implications for the basis of organizational capability, the principles of organization design (in particular, the analysis of hierarchy and the distribution of decision-making authority), and the determinants of the horizontal and vertical boundaries of the firm. More generally, the knowledge-based approach sheds new light upon current organizational innovations and trends and has far-reaching implications for management practice.

https://memberfiles.freewebs.com/84/90/65819084/documents/TOWARD%20A%20KNOWLEDGE-BASED%20THEORY%20OF%20THE.pdf

Toward a Knowledge-Based Theory of the Firm

To date, the phenomenon of entrepreneurship has lacked a conceptual framework. In this note we draw upon previous research conducted in the different social science disciplines and applied fields of business to create a conceptual framework for the field. With this framework we explain a set of empirical phenomena and predict a set of outcomes not explained or predicted by conceptual frameworks already in existence in other fields.

The Promise of Entrepreneurship as a Field of Research

This paper draws on the social and behavioral sciences in an endeavor to specify the nature and microfoundations of the capabilities necessary to sustain superior enterprise performance in an open economy with rapid innovation and globally dispersed sources of invention, innovation, and manufacturing capability. Dynamic capabilities enable business enterprises to create, deploy, and protect the intangible assets that support superior long- run business performance. The microfoundations of dynamic capabilities—the distinct skills, processes, procedures, organizational structures, decision rules, and disciplines—which undergird enterprise-level sensing, seizing, and reconfiguring capacities are difficult to develop and deploy. Enterprises with strong dynamic capabilities are intensely entrepreneurial. They not only adapt to business ecosystems, but also shape them through innovation and through collaboration with other enterprises, entities, and institutions. The framework advanced can help scholars understand the foundations of long-run enterprise success while helping managers delineate relevant strategic considerations and the priorities they must adopt to enhance enterprise performance and escape the zero profit tendency associated with operating in markets open to global competition. Copyright  2007 John Wiley & Sons, Ltd.

/pdf/explicating-dynamic-capabilities-the-nature-and-48rcozomaz.pdf

Explicating dynamic capabilities: the nature and microfoundations of (sustainable) enterprise performance

Production, Information Costs, and Economic Organization

Ricardian Economics: A Historical Study

T HE treatment of demand is the branch of economic theory in which methodological problems are most important and most difficult. This is because it is here that behavior facts are most inseparably bound up with motivation and that objective data call most imperatively for interpretation by subjective facts and meanings.' The objective in this paper is largely negative -to criticize certain recent innovations in the treatment of demand which have been generally hailed as representing an advance but which, in the writer's opinion, constitute a movement in a backward direction. The particular reference is to the treatment of demand and utility by J. R. Hicks, pioneered by E. Slutzky,

Realism and Relevance in the Theory of Demand

ed is indefinitely long, there is the further fact that the accumulation of capital immediately involves effects which change the conditions of accumulation. It is needful to mention specifically only one of these: accumulation and investment must increase the real income of society (if not of the savers, then of others), which will make saving easier, and there is no reason, a priori, why this change alone might not counteract the effect of the reduced incentive to save in the form of a progressively lower rate. Other changes are of course involved which would work in the same direction, and in fact it is an almost purely arbitrary assumption that a reduction in the rate of interest will result in a -lower rate of accumulation, even if everything else were absolutely unchanged. Historically, new " demand for capital " has opened up rapidly enough to prevent any general fall in the interest rate. The primary fact, oversight of which vitiates most discussion of the theory of interest, is that the only situation of which we have any knowledge in capitalistic society is one in which total investment is growing at a fairly rapid rate; the only time when this is not clearly true is when conditions are dominated by war or the economic disorganisation called " crisis," so that the ordinary price relations and controls are inoperative. The heart of a correct theory of interest is the fact, corresponding more or less to infinite " elasticity of demand for capital," that the investment market is capable of absorbing savings at the maximum rate at which they are forthcoming, with only a very gradual decline of the rate of return through time, other things equal, and the further fact that changes which do occur in the " other things " (partly in consequence of the growth of capital, but effects in a " historical," not an economic sense) actually prevent any general decline. With opportunity to invest to an indefinite extent and at a practically unvarying rate constantly open, no one will pay more or take less for any sort of loan than the rate obtainable by investment at the margin of capital growth.' The false impression that this quasi-elasticity is fairly limited may be accounted for by failure to consider a theoretical limitation on the notion of an instantaneous market rate already alluded to. It is true that the market cannot instantly adjust itself to rapid, unanticipated changes in the rate of flow of savings into the market without changes in the rate. This is purely a matter of planning and uncertainty and the effect of imperfect foresight. It requires time to plan for investment, and at any moment investment (actual construction of income-bearing goods) is being carried on at a fairly definite rate. If savings suddenly begin to come into the market much more rapidly than the rate planned for (whether correctly or not) by entrepreneurs and promoters in the aggregate, a temporary " glut " and fall in the rate will follow naturally. And, conversely, if the flow of savil-gs is too slow to carry out the plans actually in course of execution, a sort of distress demand will send the 1 This would be true with little qualification even in a retrograde society, but that is not in point here. This content downloaded from 157.55.39.92 on Wed, 22 Jun 2016 06:52:44 UTC All use subject to http://about.jstor.org/terms 286 ECONOMICA [AUGUST rate upward. Such facts as these undoubtedly enter into Professor von Hayek's confusion regarding the relation between the length of the production process and the analysis of the business cycle. But under no conditions is there a valid basis for arguing that either more investment, of itself, or more rapid investment, need be associated, either with investment in more durable instruments, or with a lengtlhening of the construction period. The University of Chicago. This content downloaded from 157.55.39.92 on Wed, 22 Jun 2016 06:52:44 UTC All use subject to http://about.jstor.org/terms

http://www.jstor.org/stable/pdfplus/2548804.pdf

Capital, Time, and the Interest Rate

The basic difficulty in economic theory is the philosophical problem of the meaning of explanation in connection with human behavior. I. Motive or desire in human conduct is the analogue of force in mechanics, 375. II. Is force real or merely symbolic, leaving movement (behavior in the case of human beings) the only fact open to description or study? 379. — This question is merely formal in physics, for we know forces by their effects alone, and hence unambiguously if at all; but in the realm of conduct, we know motives in ourselves directly and in others by communication, in addition to inferring them from observed behavior, and the two sources of information disagree considerably. III–IV. The intellectually embarrassing but unescapable fact of purposiveness, in thought as well as conduct, 386. — V. The place of motives and their treatment in economics, which has to be critical as well as descriptive and logical, — a branch of esthetics and ethics as well as of science, 400. — VI. The objective of economic activity and the point of view of social criticism of the economic order, 406.

Economic Psychology and the Value Problem

T ? -O ANALYZE the problem of capital and interest we have to begin by accepting the reality and conceptual separateness of two processes which cannot be sharply distinguished objectively. The first is the maximizing of return from a given total investment in an economic system, whether that of a Crusoe or of an organized or social economy, by moving investment or "capital" from one field to another. The second process is increase of return through further investment. In Part I of this essay26 we have attempted to sketch the analysis for a system in which abstraction is made from the second process. But this does not mean that we have presented in detail the first process the establishment of an equilibrium maximizing the return from a given total investment beginning with a system in some other condition than that of equilibrium and, holding other things equal, including the quantity of capital, while the capital is shifted about between different modes of investment. In this sense the treatment is unsatisfactory, but the embarrassing fact is that the readjustment in question could not be experimentally carried out or traced. It would be impossible for Crusoe, or the board of economic control in a collectivist economy, or the statistical analyst in a competitive economy, to know that a quantity of investment was being maintained exactly constant while it was being shifted from one use to another. This seems to hold even if the transfer does not involve a change in the form of the investment, but only a movement of the same concrete capital goods from one field or one mode of employment to another, and it is true a fortiori if change in form is involved. It is, however, both possible and necessary for analytical pur-

Frank H. Knight

Papers

Ricardian Economics: A Historical Study

Realism and Relevance in the Theory of Demand

Capital, Time, and the Interest Rate

Economic Psychology and the Value Problem

The Quantity of Capital and the Rate of Interest: II