The Co-evolution of Technology, Industrial Structure, and Supporting Institutions

There is a large intellectual discrepancy between most formal growth models described by economists and descriptions of growth in economic history. This paper draws on an evolutionary theory of economic growth that brings together appreciative theorizing regarding growth and formal theorizing. It aims to piece together a relatively coherent appreciative theoretical account of economic development at a sectoral level by laying out a story of the growth, and development, of a manufacturing sector, from birth to maturity, and perhaps until death, that seems to fit many cases and which can serve as a target for formalization. The paper first describes and tries to link two broad bodies of appreciative evolutionary theoretic writing. The first proposes that a new technology develops along a relatively standard track from the time it is born, to its maturity, and that firm and industry structure ‘coevolve’ with the technology. The other is concerned with the development of institutions in response to changing economic conditions, incentives, and pressures. The paper then considers ‘punctuated equilibrium’ before concluding with a consideration of two economic developmental implications that appear to flow from the analysis. One concerns the pattern of change of productivity, of capital intensity, and relative variables associated with economic growth, as a technology and industry structure develop. The other is concerned with implicitly cross-country comparisons, and is focused on how ‘comparative advantage’ develops in a new industry.