Capabilities and production theory

Von Tunzelmann, Nick and Wang, Qing (2007) Capabilities and production theory. Structural Change and Economic Dynamics, 18 (2). pp. 192-211. ISSN 0954-349X

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The paper draws on a specification by Sen to model consumer capabilities and welfare, and extends this to modelling capabilities of producers and other agents. ‘Dynamic interactive capabilities’ are the outcome of successful interaction between evolving consumer and/or supplier capabilities and evolving producer capabilities, all occurring in ‘real time’ to meet the needs of dynamic competition in Schumpeter's sense. This involves learning on each side, as well as interactive learning between them. The paper then investigates the direction of both product and process changes in producers, driven by demand as well as supply factors through historical time and during structural change. Some consideration is given as to why orthodox production theory should have failed to broach so many of the issues which appear to be driving dynamic capabilities and productivity change in historical practice. Paths for further development of the capabilities approach are suggested.

Item Type: Article
Additional Information: The paper provides a critique of conventional economic theory of production from the viewpoint of `dynamic capabilities¿, and in the course of doing so also provides a much stronger analytical basis for theorising about those dynamic capabilities, by drawing on Amartya Sen¿s conceptualisation of `capabilities¿. Prof von Tunzelmann contributed about 90% of this paper, from concept through to writing.
Schools and Departments: School of Business, Management and Economics > SPRU - Science Policy Research Unit
Depositing User: Nick VonTunzelmann
Date Deposited: 06 Feb 2012 19:53
Last Modified: 03 Apr 2012 09:32
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