Local systems, industrial districts and institutional networks: Towards a new evolutionary paradigm of industrial economics?

Abstract

This paper seeks to unify the neo‐Marshallian theory of industrial districts with evolutionary economic theory. The latter argues that firms are collective organizations with a certain degree of resource‐development capacity of their own. They are not just homogeneous atoms of rational utility maximization as neo‐classical economics assumes. Among these resources are those concerning the capacity for learning, both firm past experience and by emulating peer firms. This is similar to the thesis advanced by some theorists of industrial districts that it is practical knowledge communicated among firms that explains their coherence as production systems. Because of this, districts can evoke in ways that allow local economic development based on network relationships to coexist with apparently more powerful multinational corporations rather than being extinguished by them.