Knowledge, supply and demand in industrial development: a sectoral systems perspective

Economic development is centered around the learning processes of firms, the mastering of knowledge, and the accumulation of capabilities. This article builds upon these core elements by looking at how the knowledge boundaries of firms, the division of innovative and productive labor, and the governance of knowledge have evolved over time in the advanced industrialized countries in order to provide a historical and evolutionary context to the patterns of knowledge dynamics and innovation that are present in economic development and in emerging markets nowadays. It adopts the theoretical lenses of the sectoral system literature to discuss how the interplay of the supply and the demand side affects firm boundaries. The article shows that, over time, the knowledge boundaries for innovation, production and commercialization have greatly expanded, often to reach beyond the legal boundaries of firms or even the conventional definition of industries. The division between production and innovative labor has also ...