Big idea number one: the rediscovery
of the social in productionHowever, from the perspective of economic
geography, it is a set of meso-scale develop-
ments that have probably held the greatest sig-
nificance. Beginning in the mid 1980s, economic
geographers and other social scientists began to
discern some important changes in the nature of
capitalist competition and production systems.
One line of thought emphasized the transition
from mass production and competition based on
lowering average costs and prices, toward batch
or customized production and competition based
on quality, performance and distinctiveness
(Piore and Sabel, 1984; Scott, 1988). In response
to the macro-economic stagnation of the 1970s,
which had caused the aggregate purchasing
power of national economies to stop rising or
actually decline, firms appeared to be seeking
new ways to gain market share based on the
identification and servicing of smaller, qualita-
tively distinctive market ‘niches’. In order to
succeed at this game, they required new skills
and production practices, both private and social.
Inside the firm, the transition from producing
large runs of more or less standardized goods to
small-batch or custom (one-off) production
required firms to implement new, more flexible
process technologies and practices – versatile,
computerized machines, multiskilled and multi-
tasked workers, and novel approaches to work-
place organization that enabled quality
improvements to be identified and implemented
on a continuous basis. Closely related to these
internal changes was a restructuring in the wider
social division of labour between firms. Most
important here was a process of vertical disinte-
gration. Under an older mode of organization,
vertically integrated firms had performed a long
sequence of production operations themselves,
sometimes extending from the processing of raw
material inputs to the production and distribution
of finished goods. As firms reorganized produc-
tion, they chose to perform fewer functions for
themselves, turning instead to external specialist
suppliers of goods and services. Hence, discrete
elements of the production process that were
once provided within the bounds of the legal
entity known as the firm were now being
acquired through a market transaction between
the firm and its suppliers. The same principles of
specialization and division of labour operating
inside the firm were now being exploited at a
social scale of organization betweenfirms.
The principal virtue of this new social organi-
zation of production was that it too enhanced the
overall flexibility of producers, both individuallyand collectively. As each firm’s production
needs changed (according to rapidly changing
and increasingly fickle market demand), so too
would its input needs. Under such conditions,
it proved to be faster and/or more efficient to
draw upon the specialized offerings of external
suppliers – mixing, matching and changing
inputs (and suppliers) at will and on short notice.
As production systems transformed them-
selves toward this increasingly social basis of
organization, so the story goes, the importance of
proximity – i.e. geography – was also greatly
enhanced. Given that the market exchanges or
transactions amongst this multitude of now ver-
tically disintegrated firms would necessarily
become more frequent, less predictable and
rapidly changing, there were real cost advantages
arising from spatial concentration. The closer
they were to one another, the lower the transac-
tion costs – that is, all costs associated with
achieving successful market exchange of goods
and services. However, there is a second and
more fundamental advantage produced by spatial
proximity, related more to the growing impor-
tance of innovation, learning and culture in pro-
duction systems. As we shall see below, it is these
aspects of the new mode of production organiza-
tion that embody the truly social nature of
socially organized production systems, since they
implicate forms of interaction between firms that
go far beyond simple market transactions.Big idea number two: learning
and regional cultureIn order to meet or anticipate the demands of
rapidly shifting markets, and in a competitive
environment in which product life cycles had
become dramatically shorter, the onus on firms
to achieve successful innovations in products
and processes had become paramount. In some
accounts, couched more in the language of long
waves, these conditions were seen to stem from
an epochal transition of capitalist societies
towards a new ‘techno-economic paradigm’
based on microelectronic and information tech-
nologies (Freeman and Perez, 1988). The early
stages of such a transition are typically charac-
terized by rampant ‘creative destruction’ as
products and processes based on the new para-
digm are generated to replace old ones. Hence,
an alternative approach views this heightened
importance of innovation as being driven less by
market conditions, and more by fundamental
changes on the supply side of the economy.
Whatever the driving force, as production
processes had become increasingly socialized, soCULTURAL ECONOMIC GEOGRAPHY OF PRODUCTION 1333029-ch06.qxd 03-10-02 10:40 AM Page 133