too had the process of innovating. In place of an
old ‘linear’ model of innovation, in which new
ideas were developed in the isolation of research
and development labs, then ‘pushed’ onto the
market by firms, the new model of innovation
was interactive and recursive. It was said to
depend on close, repeated interaction between
firms (technology producers) and their customers
(technology users) over extended periods of time
(Lundvall, 1988). This interaction was under-
pinned by the frequent sharing of proprietary
technical and market information and – here’s
where cultural processes finally enter the picture –
it became clear that this kind of knowledge flow
(or inter-firm learning) was best supported by
closeness(Gertler, 1995).
Why? To begin with, much of the knowledge
passing between innovation partners is said to be
highly confidential and crucial to the competitive
advantage of the firms involved. In such cases, it
has been argued, repeated interaction over long
periods of time – as well as cultural commonal-
ity and personal relationships – serve to build up
trust or ‘social capital’ between transacting par-
ties (Putnam, 1993), discouraging opportunistic
use of the knowledge exchanged and thereby
facilitating its flow. Second, because this knowl-
edge is frequently finely nuanced, tacit and con-
text-specific, this form of learning is said to be
most effective when the partners achieve the
deeper understanding that is only possible when
they share a basic linguistic and cultural com-
monality. In Storper’s (1997) characterization,
the central idea is that the interrelationships
or dependencies that develop between firms
through the market exchange of goods and
services come to be supplemented – if not
eclipsed – by extra-market bonds, linkages and
commonalities: what he and others have called
untraded interdependencies.
The ideas of Putnam, Storper and others owe
more than a little debt to the much earlier work
of Karl Polanyi (1944), who demonstrated the
extent to which economic processes and activi-
ties are always shaped by, or ‘embedded’ within,
a social or cultural context. According to
Polanyi, and to Veblen (1919), this context
inheres in the formal and informal institutions
that produce and reproduce norms, conventions,
customs and habits, shared by a group of
economic actors, which define the grooves along
which economic behaviour runs (see also
Granovetter, 1985, who has been most responsible
for the resurgence of interest in the concept of
embeddedness). This is where the notion of
‘regional culture’ enters the picture.^4 The idea
put forth in the literature is that the shared social
attributes (conventions, routines, habits, customsand understandings) facilitating the kind of
inter-firm learning and embeddedness described
above are regionally defined. That is, economic
behaviour is embedded in regional cultures.
Moreover, these cultures will vary substan-
tially from region to region, and not always in a
happy way. In fact, within the literature on indus-
trial districts and learning regions the world
came to be divided into a handful of essentially
ideal-typical regional formations. There was the
‘Holy Trinity’ of charmed places that were
blessed with favourable regional cultures: the
industrial districts of central Italy, where direct
inter-firm collaboration of all types was said to
be rampant and deeply ingrained in the regional
culture (Piore and Sabel, 1984); the machinery
and automotive districts of Baden-Württemberg
in south-western Germany, where the institutions
of the state government encouraged and accom-
modated indirect horizontal cooperation (between
competitors) but direct vertical collaboration
(between buyers and suppliers) (Herrigel, 1996);
and Silicon Valley, the grand-daddy of them all,
where a common regional culture was produced
(and inter-firm learning supported) by a prodi-
gious ability to spin off new firms from old, as
well as astounding rates of labour market
promiscuity (serial employment relations?) by
which key information circulated rapidly
throughout the region (Saxenian, 1994).
There were also the hard-luck cases: once-
successful places where local cultures fostered
ties so strong, structures so rigid, and attitudes so
unbending that newcomers and new ways of
doing things encountered insurmountable barriers
to entry – think Germany’s Ruhr Valley (Grabher,
1993), Massachusetts’ Route 128 (Saxenian,
1994) or the Swiss Jura (Glasmeier, 2001).
Then there were the reclamation projects:
places like South Wales or the Basque country,
diagnosed as suffering from too little (rather than
too much) embeddedness and a weakly devel-
oped collaboration culture, that nevertheless
sought to mend their errant ways through a vari-
ety of locally orchestrated, concerted actions
aimed at matchmaking or social engineering of
inter-firm relations (Cooke and Morgan, 1998).Big idea number three: the evolutionary
dynamics of local production systemsTo complete the trilogy of big ideas, we turn to
one imported from the recently emerging field of
evolutionary economics. Barely 20 years old,^5 it
remains very much on the fringe of the main-
stream, since it concerns itself with the epi-
phenomena of capitalist economies: trivial things134 THE CULTURE OF ECONOMY3029-ch06.qxd 03-10-02 10:40 AM Page 134