Friday, January 29, 2010

An Architecture of Economies and Innovation Systems

Implicit in my purpose for this blog is to enter into a discussion that attempts to disentangle ideas of  geographic, economic and innovation structure. Although we might joking suggest, to paraphrase Derrida that structuralism is dead, it lives on still and should. Today I start a four part series on a relatively new comer to the lexicon of economic 'structure' words; 'architecture'.

The first use of it that I became aware of was in connection to the asia financial crisis and the perceived need to revisit the global financial system architecture. Since then it has been used by others, notably Michael Jacobides et al. (Industry Architectures) and I have even used it in my book Innovation System frontiers (Chapter 10).

Is architecture just another word for structure in English which is surprising devoid of useful terms, or can the word be used with deeper meaning.

as it is currently used.
Industry architectures
Benefiting from innovation: Value creation, value appropriation and the role of industry architectures
Michael G. Jacobides, Thorbjørn Knudsen, Mie Augier. Research Policy 35 (2006) 1200–1221.

p1201. Our first contribution is to extend the Teecian purview (which focuses on the potential dyadic relationships between innovators and outside asset holders) by considering industry architectures, i.e. templates that emerge in a sector and circumscribe the division of labor among a set of co-specialized firms. We explain why these architectures emerge, usually early on in an industry’s life, as a result of balancing advantages from division of labor with transaction costs relating to the certification of quality of the final good or service. We further explain why these architectures sometimes become stable, thus creating the contours of an industry.We then argue that firms may be able to affect the architecture of their sectors, especially when it is not sharply defined, and as such create an “architectural advantage”.

p1202. Yet most economic organizations, including firms and markets, exhibit a considerably more complex structure of cospecialized agents and assets. We shall refer to such a structure of co-specialized agents and assets as architecture, and suggest that industry architectures are the common frameworks determining the nested structures of industry organization. An industry architecture, we argue, is a sector-wide construct that defines the terms of the division of labor.
Architecture of economies. I will confess that I wanted to use the term in my book and did so in probably a rather shallow way given that my diagrams of industry connectedness are little more than the wiring diagrams of the global economy or at best the floor plans. The diagrams do not provide an idea of the overall form of economies. However, in admitting this I also want to say that I do have in mind a broader image of architecture, even if it was not articulated there.

So what is architecture?

Obviously to start with it is primarily used to define the human built environment. One of the earliest writers on architecture, Vitruvius, a Roman writer and 'engineer' of the 1st century BCE  spoke of firmness, utility, and beauty, latter translated by Wotton as "Commoditie, Firmeness, and Delight'.

... today we might summarise these as form, function and beauty (or perhaps happiness after De Botton).
For an interesting read see:  David Cast (1993) Speaking of Architecture: The Evolution of a Vocabulary in Vasari, Jones, and Sir John Vanbrugh. The Journal of the Society of Architectural Historians, Vol. 52, No. 2 (Jun., 1993), pp.179-188 Stable URL:

Can we imagine describing economic or innovation systems in terms of their form, function and delight, we shall see?

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