For a long time, the divide between ‘developed’ and ‘developing’ economies has been wide and persistent, giving rise to development economics as a specialised field. Yet with economic interactions between nations rising strongly over the past decades, economics in a broad sense needs to be able to deal with the global environment in which all economic agents operate. Evolutionary economics seems well suited to deal both with the salient long-run macro aspects of the globalisation process, as well as with factors that determine the strategy of individual economic agents.
Held in Maastricht, 1–3 June 2015, the 2015 European Meeting on Applied Evolutionary Economics (EMAEE) addressed the broad field of evolutionary change in the global economic system. It targeted contributions from an evolutionary framework, at all levels of analysis (macro, meso, micro), and from all subfields of economics. The programme gave special emphasis on dynamic driving factors, such as innovation and institutional change, covering contributions on economies at a wide range of prosperity levels.
This year’s prize went to Matthijs Janssen from the Copernicus Institute of Sustainable Development at Utrecht University, for his paper ‘Cross-specialization and structural holes: The case of the Dutch Topsectors‘. See below for the winning paper, plus interviews with the winning author, two keynote speakers and an EU delegate. Please see our Facebook page for more images from the conference.
DR. MATY KONTE INTERVIEW
What does your lecture focus on?MK: My session is about the economic and political effects of remittances: that is, money transfers by foreign workers to individuals back home. The first part talks about the effects of remittances on economic growth, based on 121 developing countries in sub-Saharan Africa, Latin America and Asia, covering the period 1970-2010.
The second part only covers a sample of sub-Saharan African countries, for which I used the Afrobarometer. This looks at the effects of remittances on the legitimacy of democracy. By legitimacy, I follow the definition of political scientists, which is the degree of support for democracy. The idea is to see whether people who receive remittances are more or less likely to support democratic regimes.
In terms of findings, I basically got two clusters of individuals. There is one cluster where remittances really decrease support for democracy and the willingness to take part in political life. Then there is a second type for which receiving remittances doesn’t change their degree of support for democracy either way.
Perception of national priorities explains the differences between the two types of individuals. For people who think the most important national priority is rights and freedom, receiving remittances (or not) doesn’t change their degree of support for democracy. This makes sense because we cannot buy rights and freedom with money – only the government can provide this type of good. For people who see the national priority as economic, they tend not to care about having democracy (or not), so long as they can receive remittances to improve their economic situation.
Can you give some country examples?
MK: In Botswana and South Africa – two of the most developed countries in sub-Saharan Africa – the economic condition is not the main issue for a huge part of the population (except perhaps for young people), so receiving remittances or not doesn’t change their preferences for democracy. Some goods can be provided at the individual level, so if the government fails to provide something, or if these goods are poorly provided – for instance education or health – extra money coming from remittances may help to improve this. But if you are more concerned about having more rights or freedom, money will not change that.
In terms of Latin America, I can tell you a little about the review of the literature. Most of the work was done in Mexico and it was shown that remittances actually decrease political participation. In some municipalities with a huge number of migrants, people are less likely to vote during elections, to contact governments, to take part in any demonstration or protest.
How does your lecture fit into this conference on evolutionary economics?
MK: I come with a topic which is purely development focused. It’s a good way of showing to the other audience that UNU-MERIT is quite diverse and that we are also interested in developing countries. This is the UN development pillar of the conference.
DR. SEMIH AKCOMAK INTERVIEW
What does your lecture focus on?
SA: This particular paper is about a concept that we’d like to develop: the concept of mid-tech trap. This basically happens when industrial production is stuck in low value-added segments for a long time and when chances of moving up the ladder are becoming slimmer. This concept was first mentioned by Robert Wade in a paper in 2010, but it has not really been picked up since then, so we thought that it can be analysed further.
How does this fit into the conference as a whole on evolutionary economics?
SA: Well, it’s really important because if developing countries really want to catch up with developed countries, this technological catching up and innovations are really important. So in that sense I think mainstream industrial production, like the automotive sector, are quite important. The automotive sector in Turkey has some history, about 50 years, so we thought it would be a really nice example to look only at the automotive industry and then try to generalise a little bit, to the effects in other sectors.
One of the things that was problematic for the automotive industry is, we don’t have sectors like software or telecommunications, ICT or micro-electronics industry, to complement the automotive industry. So in that sense one thing that really held back the automotive industry was not having these complementary sectors.
Some of the novelties in the paper are not only the concepts that we developed, but also the approach. We use qualitative and quantitative methods at the same time: so we have data at the project level, we have firm interviews which give information at the micro level, and we have expert interviews that give information at the micro level. If you put everything together it tells you a story, but if you look one by one it may not tell you anything; so this approach is interesting in terms of evolutionary economics.
What about the policy aspects?
SA: We have several lessons that we’ve learned. The first issue, complementarity, is really important. So think about the case of the Chinese automotive industry and think about the case of Huawei, think about the case of the really well-developed software industry in China. There are not a lot of R&D and innovation projects only in the automotive industry, but it’s the junctions that are really important: the intersections between the automotive industry and software, between the automotive industry and telecommunications. This is one lesson for a developing country. In the case of Turkey, it didn’t end well, but there are other good examples like the Chinese case.Another lesson involves joint design activities, because if you are really only stuck in production and manufacturing, then you learn how to produce but you don’t really learn how to read market knowledge and signals and to come up with new knowledge. But if you establish joint ventures with foreigners, not only in manufacturing but also in design and innovation, you do the whole project, then you learn better, both in terms of the firms engaged in this interaction but also other domestic firms.
What are your views on the winning paper?
SA: I think it’s a good paper, which is also complementary to what I’ve just said. It was a paper that focuses on a shift in policy: that we should not only look at industries alone but at the junctions of the industries, like the complementarities. So the future of the automotive industry lies within these intersections: between the automotive industry and software, ICT, etc. For the automotive industry, the future lies in electric cars. And if you’re talking about electric cars, it’s automotive industry at the base and on top of that it’s electronic industry, so these two industries have to come together.
How do they come together?
SA: If you take for instance the Chinese case, it’s really about government policy. The government is really backing up the automotive industry. It’s not creating an industry from scratch, but trying to get the best value added from foreign direct investments, while creating really strong companies like Huawei that are really good in electronics and other sectors. These can be related to the automotive industry, and they are backing these sectors for quite some time. So if you think about Huawei, you say it’s a private company, but it’s actually not: it’s a public company. There is always the government behind Huawei. I think that’s really important in terms of development.
Comparing countries and models, I would draw a continuum: put the Korean case at one end, the Latin American case at the other, the Chinese somewhere in the middle, and I would say the Turkish case is much closer to the Latin American case. So the government was not really that strong and on top of that we didn’t really benefit much from foreign direct investment.
DR. MAFINI DOSSO INTERVIEW
Why is evolutionary economics important?MD: Apart from EMAEE, there are very few conferences where we – as evolutionary economists – can relax the restrictions that are put on mainstream economics. It affords us a more explorative, innovative and realistic approach. My work covers R&D and innovation, knowledge flows, and for my institute – the Institute for Prospective Technological Studies, part of the EU’s Joint Research Centre (JRC)* – this is important because we have direct policy implications as part of e.g. the EU Framework Programme for Research and Innovation, Horizon 2020, etc..
Evolutionary economics, in the economic literature, is relatively young. All these technology studies actually started at the end of the 1970s and beginning of the 1980s with Nelson and Winter, Dosi, Lundvall and Verspagen, so it’s relatively young and you cannot just come up and impose your vision on what has been done before — you have to come up step by step, introducing your ideas in a gradual manner. The time you need to introduce it in the academic and scientific community, and then to bring it to the policy making, is even more.
Since the economic crisis of 2007, the EU and other funders have allowed us much more room in terms of policy implications and initiatives, specifically from technology and innovation related work and their relation with economic performance. Of course the crisis was not a positive event, but it did create room for some evolutionary economic thinking to take place in the policy arena.
The work we presented is focused on trying to understand how companies, typically large companies, will actually invest around the world; and what drives the decisions of companies to invest in specific countries. And for Europe it’s important because we want to attract R&D intensive activities, we want to attract those activities that have much more knowledge contents. Why? Because normally they are related to more longer-run growth and productivity increase and employment, so it’s also really important for the European Commission to allow a path for countries to develop policy actions that will actually improve the growth and the living conditions of people.
So it’s not just about economics?
MD: Indeed, and here I’ve seen papers about social innovation, eco-innovation. So researchers are also concerned about protecting the environment, and allowing for people to let’s say, be happy! There’s a World Happiness Report and maybe innovation can lead us in this direction. Still, it’s difficult for us scientists to assess what we do in terms of impacting happiness, so we think that if the person has a sufficient wage level and developing himself in his work, etc. then this is what we call inclusive innovation – in the sense that we are not only talking about companies investing and creating new things. We’re also talking about the involvement of European citizens in all this process.
In what direction is all this evolving and leading?
MD: The issues of shared social values and social innovation are becoming more and more central. I think also people are really interested in how the local and global will go together. These dimensions are found for instance in European regional innovation strategies, research and innovation policy in general, all aiming for a better and happier society – which is ultimately the most important goal.
* The views set out here are those of the author and do not necessarily reflect the official opinion of the European Union. Neither the European Union institutions and bodies nor any person acting on their behalf may be held responsible for the use which may be made of the information contained therein.
WINNING AUTHOR INTERVIEW
What is the topic of your research?
MJ: The topic is cross-specialisation and the starting point is: what should countries and regions do with the strengths they have? The topic is industry policy, where the natural tendency is to strengthen the strong economies you already have and to invest in that, but I try to offer an alternative, to see if policymakers in this case shouldn’t be investing in these industries which are already strong, if but they should find an alternative to sustain the competitiveness and make sure that there is new knowledge for these industries and the firms in these industries to transform and to keep up with all the developments in the market.
The argument I make is that rather than focusing on these strong industries, make sure that they develop themselves and diversify by connecting with unrelated industries, unrelated strongholds. And relatedness in this case is the extent to which they collaborate, interact and to which there are knowledge flows.
In many industries, in many regions, you will find that there are a few strong industries that don’t interact with each other. They are specialised in different domains and each one of them will be at the knowledge frontier. They will know very well what’s going on and how you will arrive at the solution but if they don’t interact, they don’t maximise the potential they have, because there will be no radical breakthrough innovations. These will be less likely if they don’t interact because cognitively they do different things. They cannot talk with each other because they are engaged in very different kinds of activities and they will not interact. My idea is that you can strengthen the economy by making them collaborate. So you should find a way to multiply, so to say, their strengths.
How can policymakers encourage industries to talk and interact with each other?
MJ: I tried to define that by looking at three starting points, which could be technologies, topics and the form of what the policymaker will do. So let’s start with the form: the basic thing is that you make industries or firms talk with each other that are not inclined to do so. So you will need to facilitate their interaction. That can be with an R&D facility or a production facility. Or you can create a community. There are different forms that would allow for different industries to interact. And then the best thing to attract these industries to actually do so is if there is technology they both can benefit from or if there is a topic that has relevance to both of them.
A technology can be 3D-printing, digitisation, robots, any kind of technology or service-based business models, any kind of technology or development that is relevant for very different industries, because if it’s relevant for both of them, they both can explore it, they can learn together, and if they’re so different, they might not be competitors, so there might also be a willingness to see together what does 3D-printing mean to us, what does it mean to you and they can explore how it works and if there can be new applications. This is for technologies, and it will be very similar for topics, such as sustainability, energy, health. These are all topics asking for multidisciplinary solutions so you would also need to engage firms from very different knowledge domains.
Which regions of the world did you look at?
MJ: I applied this idea to the Netherlands and looked at the top sectors. We have nine top sectors which basically cover 25% of Dutch companies. But 90% of the R&D is being done in those nine top sectors (high tech systems and materials, the creative industry, logistics, agriculture, horticulture…). They are very broad and consist of many more specific industries. And actually one argument I will make is: don’t treat them as one – say ‘here is one top sector and here’s another’ – because if you were to look at how they are related – and I didn’t calculate the relatedness myself, I used existing data – but if you would look which specific industry is related with which one, you will find that some industries from high tech materials are very much related with chemicals. So you would find the boundaries and you would see which industry is at the intersection of different top sectors. And that provides you actually with an angle or a direction to look at how we can bring top sectors together, by looking at the industries which are the crossovers.
How does this topic fit into the main approach of the conference to showcase non-mainstream economics research?
MJ: I think that one part of the novelty in this – and this is a general stream, it’s not only my research of course – is this thinking in terms of relatedness and industries. So an industry is not a composition of sector codes but you can actually observe which activities are related to which ones, from a bottom up view. And you will find which industries are related with each other and how this transforms over time. So I try to make an argument for saying: we now have some strong industries but you never know how things will be in a decade or in two decades, so they need to be able to adapt. And that fits really well with the new approach to economics.
WINNING PAPER (EMBED)
FULL PROGRAMME
Monday 1 June 2015
08.30 – 09.00 Registration
Maastricht University – SBE
Tongersestraat 5
Maastricht
The Netherlands
09.00 – 09.30 Introduction and welcome
Prof. dr. Bart Verspagen (UNU-MERIT)
Location: SBE AULA (Auditorium, H0.01)
Chair: Sheng Zhong
09.30 – 10.30 Keynote address
Mid-tech trap: The case of Automotive Industry in Turkey
Dr. Semih Akcomak (Middle East T. University)
Location: SBE AULA (Auditorium, H0.01)
Chair: Sheng Zhong
10.30 – 11.00 Coffee break
11.00 – 13.00 Parallel session I
13.00 – 14.30 Lunch Ad FundUM, SBE
14.30 – 15.30 Keynote address
The Economic and Political Effects of Remittance Inflows in the Developing World
Dr. Maty Konte (UNU-MERIT)
Location: SBE AULA (Auditorium, H0.01)
Chair: Tigist Mekonnen Melesse
16.00 – 18.00 Parallel session II
Tuesday 2 June
09.30 – 10.30 Keynote address
Developing country industrial clusters: from efficient technological catchup to creating shared values
Dr. Elisa Giuliani (University of Pisa)
Location: SBE AULA (Auditorium, H0.01)
Chair: Juan Carlos Castillo
10.30 – 11.00 Coffee break
11.00 – 13.00 Parallel session III
13.00 – 14.30 Lunch
Ad FundUM, SBE
14.30 – 15.30 Keynote address
Sharing Economy: definition, dynamics and debates
Prof. dr. Koen Frenken (Utrecht University)
Location: SBE AULA (Auditorium, H0.01)
Chair: Juan Carlos Castillo
16.00 – 18.00 Parallel session IV
19.00 – 21.00 Dinner
Grand Café Maastricht Soiron
Wednesday 3 June
09.30 – 10.30 Keynote address
Functional Specialization in International Production Chains: An Exploration based on Occupational Data
Dr. Gaaitzen De Vries (University of Groningen)
Location: SBE AULA (Auditorium, H0.01)
Chair: Sheng Zhong
10.30 – 11.00 Coffee break
11.00 – 13.00 Parallel session V
MEDIA CREDITS
Images: UNU / H.Pijpers
Interviews: UNU / S.Brodin & H.Hudson