Book Review (Jovanovic 2009)

Evolutionary Economic Geography: Location of production and the European Union

Evolutionary Economic Geography: Location of production and the European Union

Miroslav Jovanovic

2009, 486 pages hardback (Routledge Studies in Global Competition), Routledge, Oxford UK, ISBN 978-0-415-42346-5, £76.

Reviewed by Allison Wylde
Email a.wylde@londonmet.ac.uk
Business Analysis, Information Systems, Transport and Logistics (BASTIL Sector Group)
London Metropolitan Business School

(15 February 2009)

Why are some regions more productive or successful than others? This book tries to answer this question by reviewing neoclassical economic theories and proposing a new framework to an ‘old economic problem; where to locate a firm in space’ (Jovanovic 2009 p. xvii). Evolutionary economic geography is an emerging and important area of research, with the notable publication of Applied Evolutionary Economics and Economic Geography, edited by Koen Frenken, published in 2007 (Frenken, 2007), the publication of numerous papers and research monographs, and a handbook due out this year (Martin and Boschema 2010). Whether the author’s aim to produce a new framework for evolutionary economic geography is achieved is the subject of this review; also, a proposal for the idea of the entrepreneur or terrorist as virus is presented.

The author, Miroslav Jovanovic, is based at the Economic Affairs Office (Economic Commission for Europe) at the United Nations in Geneva. This makes him well placed to write about location of production in the European Union; he has already produced publications exploring the economics of transnational corporations and foreign direct investment (20 volumes), and written several books on economic integration and spatial location and numerous journal articles.

Jovanovic states in the preface that he wants to reach as wide an audience as possible, from undergraduates to policymakers, and in the main his examples successfully illustrate his ideas. For instance, the idea that ‘being a top dog… is no guarantee…’ and staying on ‘top is not a state but a process…’ (p.141) is demonstrated by the example of the emergence of the Boeing construction plant for military and civilian aircraft in Seattle. Formerly in decline from the loss of its traditional fishing and boatbuilding activities, Seattle had the resource of highly skilled boat builders – skills transferable to the aircraft industry. Another fascinating study is presented which examines the impact of shocks; the aftershock of war; atomic bombs on Nagasaki and Hiroshima in Japan, the firebombing of cities in Germany during World War II and plagues and wars in many Italian cities during the 16th century. All of these cities returned to their former power within a number of years; clearly demonstrating their resilience in overcoming shock.

The pedagogic value of Jovanovic using examples is backed up by research that indicates that individuals remember texts with stories and examples more easily than simple facts (Heath et al. 2001).

An introductory note by Masahia Fujita calls this book a state of the arts in evolutionary economic geography. The foreword by Ron Boschema supports the use of a wide range of examples to illustrate the many definitions of evolutionary economic geography but casts doubts, saying some of the approaches cannot be ‘labeled evolutionary’. Boschema also says that there are unresolved issues in the book, including a lack of a definition for path dependence and mechanisms for developing policy (p. xv).

The introduction sets out the author’s primary question; why do some places grow faster than others and suggests that economics ‘can do much better’ by embracing new theories. He states that his approach is conceptual rather than definitive (p.2). Chapter 2 summarises the history of evolutionary economics and sets out the theory, definitions and differences between the two theoretical concepts in economics, and provides explanations of how evolutionary economics may occur. It also gives examples and case studies, using cities and regions.

Key differences between the neoclassical and evolutionary economic theoretical concepts are presented. The neoclassical equilibrium model is a fixed steady-state system, instantaneously self-regulating and self-correcting, while the evolutionary economic is an out-of-equilibrium, uncertain system that is able to cope with shocks. The history of evolutionary economics theory presented ranges from Ricardo and the theory of imperfect advantage to the division between spatial production geography and economics and the development of new analytical tools that enable spatial economics to ‘find it’s place…’ as ‘a hot topic'(p.9).

Similarities and differences are presented for the behavioral approach. Biology and evolution similarities include resistance to change and the necessity for external shock. The differences include the accumulation, expansion and transfer of knowledge. The observation is made that ‘nothing like this exists in nature…’ (P.13); this is contested here. Numerous studies across Behavioral Genetics, Development Studies and NeuroBiology demonstrate the transfer of knowledge by inheritance and by horizontal transfer; for example, bacterial antibiotic resistance (Ochiai et al. 1959), or though learning. Nelson and Marler studied bird song; birds isolated from birth develop only a rudimentary song (inherited); free birds learnt songs and shared these with their neighbours, and the songs are subtly altered – resulting in distinctive geographic and regional accents (Nelson and Marler 1994). These examples demonstrate the transfer of both inherited and learnt knowledge in ‘nature’ (numerous other examples are not included here).

The individual tools for the framework, and their problems, are presented. These include theories of location, increasing returns, complexity, inefficiency, path dependence and lock in, history, clusters, the spread of information and knowledge. The theory chapter concludes by saying that if the linkages between skilled labour, intra-industry and clusters are weak, the incentive is to spread production; the idea of the brief ‘window’ for policy to affect location is also presented (p.152). However, the theories are not developed into a coherent framework.

The remaining chapters cover regional policy, market structure and location of production, international firms and the conclusion. The chapter on regional policy takes a practical approach, describing the slow start of EU policy and the use of supply side policy instruments; with ‘questionable results’ (p.177). Regarding periphery-core questions, the author suggests that periphery may not necessarily be bad; citing accelerated growth in Ireland and Finland. However the impact of the economic recession of 2007-8 and the crash in the Irish and Icelandic economies is not covered.

The conclusion asks whether Jovanovic’s proposed new framework answers the question of where to locate a firm.

The example used is the French company Moet & Chandon. This champagne producer possesses a highly specific technology, uses the expertise of the region and is a leading brand. However, sparkling wine producers from Australia, America and beyond are gaining ground and competing; they may not have the brand but they have the same technology and expertise. The author acknowledges that the question of how this knowledge helps a region to compete remains unanswered.

The book is successful in providing a comprehensive tour and in-depth examination of the theories of evolutionary economic geography. The case for whether the book develops a framework for location is not proven. Important policy questions remain; in the sparkling wine example, how could knowledge be used to prevent competition? This backs up Boschema’s observations of the lack of recommendations or mechanisms for policy response.

The theoretical slant is contested; the author claims that knowledge transfer does not occur in nature and that changes in biology, unlike those in entrepreneurs, are not ‘smart’ (p.85). This is simplistic and easily overturned by examples presented from biology. Using the earlier example of antibody resistance in bacteria (simple organisms); witness the current worldwide problems as a result of precisely such rapid knowledge transfer, learning and adaption in both MSRA (Methicillin-resistant Staphylococcus aureus) and swine flu (flu pandemic H1N1/09 virus). Finally, contrary to Jovanovic’s views about biology not being smart; it is proposed here that the virus equivalent in the economy may be entrepreneurs and possibly terrorists (complex entities), since like viruses they share the characteristics of rapid knowledge transfer, learning and adaptation.

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References

Boschma R., Martin R. (2010) The Aims and Scope of Evolutionary Economic Geography, Papers in Evolutionary Economic Geography # 10.01 Utrecht University. Available from http://econ.geo.uu.nl/peeg/peeg1001.pdf downloaded 25 January 2010

Koen Frenken (editor), 2007 Applied Evolutionary Economics and Economic Geography, Edward Elgar, Cheltenham, UK.

Ron Martin and Ron Boschema (eds) (2010 forthcoming) The Handbook on Evolutionary Economic Geography, Edward Elgar Cheltenham, UK.

Heath, C., Bell C., and Sternberg E., (2001) The Case of Urban Legends Journal of Personality and Social Psychology (Vol. 81), pp.1028-1041

Nelson D.A., Marler P., (1994) Selection-Based Learning in Bird Song Development Proceedings of the National Academy of Sciences of the United States of America, Vol. 91, No. 22. (Oct. 25, 1994), pp. 10498-10501. Available from http://www4.stat.ncsu.edu/~pollock/Nelson%20and%20Marler%20Bird%20Song%20pdf.pdf downloaded 25 January 2010

Ochiai K, Yamanaka T, Kimura K, Sawada, O (1959). “Inheritance of drug resistance (and its transfer) between Shigella strains and between Shigella and E. coli strains” (in Japanese). Hihon Iji Shimpor 1861: 34.