Sociology of Economic Innovation

Francesco Ramella

• Publisher: Routledge
• Year: 2015
• Print ISBN: 9781138803732
• eBook ISBN: 9781317621331
• Edition: 1
• Topic: Economics
• Subtopic: Economic History
• Index: Economics

This book offers a sociological overview of the theories and research on economic innovation. Over the past few decades, the economics of innovation has given rise to a lively flow of studies, and innovation studies continues to develop as an interdisciplinary field of research. Sociology in general, and economic sociology in particular, have already made a significant contribution to innovation and continue to play a crucial role in this emerging field.

This book presents an integrated sociological approach to the study of economic innovation. It explores the key theories and sociological research on innovation, as well as other contributions to the field of Innovation Studies from economists, geographers, and psychologists. Ramella argues that in order to understand the processes of innovation, it is necessary to look at the actors of innovation, at the relations that exist between them and at the sectoral and territorial contexts in which they operate. For students, this book includes international case studies throughout, as well as further study questions at the end of each chapter.

1 Innovation and social change

DOI: 10.4324/9781315753522-2

This chapter provides an overview of sociology’s theoretical contributions to economic innovation. After presenting Adam Smith’s reflections on the division of labour (sections 1 and 2), the first part (sections 3 and 4) introduces the classics of sociology, showing how innovation is studied in close connection with social change. The second part starts with Schumpeter (section 5) and then focuses on contemporary sociologists, illustrating the contribution of comparative political economy and the structural approach of the new economic sociology (sections 6, 7 and 8). The former draws attention to the relationship between models of capitalism and innovative regimes; the latter to the role played by social networks in innovative partnerships.

1.1 Capitalism, society and innovation

Sociology was born in the nineteenth century and dealt essentially with social change and capitalist society. As has been observed, this new discipline ‘is the daughter of a great historical rupture, one that saw the rise of modern industrial society’, providing a strong thrust to the production process (Ferrarotti 1986, 11). A richly admiring awareness of the intrinsically innovative nature of capitalism finds one of its most impressive formulations in the book that offers the most radical critique of the capitalist mode of production: The Communist Manifesto:

The bourgeoisie cannot exist without constantly revolutionising the instruments of production, and thereby the relations of production, and with them the whole relations of society. Conservation of the old modes of production in unaltered form, was, on the contrary, the first condition of existence for all earlier industrial classes. Constant revolutionising of production, uninterrupted disturbance of all social conditions, everlasting uncertainty and agitation distinguish the bourgeois epoch from all earlier ones… . The bourgeoisie, during its rule of scarce one hundred years, has created more massive and more colossal productive forces than have all preceding generations together.

(Marx and Engels 1848, Eng. trans. 1969, 16–17, my italics)

The discontinuity brought about by capitalism in relation to ‘economic traditionalism’ is also underlined by another classic author of economic sociology – Max Weber – who sees the preeminent and more independent role of the cultural and religious dimensions behind the continuous pursuit of production, in the beginning at least. Specific considerations regarding economic innovation are not always found in the works of classical sociologists. However, even if the term does not appear explicitly, there is an awareness that the dynamism of capitalism is linked to changes introduced in modes of production and consumption. The engagement of classical sociologists with these issues tends to be primarily of a ‘macro-sociological’ kind – relating, that is, to the study of overall changes in the economy and capitalist society. However, ‘micro’ observations are also present, relating to the more specific dynamics of economic innovation: pages dedicated to technological change, to innovators (entrepreneurs, inventors, etc.) and to mechanisms of innovation (specialised division of labour, collective effervescence, marginality and social intermediation, personal charisma). There is also the perception that the introduction of new economic elements involves relationships of power and conflict. These are aspects that tend to elude the current debate on innovation, especially amongst economists. Having said that, economists are the first to speak about economic innovation in a specific manner, as will be seen from the fundamental contributions offered by Adam Smith and Joseph Schumpeter – scholars who are, not by chance, attentive to the topic of development. This is a characteristic that links them to sociologists concerned with social and economic change.

In recent decades, economic sociologists have further studied and researched the topic of innovation, with analyses at both a macro and micro level. This chapter, therefore, will show the analyses of both classical and contemporary authors from this discipline (with the addition of Smith and Schumpeter), in order to demonstrate the contribution that economic sociology can make to IS. The review offered will not pretend to be a comprehensive one, but rather illustrative, and it will focus selectively on the studies closest to the topic that interests us here: economic innovation.

1.2 Adam Smith and the division of labour

Where innovation is concerned, it is inevitable to begin with the pioneering contribution made by the founder of economics, Adam Smith, in his main work with the symbolic title An Inquiry into the Nature and Causes of the Wealth of Nations (published in 1776). For Smith, the wealth of a nation is nothing more than the work done in a year, i.e. the set of goods produced within the country or acquired externally through trade. Wealth will be greater or lesser depending on the relationship between the product and the people who consume it. The amount of goods produced – that is, the productive capacity of a nation – in turn depends on two parameters: (1) the proportion of people in the total population who carry out ‘useful work’, and (2) the productivity of the workers – namely the competence and dexterity with which they do their work. Smith has no doubt that the ‘ultimate cause’ of a nation’s wealth is to be found in this second parameter.

But what determines worker productivity? The answer is simple: the division of labour. To explain this point, the Scottish economist uses the famous example of the pin factory. Smith writes:

If all the parts of a pin were to be made by one man, he would hardly be able to produce one per day. In English factories, however, this ‘simple’ work is divided into 18 ‘special’ steps, each of which is carried out by people with specific skills. In a factory of this kind, with 10 workers, the daily output of pins reaches an average of 48,000 units, which means 4,800 pins per head.

(Smith 1776 (2005), 11)

The division of labour allows an exponential increase in productivity, generating three types of benefits: (1) increases the dexterity of workers, who, specialising in one activity are able to perform it with greater skill, (2) saves time because it is not necessary to switch from one task to another, and (3) facilitates the invention of new machines (ibid., 13–15). The factor of most interest to us here is the third. According to Smith, the majority of new machines used in manufacturing were created directly by the workers, concerned as they were to alleviate their own hardships. They are assisted in this by their total concentration on a specific task, which facilitates discovery aimed at improving the production techniques. Other inventions, meanwhile, derive from the ingenuity of those who build the machines, when this activity becomes a specific professional occupation. The simplest inventions originate from the users of the machines, i.e. from the workers; the more complex from the manufacturers. In both cases it is a matter of incremental innovation – of small, step-by-step improvements introduced in a cumulative and collective manner thanks to a process of ‘learning by doing’ (Smith 1997, 20; Eng. trans. 1965). With the increase in the ingenuity of the inventions, however, it is a different matter. Radical innovation, in fact, requires the use of more complex concepts, possessed by the so-called ‘philosophers, or men of speculation’; that is, people ‘whose trade is not to do any thing, but to observe every thing, and who, upon that account, are often capable of combining together the powers of the most distant and dissimilar objects’ (Smith 1776 (2005), 15, my italics). Smith notes that with society’s progress, these activities of philosophical speculation become, in turn, the employment of a particular class of citizens, and are subdivided into a number of different branches – and this specialised division of labour greatly increases their productivity.

From Smith’s reflections, then, there emerge two different generative mechanisms regarding innovation. The first is an incremental process based on the division of labour: innovation resulting from gradual improvements introduced by persons employed directly in the activity of production. These incremental innovations are the result of strict specialisation. The second is a more discontinuous and radical process based on the use of theoretical knowledge: innovations are more far-reaching and come from ‘intellectual workers’ who combine extensive and diverse forms of knowledge. As Smith observes:

To apply in the most advantageous manner those powers, which are already known and which have already been applied to a particular purpose, does not exceed the capacity of an ingenious artist. But to think of the application of new powers, which are altogether unknown, and which have never before been applied to any similar purpose, belongs to those only who have a greater range of thought and more extensive views of things than naturally fall to the share of a mere artist.

(Smith 1763 (1937), 337–8, my italics)

The point I would like to draw attention to is that in the second mechanism, the process of specialisation does not seem to be the determining force behind innovation. It is rather the ability to combine different components, overcoming the rigid barriers of specialisation to bring together ‘the most distant and dissimilar’ knowledge and phenomena. This point – often overlooked in comments on Smith’s work – anticipated (albeit in embryonic form) Schumpeter’s conception of innovation, defined as a new combination of production factors that introduces a sharp discontinuity into the economy.

What is the original force behind the division of labour? According to Smith it is the natural tendency in men to ‘truck, barter, and exchange one thing for another’ (Smith 1776 (2005), 18). In ‘civilised societies’ men always require the cooperation and assistance of others. This ‘interested cooperation’ is the fundamental drive behind the division of labour and is also present in societies which preceded the commercial (capitalist) form of society.

That said, the natural tendency to ‘trade’ varies from society to society. The pursuit of one’s interests is tempered by a search for the approval of others. It is, in other terms, socially regulated, and in this regulation institutions – both economic and otherwise – play an important role. The wealth of a nation, in fact, also depends on its socio-institutional structure: the presence of a competitive market; the efficiency of state administration; the manner in which wealth is distributed across social classes, ensuring low profits for entrepreneurs and high wages for workers, to stimulate the innovativeness of the former and the collaboration of the latter (Trigilia 2002, chapter 1.2).

Let’s recap some of the most salient aspects of Smith’s reflections.

First, there is no technological determinism in his conception of innovation and economic development. It is true that inventions and new machinery are essential to increase the productive capacity of a nation, but it is the social division of labour that creates the conditions that facilitate these discoveries. That is to say, everything depends on the social and economic organisation of the production process. Even the differences in personal ingenuity ultimately derive not so much from the ‘natural talent’ of the individual as from the different socio-professional roles and the division of labour between them (Smith 1763 (1937), 341). In this, paradoxically, Smith demonstrates greater sociological sensitivity than that present in the work of Durkheim, who – as we shall see – speaks of the innate qualities of people.

Second, the division of labour gradually consolidates itself alongside social development and market expansion. This development is, on the other hand, linked once again to socio-institutional factors: to the transformation (in the capitalist sense) of the social and economic arrangements of nations, and to the efficiency and effectiveness of state regulations – for example, making safe the routes of communication and commerce (Smith 1776 (2005) chapter III).

It is present in the work of the very founder of economic science, therefore, a reading of innovation that is anything but ‘economistic’. Innovation, in fact, ultimately depends on a complex social construction: on a socio-institutional context that allows the expansion of the market; and on a specific organisation of the production process based on the division of labour. According to Smith, these conditions are realised to the fullest extent in commercial societies, where there is a structure of a capitalistic kind based on competition amongst a number of manufacturers and the total mobility of all factors of production (land, labour and capital). Smith, therefore, frames the issue of innovation within an analysis that brings together economy and society, economic behaviour and institutional regulation – as will the economic sociology that comes to the fore in the following years.

Unlike the classical sociologists, however, the Scottish economist does not bring out the contradictory and adversarial nature of the process. For Smith, in fact, the division of labour creates more wealth, and in developed societies – despite the greater inequalities – this higher level of well-being also extends to the lower classes (Smith 1763 (1937), 332). In short, the division of labour produces innovation and economic development and, thanks to the distribution of wealth, social consensus as well. As shown in the next section, economic sociology offers a less ‘pacified’ reading of capitalism.

1.3 Between conflict and consensus: Marx and Durkheim

Smith’s idea that division of labour inevitably tends to qualify work and create greater well-being is challenged by two classical sociologists, Marx and Durkheim. They are considered the founders of two antagonistic sociological traditions based on conflict (Marx) and social order (Durkheim) (Collins 1985). Both, however, devote great attention to the division of labour and, as has been perceptively observed, are aware of its side based on cooperation and solidarity, and its side based on conflict (Giovannini 1987, 11).

Let’s start with Karl Marx’s contribution. As previously mentioned, the German scholar is deeply aware of the innovative nature of capitalism and is a keen observer of technology. Not only because he is interested in understanding its effects on the condition of the working class, but also because he realises that the increase in the production capacity of capitalism is closely related to scientific and t...

Table of contents

• Cover Page
• Half Title Page
• Title Page
• Copyright Page
• Contents
• List of Figures
• List of Tables
• Acknowledgements
• Introduction Innovation Studies
• 1 Innovation and social change
• 2 Inventors and creativity
• 3 The sociology of economic inventions
• 4 The small worlds of creativity and innovation
• 5 Innovation systems
• 6 The geography of innovation
• 7 Innovation and local development
• Bibliography
• Index