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Economic Welfare, International Business and Global Institutional Change

Edited by Ram Mudambi, Pietro Maria Navarra and Giuseppe Sobbrio

The distinguished authors in this volume address the fundamental causes for such heterogeneous international experiences, placing particular emphasis on the role of institutions. They demonstrate how the study of economic development is increasingly linked to the development of institutions, which allow for more complex exchanges to occur in markets and societies. Institutions can be understood as rules or constraints that channel individuals' actions in specific directions, and can be formal or informal depending on their genesis. The book highlights the connection between institutions and economic welfare by examining countries at different stages of development. Although the authors' study material effects, they also look at individual well-being which is more strongly influenced by the non-material products of institutions such as opportunity, freedom and relationships. They move on to highlight the role of institutions in global business, in terms of innovation, entrepreneurship and foreign direct investment. In the concluding chapters they focus on the actual process of transition from one institutional framework to another. Amongst other examples, they examine reforms to international financial institutions and constitutional adjustments in transition countries.
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Chapter 8: Institutions, Entrepreneurship, and Growth: Biomedicine and Polymers in Sweden and Ohio

Bo Carlsson


Bo Carlsson INTRODUCTION What are the linkages between institutions, entrepreneurship, and growth? The purpose of the present chapter is to examine the role of institutions in explaining the differences in performance with respect to entrepreneurship and growth in two industry clusters in two countries. In a series of papers, my colleagues and I have studied the biomedical and polymer clusters in Ohio and Sweden.1 The main reason for selecting biomedicine and polymers is that these clusters include the fastest-growing industries in both regions over the past two decades. They are also very different in terms of supporting institutions and other infrastructure. Given the focus in this chapter on institutions, entrepreneurship, and growth, it is desirable to compare regions that can be expected to differ in these dimensions while not being too dissimilar in other dimensions. The differences in economic growth between Europe and the United States over the last two decades makes it interesting to compare regions on both sides of the Atlantic. The diversity within Europe and the US and the difficulty of obtaining data makes it impractical to compare Europe and the United States as a whole. The main reasons for the choice of regions are that Sweden and Ohio are similar in size (population 8.8 and 11.2 million, respectively in 1996), income level ($27 794 GDP per capita in Sweden and $27 240 in Ohio in 1996 at official exchange rates), and industrial history (especially, heavy reliance on engineering and metalworking industries); and that both suffered economic...

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