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Toward a dynamic capability theory of economic growth

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  • David Sainsbury

Abstract

New theories of economic growth that are policy-relevant and connect with the histories of success and failure in economic development are urgently needed. This article compares the neoclassical (or market efficiency) school of thought with the production-capability school of thought which included Alexander Hamilton, Friedrich List, and Joseph Schumpeter. Many affirmative, industrial policy steps by governments to promote economic development have been historically recorded—including in the UK and the United States. Meanwhile the neoclassical school has ignored the role of government in helping to create competitive advantage. It has also chosen to ignore how firms are formed, how technologies are acquired, and how industries emerge. The dynamic capability theory of economic growth developed here assigns the central role in economic growth to firms but also an important role to governments. The rate at which a country’s economy grows depends critically on whether its firms can build the capabilities to generate and take advantage of “windows of opportunity” that exist for innovation and new markets, and whether over time they are able to enhance their capabilities to move into higher value-added activities.1

Suggested Citation

  • David Sainsbury, 2020. "Toward a dynamic capability theory of economic growth," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 29(4), pages 1047-1065.
    • Handle: RePEc:oup:indcch:v:29:y:2020:i:4:p:1047-1065.
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    File URL: http://hdl.handle.net/10.1093/icc/dtz054
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    Cited by:

    1. Hausmann, Ricardo & Pietrobelli, Carlo & Santos, Miguel Angel, 2021. "Place-specific determinants of income gaps: New sub-national evidence from Mexico," Journal of Business Research, Elsevier, vol. 131(C), pages 782-792.

    More about this item

    JEL classification:

    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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