Local and Regional Development


Oct 28, 2013 (4 years and 8 months ago)


Local and Regional

Lecturer: Prof. Gunther Maier

By Rory O′Connor and Philipp Hollenstein

Industrial Geography

Introduction to Industrial Geography

Theoretical Approaches

2. Historical Developments

Manufacturing Change in Historical Perspective

Smith vs. Marx

Industrialization as a Process of Creative Destruction


Introduction to Industrial Geography

Industrial Geography/Manufacturing Geography

Explains changes in location of and growth/decline in industrial activity and the
implications of such changes on local development

The watershed of the 1950s/1960s

Idiographic (Pre

Concerned with individual cases

Nomothetic (Post

Concerned with theory on widescale

Modern Theories



Structuralist (Radical)


1.2 Theoretical Approachs

Conventional: Neoclassical and Behavorial


Competition maximizes individual efficiency and social welfare in the


Focuses soley on economic variables, disregarding factors such as social processes

Assumes universial economic laws

Challenged idiographic view of unique environments


Challenged neoclassical

Real world decisions do not follow set rules

Applied additional factors to decisions such as preference, rational, and
abilility (i.e., small firm v. multinational fim)


Theoretical Approachs

Radical and Structuralist

Influenced by institutional and marxian economics

Challenged the notion that capitalism provides the most ideal outcomes

Instead, unregulated capitalism generates instability

Emphasises political economy

Ability of corporations to manipulate their markets and locations


Strong marxian influence

Capitalism is crisis
ridden and exploits labor


Unclear, lack form of evolution

Overemphasis of macro
economic forces

Spread of Industrialization

Powerful tendencies help to standardize supply and demand

Geographically uneven, causing modification due to local circumstances


2.1 Manufacturing Change in Historical

The Industrial Revolution of the late 18th century brought changes in
the nature, scale and growth rates of manufacturing activities

Primitive accumulation

Handicraft industry, large workshops, factory system

Large workshop promotes division of labor by seperating workers from means of

Industrialization follows through further labor exploitation and control


Handicraft industry, putting out system, factory system

Promotes large
scale industrialization through the capacity of rural areas to increase
levels of production

In reality, path to industrialization is more complex


2.1 Manufacturing Change...

Evolution of Paper Making

Illustrates several aspects of the diffusion of traditional industry

Process was invented in China

Travel of merchants, explorers, artisans, etc. brought paper making to
various regions worldwide

Through its evolution, experimentation with different processes and
materials changed technology

By 1800, paper making was labor intensive and based in small

Within 100 years, it became capital intensive and based in large

Expansion to areas of geographic significance (i.e., coniferous forests,
rainforests, urban areas)


2.1 Manufacturing Change...

English Wool Industry

Different organization than that of paper making

Domestic system based in West Riding of Yorkshire

Putting out system based in West Country

Domestic system

Process was organized amongst small land owning families

Limited class differences between masters and workers

Putting out system

Organized by merchant manufactorers

Merchants owned material and equipment and paid workers to complete
specialized processes

Workers based more heavily on agriculture, thus more susceptible to changes in
harvest or wages

Workers borrowed more increasing merchant control of entire process

Encourgaged class alienation and conflict

Industrialization started through cooperative mills

Later developed into putting out system in which merchants owned factories and
employed labor


2.1 Manufacturing Change...

The Factory System

Originally, factories and traditional industries existed side by side

Factories could higher quantities of goods at lower costs than
traditional industries

Despite opposition, factory system grew in importance

Capitalists found motivation in profit, status, and control

Regulations were established to ensure the continued existence of a
modern society

The industrial revolution helped develop capitalism‘s significant
characteristic for self
generated change


Smith vs. Marx

The truth is somewhere in between

Smith view: the markets work most efficiently when they
are regulated by freely competitive processes


no restriction of competition by the government

efficient allocation of resources

Marx view: industrialization is an exploitative processe at
the expense of the labour force

capitalists are able to drive down wages to provide surplus value

Both sides where wrong

Perfect competition will not always serve the best results

Labour has developed abilities to cope with capitalism (labour unions)

Industrialization as a process of
creative destruction

New Innovations as response of a crisis

Kondratieff cycles

industrial revelution occured in terms of a series of long waves

each wave comprises periods of recovery, prosperity and recession
and is terminated by severe depression

Development of the waves

each new wave is created by the clustering of basic innovations

This stimulate the opportunities for investment and employment in new
branches of industrie

after some time markets for the new goods become saturated

emphasis is now on improving precess technology (reducing labour)

This creates a crisis because of the excess capacity and decreasing

the way out is another cluster of innovations


Industrialization as a process of
creative destruction

Each wave was started by an important innovation

5 Kondratieff waves have been identified:

1. Wave started in the 1770‘s evoked by clustering of innovations in
the iron and textile industrie

2. Wave started in the 1820‘s evoked by clustering of innovations in
steam power and railways

3. Wave started in the 1880‘s evoked by clustering of innovations in
electric power and chemicals

4. Wave started in the 1940‘s evoked by clustering of innovations in
petrochemicals, electronics, autos and aerospace

5. Wave started in the 1980‘s and is still in progress evoked by
clustering of innovations in microelectronics


Industrialization as a process of creative

The new approach try to improve the old theory

Critique and improvements of the Kondratieff cycles theory

The emphasis is only on technological variables

But the reason way industrial development happens is more
complicated and includes other variables

New approach

based on recognizing shifts in techno

Long waves of economic activity are broadly based and embedded
within a society


Industrialization as a process of
creative destruction

Radical innov. have an greater impact than incr. innov.

Shifts in techno
economic paradigm

4 different types of innovations are distingushed

Incremental innovations

occur continuously

no single incremental innovation has a dramatic effect

but all all incremental innovations together have a great influence on the

Radical innovations

occur unevenly over time, space and sectors

they have a dramatic impact

the basis of investment booms

the impact is may limited to the new products


Industrialization as a process of
creative destruction

economic paradigm herald a new wave

New technology systems

combine radical and incremental technological innovations with
organizationl and managerial innovations

broade impact on several branches of the economy

create new industries

economic paradigm

the new technology systems exercise pervasive effects throughout the
entire economy

major industrial and infrastructural innovations

new principles of productivity

emergence of new forms of business organization

innovations in international and national systems of regulation

Broad shifts in industrial and technological leadership


Industrialization as a process of
creative destruction

new paradigms are associated with a main industry

New techno
economic paradigms occure:

As a response of a downswing phase of the previous Kondratieff wave

Because it offers some decisive advantages over the previous one e.g.
reducing the costs of production

Main industries and infrastructure

each paradigm is associated with specific mixes of dominant industies
and expansions of particular forms of infrastructure

the new small industries of a paradigm which grow rapidly become the
main carrier branches of the next paradigm

each wave adds layers of new activity and infrastructure while
simultaneously forcing changes in existing structures

Interdependencies among industries is a very important feature for the
industrializaton process


Industrialization as a process of
creative destruction

new paradigms are supported by a key factor

Sources of producivity improvement:

economies of scale


highly spezialised labour can do the work faster and better

reduction in labour costs and improvement in quality

but there also diseconomies of scale e.g. rooted in the boring work
or inflexibility

Key factor

each paradigm is associated with a key factor, e.g. oil or micro

they fulfill three conditions:

avarage cost (and price) of key factors falls rapidly

key factors are in almost unlimited supply for long periods

key factors have potential for incorporation in many products and


Industrialization as a process of
creative destruction

A crisis pave the way for a new paradigm

Institutional innovations

each paradigm is implicated with new forms of international and national
systems of regulation

In addition to that each paradigm is associated with institutional
innovations affecting business organization (e.g. plc.), labour relations
and systems of innovation (e.g. r&d laboratories, universities)

The crisis of structural adjustment

The shift from the old to the new techno
economic paradigm occurs
mostly in time of recession


Old paradigms are considerable resistance against changes because of
the made investments, human attitudes (the sense of tradition) and
because of the fear of new challenges

Thus, as the economic and social problems of the old paradigm become
apparent, the people are willing to change their mind


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