Ola Olsson

Product Innovation in Small and Large Enterprises

Innovation networks, establishment characteristics and the regional environment are likely to play different roles in product innovation in enterprises of different size. This paper focuses on the influence of the regional environment on the early adoption of micro-electronic components in product development in small and medium-sized enterprises (SMEs) and large enterprises (LEs). Drawing upon existing literature we compare the role of enterprise characteristics, innovation networks and, in particular, the regional environment for an early use of micro-electronic components in product development in SMEs and LEs using a tobit model. Our central hypothesis is that SMEs are more dependent upon their regional environment than LEs for an early adoption. However, this hypothesis is rejected by our empirical results that show that location in a large, dense region has a significant positive effect on product innovation in LEs, while it has a negative but non-significant effect on product innovation in SMEs. Our results imply peripheral regions are able to provide an innovative environment for SMEs, whereas LEs need the richer environment offered by the core regions. The results are also interesting from a policy point of view because they indicate that SMEs can be early users of new technologies even if they are located outside the large urban areas.

Congo: The Prize of Predation

The article analyzes the war against Mobutu (1996-97) and the more recent war (1998-) in the Democratic Republic of the Congo with particular attention to greed and grievance as motivating factors in these two wars. Whereas the authors’ usage of the term ‘greed’ simply reflects the desire to gain control of natural resource rents, they model ‘grievance’ as deliberate institutional differences, implemented by the ruler, between the formal and informal sectors. On the basis of quantitative and qualitative evidence, the authors outline a model of a predatory conflict between a kleptocratic ruler and a group of potential predators within a given region. The potential predators choose between peaceful production and predation on the ruling elite, who control the country’s natural resource rents. It is shown that institutional grievance between the formal and informal sectors, along with the relative strength of the ruler’s defense, play a key role for the initiation of a war. This observation is used to explain the timing of the two wars analyzed in this article. The model also shows that once a war has commenced, the abundance of natural resources and the ruler’s kleptocratic tendencies determine conflict intensity. This result is also well in line with experience from the most recent Congolese war.

Knowledge as a Set in Idea Space: An Epistemological View on Growth

This articlepresents a model of knowledge, seen as a set of ideas definedin a multidimensional idea space. Knowledge is created throughconvex combinations of older ideas and through paradigm shifts.When normal science has made the knowledge set convex, scientificopportunity is exhausted. Individual countries are endowed withdifferent knowledge sets, which gives rise to idea gaps. Thegrowth of a countrys knowledge depends on diffusion from othercountries, on own production, and on the state of its human capitaland institutions. In the long run, economic growth will dependon knowledge growth, but only paradigm shifts can save R&Dfrom diminishing returns

ENTREPRENEURSHIP AS RECOMBINANT GROWTH

The paper presents a model of the entrepreneur as an undertaker of new combinations of ideas. Technology is seen as a set of ideas in a metric technology space where new knowledge is created by the combination of older ideas in the spirit of Schumpeter (1934), Weitzman (1998) and Olsson (2000). Given some intuitive assumptions, we demonstrate that technological progress generated by the convex combination of ideas is constrained by five factors: First, the combinatory process eventually leads to the exhaustion of technological opportunity. Second, the cost of combining ideas increases with the technological distance between the originating ideas. Third, profits are maximized when ideas are combined that are technologically close. Fourth, the technology set is constrained by a social possibility set of socially acceptable ideas. Fifth, the boundaries implied by the ruling technological paradigm limit the scope for eternal recombinant growth.

Diamonds are a Rebel's Best Friend

Many countries that produce rough diamond have experienced a highly adverse pattern of economic development. In this article, we propose that the primary reason for the negative impact is that diamonds easily become the prize in predatory struggles between loot-seeking rebels and more or less kleptocratic governments. In weakly institutionalized countries like Angola, Democratic Republic of the Congo, and Sierra Leone, this theory works well, but it does not explain the impressive growth record of diamond-rich Botswana and Namibia. For a deeper understanding of these countries’ success, we point at the crucial differences between kimberlite and alluvial mining and the effect of having the world leading firm De Beers as a partner. Indeed, we argue that in countries like Angola, diamonds can never be a major vehicle for sustained growth, although the ongoing Kimberley process for eliminating conflict diamonds probably has contributed to making several African countries more stable.

A Western Reversal Since the Neolithic? The Long-Run Impact of Early Agriculture

While it is widely believed that regions which experienced a transition to Neolithic agriculture early also become institutionally and economically more advanced, many indicators suggest that within the Western agricultural core (including Europe, North Africa, the Middle East, and Southwest Asia), communities that adopted agriculture early in fact have weaker institutions and poorly functioning economies today. In the current paper, we attempt to integrate both of these trends in a coherent historical framework. Our main argument is that countries that made the transition early also tended to develop autocratic societies with social inequality and pervasive rent seeking, whereas later adopters were more likely to have egalitarian societies with stronger private property rights. These different institutional trajectories implied a gradual shift of dominance from the early civilizations towards regions in the periphery. We document this relative reversal within the Western core by showing a robust negative correlation between years since transition to agriculture and contemporary levels of income and institutional development, on both the national and the regional level. Our results further indicate that the reversal had become manifest already before the era of European colonization.

Feeding the Horse: Unofficial Economic Activities within the Police Force in the Democratic Republic of the Congo

ABSTRACT Based on original interview material, this article addresses the organization of unofficial economic activities within the Congolese (Democratic Republic of the Congo) police force. In contrast to dominant assumptions in security sector reform discourses in the Democratic Republic of the Congo, in which property violations tend to be portrayed as disorganized, ad-hoc activities, following from irregular and insufficient salaries, the article shows how property violations are highly organized with large portions flowing upward in the chain of command. However, the article also argues for the need to go beyond one-dimensional notions of “unrestrained predation” and simplistic dichotomies between civilians (victims) and police/military (predators). Furthermore, it argues for a more contextual analysis in which the core security sector institutions are situated more firmly in the political and economic context in which they operate.

Origins of the Sicilian Mafia: The Market for Lemons

Since its first appearance in the late 1800s, the origins of the Sicilian mafia have remained a largely unresolved mystery. Both institutional and historical explanations have been proposed in the literature through the years. In this paper, we develop an argument for a market structure -hypothesis, contending that mafia arose in towns where firms made unusually high profits due to imperfect competition. We identify the production of citrus fruits as a sector with very high international demand as well as substantial fixed costs that acted as a barrier to entry in many places and secured high profits in others. We argue that the mafia arose out of the need to protect citrus production from predation by thieves. Using the original data from a parliamentary inquiry in 1881-86 on Sicilian towns, we show that mafia presence is strongly related to the production of orange and lemon. This result contrasts recent work that emphasizes the importance of land reforms and a broadening of property rights as the main reason for the emergence of mafia protection.

Geography and institutions: Plausible and implausible linkages

In recent years, empirical investigations have shown that various aspects of physical geography are closely related to the quality of a country’s economic institutions. For instance, distance from the equator in latitude degrees is positively correlated to both institutional quality and to levels of economic development. In order to reach a better understanding for this type of regularities, this article reviews the growing empirical literature on geography and institutions, as well as a large body of older and newer theoretical works on the social impacts of geography. It is argued that the most plausible candidates for explaining the broadest cross-continental variance in institutional quality are those focusing on historical differences in biogeographical potential for early agriculture and on the importance of disease geography for European colonization strategy.

State History and Economic Development: Evidence from Six Millennia

All since the rise of the first civilizations, economic development has been closely intertwined with the evolution of states. In this paper, we contribute to the literature on state history and long-run economic development in four ways. First, we extend and complete the state history index from Bockstette, Chanda and Putterman (2002) by coding the experience with states from the first state origins, 3500 BCE, up until 2000 CE. Second, we explore empirically the relationship between time since transition to agriculture and state age, as well as subsequent state history. Our estimated unconditional correlation implies that a 1000 year earlier transition to agriculture is associated with a 470 years earlier emergence of state institutions. We show how this relationship differs between indigenously - and externally - originated states. Third, we show that the relationship between our extended state history index and current levels of economic development has the shape of an inverted u. The results reflect the fact that countries that were home to the oldest states, such as Iraq, Egypt and China, are poorer today than younger inheritors of their civilizations, such as Germany, Denmark and Japan. This pattern was already in place by 1500 CE and is robust to adjusting for migrations during the colonial era. Finally, we demonstrate a very close relationship between state formation and the adoption of writing.