ABSTRACT
Perhaps the most striking fact in economics pertains to the large cross-country differences in economic growth and, of special relevance to this book, in innovation performance (Casper and van Waarden 2005). We propose and argue throughout this book that it is critical to seriously consider the role of institutions as an explanatory variable. This is what institutional economics is about: it analyses how institutions affect the behaviour of economic (corporate and individual) actors. In short: ‘institutions matter’. A further striking fact is that these cross-country differences remain quite stable over time, despite globalization and the development of new technologies. Thus, differences are not of a temporary nature. Of relevance here is evolutionary economics, inspired by economists like Joseph A. Schumpeter or Friedrich A. von Hayek, which stresses the role of knowledge, the role of actors (differentiating them from the neoclassical rational choice agent), and, most importantly, the role of historical conditionality and the systemic characteristics of institutions (see for an introduction into evolutionary economics Herrmann-Pillath and Lehmann-Waffenschmidt 2001; Koch 1996; Nelson and Winter 1982). In short: ‘history matters’.
