Innovation and institutional change: the transition to a sustainable ...

Theoretical perspectives 19
Nelson and Winter (1982) developed an evolutionary theory of economic
change with routines as principal elements to explain firm behaviour. In
evolutionary economics, habits and routines function as relatively durable
genes, because “firms may be expected to behave in the future according to
the routines they have employed in the past” (Nelson and Winter, 1982:
134). Routines are defined as decision-rules that are applied routinely over
longer periods of time, and “range from well-specified technical routines for
producing things, procedures for hiring and firing, ordering new inventory,
or stepping up production of items in high demand, to policies regarding
investment, research and development, or advertising, and business
strategies about product diversification and overseas investments” (Nelson
and Winter, 1982: 14). Routines are ‘remembered’ by doing, just as
professional piano- or tennis-players need to practice every day to keep their
movements smooth and accurate, in a natural and unconscious way. This
also implies that there is some level of tacitness involved: routines can not be
transferred smoothly, just as skills need to be built up. Nelson and Winter
(1982: 16-17) discern three types of routines within firms, those of an
operational nature, those regarding investment decisions, and routines to
modify various operating characteristics, thus contemplating whether the
way they are doing things is still appropriate. Here they assume a hierarchy
of decision rules with higher order procedures governing modification of
lower ones. In the economy the most successful routines survive (are
selected) and are transferred to other firms through imitation, take-overs,
labour mobility and training. According to Nelson and Winter routines also
play a crucial role in innovative activities. They view innovations in
organisational routines as new combinations of existing routines. They argue
that problem-solving is routinised in terms of the way the problem is
approached: certain search and problem-solving heuristics are applied
(Nelson and Winter, 1982: 132-133). Search processes are local in the sense
that the focus is on techniques close to the current one (Nelson and Winter,
1982: 211). This leads to technological trajectories based on general
principles on how to move a certain technology, technological configuration
or system forward. Saviotti (1996: 45) argues that “know-how, routines,
decision rules and dominant competences are relatively invariant with
respect to many types of environmental changes thus giving rise to dominant
designs, technological regimes and paradigms”. Dosi (1988: 225) uses the
term technological paradigm that defines “the technological opportunities
for further innovations and some basic procedures on how to exploit them”.
Certain exemplars (basic artefacts such as a car, steam turbine or fuel cell)
are further developed and improved on the basis of a set of heuristics that
guide direction and knowledge nature of search processes (Dosi, 1988: 224).
An example is the steam turbine for which efficiency steadily improved by