The Long-Term Evolution of the Knowledge Boundaries of Firms: Supply and Demand Perspectives

This paper argues that, over the past decades, the boundaries of innovation, production and commercialization in terms of the content and the sources of knowledge for innovation have greatly expanded, often to reach beyond the legal boundaries of firms or the conventional definition of industries. The division between manufacturing activities and innovative labor has also increased. However, the governance of the knowledge that is relevant for innovation has remained in the hands of a relatively small number of firms within industries, or in a few areas within firms. These actors may indeed decide how and where that knowledge is used. As a consequence, the boundaries in terms of the governance of knowledge have remained much tighter than the boundaries in terms of the exchange of that knowledge. In addition, although important changes have occurred in terms of industry and firm boundaries, they do not represent a radical change from the past. Rather they are a gradual transformation of the industrial system due to co-evolutionary processes involving knowledge, technology, production and demand.