Improving embedded knowledge in old industrial districts: Case studies, from Valencia, Spain

Abstract

The loss of competitive advantage is one of the risks facing local productive systems that are specialized in mature sectors. Case studies seem to indicate that these systems sometimes respond negatively to technological and commercial change because they are incapable of designing adequate adaptive strategies. We hypothesize that the principal cause of this situation is linked to the relative lack of quality in productive inputs used by local systems. While capital goods show a tendency toward modernization due to investment by firms in new machinery and designs acquired and adapted from abroad, human resources and, in general, the level of knowledge existing in the local productive system, do not conform to a similar pattern. Indeed, there is a potential gap between the technological and training capabilities of managers and workers and the potential levels at the frontier of knowledge. As a consequence, accumulated human knowledge may become stagnant and firms within the system may show considerable inertia.