“What Do Firms Learn? Capabilities, Distribution and the Division of Labour”

The aim of this paper is to investigate the relation between the learning processes of firms and their industrial specialisation. Its point of departure is recent research in the theory of the firm – namely the capabilities (or competence) based approach - which has stressed how codified and tacit knowledge jointly account for the existence of differences in individual and organisational capabilities within and among firms. The paper contends that capabilities depend on the division of labour that management devises. The division of labour and the resulting capabilities affect the pattern of specialisation of the firm, which feeds back on the strategy pursued. Two alternative patterns may be envisaged. If, for whatever circumstance, management focuses on qualitative competitiveness and leaves distribution - within the firm or within the industry’s value chain - unaffected, the parties concerned are more likely to share the firm’s strategic outlook. A division of labour may be devised to solve problems associated to qualitative competitiveness and, in so far as such a goal is achieved, the value added accruing to the firm – and to the value chain – will rise and distribution will remain a minor issue. Alternatively, if management focuses on distribution, conflicts of interest may force it to devise a division of labour that assures loyalty at the expense of problem-solving. Under these circumstances, value added may not grow much, thereby leading to cost stripping as the only way to ensure short run profitability. The self-reinforcing patterns outlined may help to provide an account for actual divergences in the patterns of specialisation at the regional and country – as well as firm – levels.