Economic Organization, Capabilities and Coordination

9

THE CONCEPT OF CAPABILITIES

Brian J. Loasby

INTRODUCTION

It is convenient to think of industry as carrying out an indefinitely large number of activities, activities related to the discovery and estimation of future wants, to research, development, and design, to the execution and co-ordination of processes of physical transformation, the marketing of goods, and so on. And we have to recognise that these activities have to be carried out by organisations with appropriate capabilities, or, in other words, with appropriate knowledge, experience, and skills.

(Richardson 1972: 888)

In these two sentences George Richardson set out the agenda for what has come to be called the capabilities theory of the firm. It is a theory which seeks to explain ...