Transformations  in
Business & Economics

Transformation of Small Open Economies in The Globalising Learning Economy – The Danish Case
Bengt-Åke Lundvall

ABSTRACT. Small economies should be handicapped in the knowledge economy. There are scale advantages in the production and use of knowledge and they have difficulties in establishing high tech sectors. Still some of the most productive national economies in the world are small.

We argue that this has to do with social capital and social cohesion. Small countries have established institutions that promote flexibility, incremental innovation and learning, qualities much in demand in the current ‘globalising learning economy’.

We illustrate with a unique data set combining survey data from 2000 Danish firms with employment data how increased competition stimulates innovation and how job losses take place among the firms that do not engage in innovation.

Finally, we indicate lessons for small post-socialist countries. We argue that for small modern innovation systems, welfare states and broad participation in training and work life are as important as investing in advanced technologies.

KEYWORDS: competition, learning economy, economic transformation, small countries, transition economies, Denmark.