This paper addresses the organisation of production and how it impacts on the development of economic systems. We consider production systems from a knowledge perspective, looking at how the inputs to production are enriched both by the ‘skills, dexterity and judgement' of labour, and by the knowledge incorporated in technologies. Our main finding is that production activities impact on local systems by activating either virtuous or vicious cycles of capital accumulation, where by capital we refer to the knowledge incorporated into technologies, human resources, and production relationships. The division of labour across firms and localities, in particular, has been accentuated by the increasing complexity of knowledge contents in production. Complementary functions are compatible, however, with a hierarchy of activities characterised by different levels of knowledge contents and by different levels of economic power. In particular, in those localities where strategic decisions in production are mainly taken by firms according to their own objectives, the direction towards which local economic systems move could be contrasting with the development objectives shared collectively. We argue that knowledge is not a sufficient condition to retain strategic decision-making power in production, but it must be associated to the capability to exert voice effectively.
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