Chapter 11: What do we learn from the research?
Value creation occurs through interaction
Throughout this series, we have examined value creation from multiple perspectives. We have seen how economic thinking about value creation has evolved, how value is created in modern economies, and how some of the world's leading economists and researchers explain the connection between knowledge, innovation, productivity, institutions, competitiveness, and economic development.
Joseph E. Stiglitz , Mariana Mazzucato , Philippe Aghion , Douglass North , Michael Porter , and Kalle Moene represent different research traditions. They place different emphasis on the mechanisms that drive economic development, and they do not necessarily agree on how policies, markets, and institutions should be designed.
Yet a clear bigger picture emerges when their perspectives are seen in context:
Value creation does not happen in isolation. Value creation happens in interaction.
Table of contents
No one creates value alone.
Knowledge is a fundamental resource
Innovation turns knowledge into new opportunities
Productivity determines how much we get out of our resources.
Institutions and trust influence interaction
Public and private sectors are interdependent
The people tie the system together
Value creation occurs in an ecosystem
The quality of the interaction matters.
What do we learn?
1. No one creates value alone
One of the clearest lessons from the research is that modern value creation is difficult to understand as the result of a single actor.
The business needs competent employees.
Employees need education and knowledge.
Innovation needs research, ideas and capital.
Investors need businesses and entrepreneurs who can convert capital into productive activity.
Markets need institutions, laws and trust.
The public sector needs the revenue generated through economic activity, while the business sector is dependent on infrastructure, education, health, the legal system and stable framework conditions, among other things.
Value creation thus becomes a mutual process.
2. Knowledge is a fundamental resource
Joseph Stiglitz 's research shows how important knowledge and learning are for economic development.
In modern economies, it is not just the amount of labor or physical capital that determines productivity. It is also what people know, what they learn, and how well knowledge is disseminated and applied.
Knowledge also has a special property: When knowledge is shared, it does not disappear from the person who already has it.
It can be used by several people.
Further development.
Combined with other knowledge.
And form the basis for new ideas.
Thus, knowledge becomes one of the most important building blocks in modern value creation.
3. Innovation translates knowledge into new opportunities
Philippe Aghion shows how innovation drives economic renewal.
New knowledge gains economic significance when people and businesses manage to use it to develop better products, services, technologies and work processes.
Innovation also challenges existing solutions.
Some businesses are growing.
Others disappear.
Job duties change.
New technology replaces old technology.
This continuous renewal is an important source of productivity growth and long-term economic development.
4. Productivity determines how much we get out of our resources
Michael Porter focuses on productivity and competitiveness.
Value creation is not just about how many resources a society has at its disposal.
It's about how well resources are used .
Competence, technology, capital and labour can be combined in very different ways. Businesses that continuously improve work processes, develop competence and create greater value for customers can achieve higher productivity without necessarily using correspondingly more resources.
Productivity is thus a result of how resources are put together.
Value creation occurs through interaction – and how great the value creation will be depends not only on the resources we have, but on how well people, knowledge, capital, technology, businesses and institutions work together.
5. Institutions and trust influence interaction
Douglass North adds another crucial dimension.
Economic activity always takes place within institutions.
Laws.
Property rights.
Contracts.
Norms.
Political systems.
And expectations of how other people will behave.
When institutions function well, uncertainty is reduced.
People and businesses dare to invest, enter into long-term agreements and collaborate.
Trust thus takes on economic significance.
It reduces the need for control and makes financial transactions easier.
Value creation therefore depends not only on the resources in the economy, but also on the quality of the institutions that connect the actors.
6. The public and private sectors are interdependent
Mariana Mazzucato challenges the notion that value creation occurs exclusively in the private sector, while the public sector primarily distributes the values afterwards.
She shows how publicly funded research, education, infrastructure and long-term investments can contribute to the development of technologies and markets that later form the basis for private innovation and commercialization.
At the same time, the public sector is dependent on a productive business sector, jobs, investments and tax revenues.
The relationship between the public and private sectors cannot therefore be reduced to a question of which sector "creates" and which "consumes".
Modern value creation occurs through a far more complex interaction.
7. The people tie the system together
Kalle Moene's research brings several of these perspectives together through analyses of the Nordic model.
Competence, trust, high labor force participation, cooperation, coordinated wage formation and adaptability affect how the economy functions.
Behind the institutions are people.
Behind innovation are people.
Behind the businesses there are people.
Behind the research there are people.
And behind the public sector there are people.
Technology, capital and institutions are crucial resources, but it is people who develop, apply and connect them.
Thus, human capital becomes a central part of society's value creation.
8. Value creation occurs in an ecosystem
When the research is viewed as a whole, it becomes difficult to draw a clear line between where value creation begins and where it ends.
A university develops research.
A scientist discovers something new.
An entrepreneur sees an opportunity.
An investor provides capital.
A business develops the solution.
Employees are improving it.
Suppliers contribute expertise.
Public institutions establish the framework conditions.
Customers decide whether the solution actually creates value for them.
Value creation can therefore be understood as an ecosystem of interdependent actors .
Value does not only arise in each individual link.
It also occurs between the joints .
9. The quality of the interaction matters
Several research perspectives meet here.
It is not enough to have good universities if the knowledge is never put to use.
It is not enough to have capital if it does not find productive investments.
It is not enough to have technology if people lack the skills to use it.
It is not enough to have innovative businesses if the institutions around them create great uncertainty.
And it is not enough to have strong institutions if
the economy lacks entrepreneurship, investment and renewal.
The quality of the connections between the resources therefore matters.
Trust can make collaboration easier.
Expertise can make technology more productive.
Good institutions can reduce uncertainty.
Competition can stimulate innovation.
Collaboration can spread knowledge.
When these mechanisms work well together, friction in the economy is reduced.
10. What do we learn?
The research does not provide one simple formula for value creation.
But it shows that modern value creation is difficult to understand through capital, labor, technology, the public sector or private business in isolation.
Knowledge must be developed.
Innovation must take place.
Capital must be invested.
People must have competence.
Businesses must be productive.
Institutions must function.
And people and organizations must be able to trust each other enough to collaborate, invest and think long-term.
Perhaps the most important lesson from the research is therefore not that one specific resource creates the values.
It is that value creation occurs through the interaction between them .
And this leads us to the next question:
If value creation occurs through interaction – what is it that makes some societies and businesses better than others at making this interaction work?
That is the starting point for the next article:
Invisible capital's understanding of value creation.
11. Further reading
For readers who want a broader understanding of value creation and economic development, the research is also recommended for:
Academic background and further reading
This series also builds on my own professional journey through the Web Design study , the eMarketing study , Innovation and Commercialization and professional seminars in San Francisco and Oxford . Here you will find the background, professional environments and experiences that have followed the development from the early years of the web to today's digitalization.
Recommended literature
Value creation is about much more than economic growth and money. It is about people, knowledge, innovation, productivity, institutions, trust and the interaction between the public and private sectors.
Here we have collected books from some of the world's leading economists and thinkers who explain in various ways how value is created, who contributes to creating it, and what prerequisites make long-term value creation possible.
The books complement each other and provide different perspectives on the same fundamental question:
What really makes people, businesses and societies create greater value over time?
Recommended books from our library
Author: Joseph E. Stiglitz and Bruce C. Greenwald
Short review:
Creating a Learning Society examines how knowledge, learning, and technological development contribute to economic growth and long-term value creation. Joseph E. Stiglitz and Bruce C. Greenwald challenge the notion that economic development is primarily about accumulating more physical capital. They argue that society’s ability to create, disseminate, and apply knowledge is crucial to productivity growth and improved living standards. A key point is that learning does not only occur in schools and universities. It also occurs in businesses, through work, production, innovation, and the interaction between people and organizations. Knowledge can also spread from one business and one part of the economy to others.
The book thus provides an important perspective on why human capital, competence, innovation and learning must be understood as central parts of a society's ability to create value over time.
Why we recommend the book
We recommend Creating a Learning Society because it expands the understanding of what lies behind economic value creation.
Machines, technology and financial capital are important, but they do not create productivity growth alone. Behind the development are people who learn, develop knowledge, improve work processes, share experiences and find new solutions.
This makes the book particularly relevant to Invisible Capital and our perspective on value creation: A significant part of society's value-creating capacity is found in the knowledge, competence, and learning ability of the people who participate in the economy.
Stiglitz and Greenwald thus provide an academic foundation for one of the most important relationships in modern value creation:
Author: Mariana Mazzucato
Short review
IN The Value of Everything asks Mariana Mazzucato a fundamental question: What exactly is value – and who creates it? Mazzucato returns to the historical discussions of value in economics and shows how the understanding of value creation has changed. She challenges the notion that high income, high prices or large profits necessarily mean that correspondingly large values have been created. One of the book's most important contributions is the distinction between value creation and value extraction . Mazzucato examines the financial sector, the pharmaceutical industry, innovation and the public sector, among others, and argues that we must become better at distinguishing between activities that actually create new values, and activities that primarily extract values that have already been created.
The book also challenges the traditional notion that the private sector creates value while the public sector mainly consumes or redistributes it. Innovation and economic development often arise through a complex interaction between public investment, research, businesses, capital and people.
Author: Philippe Aghion, Céline Antonin and Simon Bunel
Short review
The Power of Creative Destruction is about one of the most important drivers of long-term economic growth: innovation.
Philippe Aghion, Céline Antonin and Simon Bunel build on Joseph Schumpeter's classic idea of "creative destruction" – the process by which new technologies, businesses, products and ideas challenge and replace existing solutions.
But the book is not just about the disappearance of the old. The authors examine why some economies manage to create continuous innovation and productivity growth, while others stagnate. Competition, entrepreneurship, research, education, institutions and public policy thus become important parts of the explanation.
Creative destruction also comes at a cost. New technologies and businesses create opportunities and jobs, but can also make existing skills, tasks and business models less relevant. The challenge is therefore to create societies that both promote innovation and enable people to participate in the transition.
Why we recommend the book
We recommend The Power of Creative Destruction because it shows why innovation is a fundamental driver of value creation .
Value creation is not just about producing more of what we already produce. It also occurs when people develop new ideas, technology, and ways of working that enable us to solve tasks better than before.
This makes the book particularly relevant to The Invisible Capital. Behind innovation are people with knowledge, expertise, creativity and experience. But Aghion's perspective also shows that human capital must be part of a larger system where competition, institutions, research, investment and policy create the conditions for new ideas to actually turn into economic and social development.
The book thus provides an important context in our understanding of value creation:
Knowledge → new ideas → innovation → productivity growth → long-term value creation.
Author: Michael E. Porter
Short review
Competitive Advantage is one of Michael E. Porter's most influential works on how businesses create value and develop lasting competitive advantages.
One of the book's most important contributions is the value chain . Porter shows that a business should not be viewed as a single, unified activity, but as a series of interconnected activities – from development and production to logistics, marketing, sales and service. It is through these activities, and the interaction between them, that the business creates value for customers.
Porter also shows how competitive advantage can arise through, among other things, lower costs or differentiation. But behind these results lies the organization of the company's activities, expertise, technology, work processes and the way in which resources are used.
The value chain thus makes it possible to examine where in the business the values are actually created – and how different activities together contribute to the end result.
Why we recommend the book
We recommend Competitive Advantage because Porter gives us a perspective that fits very well into our broader understanding of value creation.
When we talk about a business “creating value,” it may sound as if the business does this as a single entity. Porter opens up the business and shows that value creation occurs through many activities that are interrelated .
And this is where people become particularly interesting.
Behind research, product development, purchasing, production, logistics, marketing, sales, customer service, technology and management are people with knowledge, experience, expertise and the ability to collaborate . The value chain is therefore also a useful way to highlight the human effort behind the company's financial results.
For Invisible Capital, Porter thus gives us another important part of the value creation picture:
People and resources → activities → interaction → customer value → competitiveness → value creation
Author: Philippe Aghion, Céline Antonin and Simon Bunel
Short review
Institutions, Institutional Change and Economic Performance is one of Douglass C. North's most important works on why some societies are more successful than others in creating economic development over time.
North shifts attention from traditional factors of production such as capital and labor to the institutions that shape how people, businesses, and governments act and cooperate. Institutions are society's formal and informal rules of the game – including laws, regulations, norms, traditions, and established ways of organizing interaction.
These rules of the game affect the incentives that people and organizations face. They also affect investments, knowledge development, cooperation, transaction costs, and which economic activities emerge.
North also shows that institutions develop over time. History therefore matters: Today's economic opportunities are influenced by institutional choices and development paths that can stretch far back in time.
Why we recommend the book
We recommend Institutions, Institutional Change and Economic Performance because it explains a crucial aspect of value creation that easily becomes invisible:
Value creation needs good rules of the game.
People may have knowledge. Businesses may have capital. Entrepreneurs may have great ideas. A society may have natural resources and advanced technology. But outcomes are also influenced by the institutions that determine how people can collaborate, invest, compete, make deals, and develop businesses.
This makes North particularly interesting for our understanding of trust as part of invisible capital. Trust is not the same as institutions, but stable rules of the game, credible agreements, and well-functioning institutions can reduce uncertainty and make economic interaction easier.
North thus gives us another important part of the value creation picture:
Institutions → predictability and incentives → cooperation and investment → productive activity → long-term value creation.
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