By Brad Cunningham – For those who haven’t played Scrabble recently, here’s a refresher. Players collect a number of individual tiles, each of which carries one letter of the alphabet. Players then combine their letters in order to spell words. The value of the words is determined by the sum of the value of each letter, with rarer letters (e.g. Q, X, Z) having a higher value than common letters (e.g. A, E, S, T). Players then compete to produce the most valuable words out of the letters available to them.
In an economy, firms endeavor to make products similar to how Scrabble players make words. To make a product, firms must bring together a variety of very different and very specific inputs and activities. Each of these inputs can be thought of as one capability needed for production, just as a letter in Scrabble represents one capability needed to make a word possible.
Under this model, there are two paths to industrial growth. The first path occurs when an industry with potential is new to an area and some necessary capabilities are not available locally. An entrepreneur must figure out how to create the missing letters and coordinate them with locally available letters to spell a new word. Once this problem is solved, industries can grow via the second path: by simply replicating and scaling up existing capabilities.
Developing countries can grow by bringing in capabilities from around the world, whereas developed countries generally have to innovate new capabilities to grow. more> https://goo.gl/m52AbL