This paper sets out a theoretical framework for an explanation of the co-evolution of the institutional selection environment and organizations in innovation systems. The paper demonstrates that coevolution can be understood in terms of how exploitation and exploration build on each other, in a ‘cycle of discovery’, developed in earlier research. The framework is tested empirically, in the sense of seeing whether it can help to reconstruct and understand the emergence of the (Dutch) pharmaceutical industry. From this, we conclude that the theoretical framework we propose serves its purpose of providing a theory of co-evolution. But there are also some lessons for improving it.
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