This chapter is about the external and internal basic conditions that affect the decision-making mechanisms, organisational coordination and competitiveness of the firm. The basic conditions are listed in the left-hand rectangular box in figure 1.1, which also indicates the section number in which each basic condition is discussed. Basic conditions are mainly composed of the following interrelated features: (i) attributes of information and knowledge, (ii) techniques and equipment available, (iii) individual motivations and aims, (iv) individual abilities, (v) degree of uncertainty, (vi) structural change and (vii) institutional and market conditions. The basic conditions are two-fold: they have an external face given by the characteristics of the environment and an internal face which emerges from the organisational setting of the firm. For instance, a given enterprise may acquire external knowledge characterised by specific features (e.g. low cost of reproducibility) and may produce internal knowledge that is highly tacit. The former is an external environmental condition while the latter is an internal condition. Analogously, firms mainly rest on the labour supply characteristics of the local market. The abilities of the members of firms largely derive from the abilities of labour forces available on the market. However, firms have the option of training their employees. This changes the abilities possessed by their employees and moulds the characteristics of the labour force actually utilised by the firm. Hence, internal training and the development of experiences by the employees tends to influence the level and kind of abilities available on the market.