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Innovation Economics

Innovation Economics. Class 1. Importance of Science and Technology. Rate of economic growth and innovation Economists have recognized the central importance of technological innovation for economic progress Adam Smith “Wealth of Nations” Marx’s model of capitalist economy

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Innovation Economics

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  1. Innovation Economics Class 1

  2. Importance of Science and Technology • Rate of economic growth and innovation • Economists have recognized the central importance of technological innovation for economic progress • Adam Smith “Wealth of Nations” • Marx’s model of capitalist economy • Marshall considers knowledge as chief engine in progress • Earlier neglect of invention and innovation in the economic models. Treat innovation as exogenous. Economic growth problems treated technology as constant.

  3. The Research and Development System • Research system • Government and university, firms. • 1870s: First specialized labs • Schumpeter’s distnction between innovation and invention • Invention: New idea, sketch, model for a new and improved device. • Innovation: The whole process of developing a new product. Product innovation and process innovation.

  4. Technology Index Macroeconomic Environment Index Public Institutions Index Technology Transfer Sub-Index Corruption Sub-Index Country Credit Rating Government Waste Information & Communications Technology Sub-Index THE GLOBAL COMPETITIVENESS REPORT Growth Competitiveness Index Macroeconomic Stability Sub-Index Contracts and Law Sub-Index Innovation Sub-Index Kaynak: WEF, 2003

  5. Company Operations & Strategy Factor (Input) Conditions Related and Supporting Industries THE GLOBAL COMPETITIVENESS REPORT Business Competitiveness Index Demand Conditions Context for Firm Strategy and Rivalry Kaynak: WEF, 2003

  6. Business Competitiveness Rank • Türkiye (65,52) Growth Competitiveness Kaynak: WEF, 2003

  7. Turkey’s Position in Global Competitiveness Kaynak: IMD

  8. COMPETITIVE INDUSTRIAL PERFORMANCE INDEX Kaynak: UNIDO

  9. Hihgh tech. tota HONG KONG ABD KORE ÇİN SANAYİLEŞMİŞ ÜLKELER FRANSA MEKSİKA GELİŞEN ÜLKELER ALMANYA TAYVAN JAPONYA ARJANTİN SİNGAPUR BREZİLYA İNGİLTERE 68 ÜLKE Growth Rates: High Technology and Total Manufacturing (1980-1998) Kaynak: US National Science Board

  10. Share of Manufacturing Value Added (%) Manufacturing Value Added Kaynak: UNIDO

  11. UNIDO Growth Rate of Manufacturing Value Added (1980-2000)

  12. Business Competitiveness index (2001) National Innovation Capacity Index (2001) Kaynak: WEF, 2003

  13. GDP Per Capita (2001) (PPP) National Innovation Capacity Index (2001) Kaynak: WEF, 2003

  14. Tecnnological Innovation in the Manufacturing Sector Kaynak: DİE, İmalat Sanayii Teknolojik Yenilik Anketi Sonuçları, Ankara,2004.

  15. Types of Technological Innovation Kaynak: DİE, İmalat Sanayii Teknolojik Yenilik Anketi Sonuçları, Ankara,2004.

  16. Types of Innovative Activities Kaynak: DİE, İmalat Sanayii Teknolojik Yenilik Anketi Sonuçları, Ankara,2004.

  17. Collabortion / Knowledge Sharing Kaynak: DİE, İmalat Sanayii Teknolojik Yenilik Anketi Sonuçları, Ankara,2004.

  18. R&D Intensity Avrupa Birliği 1,88% OECD 2,24% Kaynak: OECD in Figures 2002 Report

  19. Private R&D Expenditures Per Capita (Country Rank) Kaynak: UNIDO

  20. Share of Capital Investment in GDP Kaynak: DİE Kaynak: G. Ulusoy. GÜNÜMÜZ TÜRKİYE EKONOMİSİNDE ENDÜSTRİ MÜHENDİSLİĞİNİN YERİ, Sabanncı Üniversitesi.

  21. FDI Flows

  22. Professionalization of R&D is Associated With • 1. Increasing scientific character of technology • 2. Growing complexity of technology • 3. General trend towards division of labor

  23. Long Waves or Cycles • 1780-1840: Industrial revolution • 1840-1890: Age of steam power and railways • 1890-1940: Age of electricity and steel • 1940-1990: Age of mass production • 1990 - : Age of microelectronic and computer networks Successive industrial revolutions were based on the qualitative transformation of the economy by new technologies, rather than the simple quantitative growth of individual industries.

  24. Elements of the Innovation Process • Basic research • Applied research • R&D

  25. Stages in the Innovation Process • Invention • Innovation • Imitation Science push or market driven innovation Links, chains and feedbacks. Set of linked activities which may occur in a variety of sequences and sometimes simultaneously. Activities are linked.

  26. Recognizing the importance of science andtechnology for economic development.. • Francis Bacon (1620): Printing, gunpowder andthe compass ‘have changed the whole face andstate of things throughout the world…’ • Adam Smith (1776): ‘Improvements inmachinery’ go hand in hand with the division oflabour, and ‘very pretty machines . . . Facilitateand quicken production… • Karl Marx (1848): ‘The bourgeoisie cannot existwithout constantly revolutionizing the means ofproduction’! • Alfred Marshall (1897): ‘Knowledge’ is the chiefengine of progress in the economy • Joseph Schumpeter (1911): The entrepreneurand his search for ‘new combinations’ is thedriving force in all economic development… • Freeman & Soete (1997): ‘In the mostfundamental sense the winning of newknowledge is the basis of human civilization’…

  27. • So, no one doubts that innovationis crucial for our moderneconomies... • • ... but how can innovation be’analysed’... • • ... and how can it be’managed’?

  28. Economics of change... • • ’Production capacity’ = capital goods,knowledge and labour skills to PRODUCE • • ’Technological (innovative) capabilities’ =skills, knowledge and institutions thatmake it possible to generate and manageCHANGE in technology (Bell & Pavitt 1997)

  29. Invention and Innovation • Schumpeter’s distinction between”Invention” and ”innovation” • • An ’invention’ is an idea, a sketch or model fora new or improved device, product, process orsystem. It has not yet entered to economicsystem, and most inventions never do so. • • An ’innovation’ is accomplished only with thefirst commercial transaction involving the newproduct, process, system or device. It is part ofthe economic system.

  30. What type of innovation? • • ”product innovation” vs. ”process innovation” • • ”goods” vs. ”services” • • ”technological” vs. ”organizational” innovation • • ”incremental” vs. ”radical” innovation • • (”continuous” vs. ”discontinuous” innovation) • • ”architectural” vs. ”modular” innovation • • ”richness” vs. ”reach” • • ”position” innovation • • ”techno-economic paradigm change” • • etc.

  31. Changes in techno-economic paradigm • • Industrial revolutions, long waves, technoeconomic • paradigms... • • Freeman & Perez (1988): • – 1780-1840 (early mechanization) • – 1840-1890 (steam power and railways) • – 1890-1940 (electrical and heavy engineering) • – 1940-1990 (fordist mass production) • – 1990-? (information and communication)

  32. Which type of innovation is mostimportant??? • ”...it is the perceived degree of novelty whichmatters; novelty is very much in the eye of thebeholder. For example, in a giant,technologically advanced organization like Shellor IBM, advanced networked informationsystems are commonplace, but for a small cardealership or food processor even the use of asimple PC to connect to the Internet may stillrepresent a major challenge”!

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