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Theories of Technological Change. Definitions and concepts. Definitions and Concepts. Technological change: improvements in the products, production processes, material and intermediate inputs and management methods in the economic system The study of technological change analyzes:

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theories of technological change

Theories of Technological Change

Definitions and concepts

definitions and concepts
Definitions and Concepts
  • Technological change: improvements in the products, production processes, material and intermediate inputs and management methods in the economic system
  • The study of technological change analyzes:
    • The sources and the direction of potential improvements
    • The selection of actual changes from the long menu of potential changes
    • The process of the introduction of such changes
    • The impact of such introductions
definitions and concepts1
Definitions and Concepts
  • The three stages in the technological change process: The Schumpeterian trilogy
  • The first stage → invention process: the generation of new ideas
  • The second stage → innovation process: the development of new ideas into marketable products and processes
  • The third stage → diffusion: the new products and processes spread across the potential market (that is where the impact of new technology occurs and is measured)
definitions and concepts2
Definitions and Concepts
  • The trilogy is not a linear process in which invention automatically leads to innovation which automatically leads to diffusion
  • At each stage there is a selection process
  • There are extensive feedbacks that a linear process does not represent
    • As diffusion proceeds, expectation of profit may feedback to the invention and innovation process
    • The expectations of the returns to technologies represent the incentive to generate and introduce new technologies
definitions and concepts3
Definitions and Concepts
  • Product innovation: the generation, introduction and diffusion of a new product
  • Process innovation: the generation, introduction and diffusion of a new production process
  • Organizational innovation: changes in management methods
definitions and concepts4
Definitions and Concepts
  • Science is associated with the early stages in the trilogy, say invention, whereas technology is often associated with later stages in the trilogy
  • Technology: as activities generating advances close to market, which will yield private gain
  • Research and development (R&D) process: basic and applied
    • Basic research: relate closely to the invention process
    • Applied research: relate closely to the innovation stage
definitions and concepts5
Definitions and Concepts
  • Sources of technological improvement:
    • R&D
    • Learning of various kinds, design, reverse engineering and imitation
    • Licensing agreements and collaboration agreements
    • Acquirements from the suppliers of capital goods
  • Technological change: dynamic, involving risk and uncertainty
  • Technological and commercial risk: market failure-government intervention- policy making
technology and innovation the neoclassical viewpoint
Technology and Innovation:The Neoclassical Viewpoint
  • Technology as a set of fully known blueprints, codified knowledge available from the “universal blueprint library”
  • Producing the particular level of output at a minimum cost given the knowledge of the relative prices of the factor services (technology)
  • The flow of new knowledge, of inventions and innovations treated as outside the framework of economic models, as exogenous variables
  • Link between technical opportunities and economic choices (productivity, the elasticity of substitution, factor intensity)
  • What determines the production set if not contained in a universal library?
    • Specified by the knowledge contained within the firm
    • How about any changes of technique that needs learning and the growth of new knowledge?
technology and innovation the neoclassical viewpoint1
Technology and Innovation:The Neoclassical Viewpoint
  • The state of technical arts “ manna from heaven” → knowledge as a non-rival good
  • Knowledge could be used any number of times by any number of firms to produce any quantum of output or indeed to develop new knowledge
  • Knowledge is costless to transmit but not costless to absorb
  • Present state of accumulated knowledge matters
  • Fact: knowledge costly to produce, costly to absorb and absorptive capacity depends on prior acquisition of knowledge
technology and innovation the neoclassical viewpoint2
Technology and Innovation:The Neoclassical Viewpoint
  • Differences in innovation possibility sets are the rationale of different production possibility sets
  • Learning depending on experience by itself diversifies between firms generating different innovation locus (locally bounded pattern of technological development)
  • Creativity; local and radical
  • Why different capabilities to innovate and to produce between firms?
evolutionary approach
Evolutionary Approach
  • How and why do firms differ in their productive capabilities?
  • The focus is on adaptive response that is also creative
  • Local rationality but variation (not uniformity)
  • Firm is a creative, imaginative entity and the outcome of ongoing and unfinished process of organizational design
  • Penrose “ the capability theory of the firm” → the competence of the firm
  • The central feature of the capabilities perspective lies in its link with the creation and exploitation of knowledge → continual development of capabilities and creating new ones, “routines”
technical change and development from an evolutionary perspective
Technical Change and Development from an Evolutionary Perspective
  • Why the technological change and development is an evolutionary problem?
  • It requires:
    • Variation in performance relative to international competitors
    • Structural change in domestic and international economies (selection)
    • Generation of innovation to keep pace with world developments
  • Three concepts of building blocks of economic evolution: variation, selection and generation
technical change and development from an evolutionary perspective1
Technical Change and Development from an Evolutionary Perspective
  • Variation
    • Differences between firms in their economic performance traceable to the differences in their technological and organizational capabilities
    • Idiosyncratic dimension of firms
    • Development by imitation and dynamic competition
  • Selection
    • The competitive process by which the different technological capabilities acquire different levels of economic significance over time
  • Variation and selection → generation
    • Creative capacity “innovative variation”
  • The nature of the firm as an experimental agency embedded in market process as well as its nature as a productive agency is at the forefront of the evolutionary analyses of technological change
the policy dimension
The Policy Dimension
  • Science and technology policy versus innovation policy
    • Innovation policy “much broader”
  • It is concerned with the economic exploitation of practical knowledge with the flow of resources to support knowledge accumulation within and between firms
  • Classical viewpoint → firms know opportunities but fail to exploit them effectively because of market failure induced divergence in the private and social rates of return from investments in knowledge and innovation
  • Role of optimizing policy maker is to correct these divergent incentives by fiscal arrangements and grants
the policy dimension1
The Policy Dimension
  • Evolutionary viewpoint → also a matter of the knowledge and skill to define a space of possibilities
  • Policy makers to create a rich ecology of organizational and institutional support for knowledge absorption and generation and to support the development of the associated innovative capabilities → adaptive not optimizing
  • Innovative capabilities depend on the links between users, suppliers and non-firm organizations
  • Innovation systems → modular (adaptive and evolutionary)