[D] Innovation and Technological Change
Coordinators: Andreas Pyka
University of Hohenheim, Germany
University of Hohenhein, Germany
Since the dawn of man, people have made technical artifacts to bring prosperity to their community. In the 18th century, a synergistic mix of steam-powered mechanization and entrepreneurial activities in a capitalistic market sparked a snowballing of inventions. Ever since this industrial revolution, countries in the Western world embarked on an unprecedented economic growth path, ultimately dragging along other countries in the slipstream. Indicative of the significance of technological change for economic growth is the observation of Robert Solow in the late 1950s that roughly four-fifth of the economic growth in the USA is to be attributed to technological change in the form of increasing efficiency of production, introduction of new products, etc. Joseph Schumpeter argued that, in a competitive market, firms force each other to innovate their products, processes, and business models to reap monopolistic rents until competitors catch up. Given the competitive importance, firms progressively institutionalized research & development over the years. As firms thereby also exploit fundamental scientific progress in fields as chemistry and physics, yet there is a market failure for such scientific research (due to the limited appropriability of its discoveries), government stepped in with financial support.
However, technology research & development alone is not enough for economic growth. Picking up on notions of Marx and Engels, Luigi Pasinetti argued that process innovation (bound to occur in the mature stage of the product life-cycle) causes obsolescence of labor in existing sectors, such that structural change (and notably spawning of new sectors) is a precondition for sustained economic growth. So, arguably, growth in the real economy is due to snowballing of technological development (driven by perpetuating technological competition) interlocked with progressive extension & specialization of labor and spawning of new industrial sectors absorbing surplus labor.
- computational models of technology development (e.g. NK landscape model; Silverberg & Verspagen percolation model; fractal landscape model)
- neo-Schumpeterian models of industry evolution under technological competition (e.g. Fagiolo & Dosi island-sea model; Klepper model; Gilbert, Pyka & Ahrweiler SKIN model; Silverberg & Verspagen vintage model)
- history-friendly or empirically calibrated models of industry evolution (e.g. for policy or strategy evaluation)
- models of co-evolution of demand and supply and diffusion & adoption of innovations