Summary
Samenvatting Economics Of Innovation (GEO2-2211)
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Summary of the slides of Economics of Innovation as well as the complementary material of Frenken.
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Micro-level: technological innovation 2Search, Variety and selection 2
Adoption and diffusion 5
Meso-level: industries 6
Protecting knowledge, profiting from innovation 6
Industry life-cycle, modes of innovation 7
Macro-level: countries 12
Countries economic growth and structural change 12
, Micro-level: technological innovation
Search, Variety and selection
According to Schumpeter, innovations are new combinations of existing resources.
Inventions is the first occurence of an idea for a new product or process, innovation is the
first attempt to carry it out into practice.
innovation introduces variety into the economic sphere. when there is no innovation, the
economy will settle into a stationary state with little to no growth. → innovation is the engine
of growth.
Schumpeter’s notion of creative destruction → growth is brought about by the introduction of
new technologies and creation of new firms which replace existing firms and technologies.
the neoclassical approach: the evolutionary approach:
● substantive rationality ● bounded rationality and satisficing
● production function and set behaviour
● maximisation and equilibrium ● process, dynamics and transformation
● disequilibrium
● a-historical and a-contextual firms
● competences and variety of firms
● technology is an exogenous shock ● technology is endogenous
(blackbox) ● technology as knowledge
● technology as information
main evolutionary process:
1. generation of novelty
perturbations which increase variety
2. selection
mechanisms that reduce this variety systematically
3. preservation and transmission
inertial forces which give continuity to the system
The main difference between biological evolution and technological evolution is that
biological variation occurs through random mutations by nature while technology evolves as
a consequence of computational complexity. Both effects are a function of both selection
conditions and structure of interdependencies.
NK-model
- technologies are complex systems with interdependent components (epistatic
relations).
- trade-offs are when improvements in one component may damage other components
- design is thus a complex search process resulting from trial and error rather than
optimization
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