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March 10th lec 8th- Dynamics of Innovation

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Political Science
Harald Bathelt

March 10th lec 8th Table of contents 1. Concept of innovation 2. Linear model of technological change 3. Product-cycle theory 4. Extensions and critique 5. Interactive model of technological change 6. Long-wave theory 7. Foundations of regulation theory 8. Fordist accumulation and crisis 9. Toward post-Fordism? 1. Concept of innovation * Innovations: are “new combinations” (of production factors) that compete successfully against “old combinations” (Schumpeter 1911) * Distinction: invention vs. innovation * Types of combinations: product/process/organisational/ market innovations * Radical vs. incremental innovations * Schumpeter’s notion of the “entrepreneur” * He/she is not necessarily the owner of a firm, BUT: the person who introduces new combinations to the market * Why do people become entrepreneurs/leave everyday routines? * Potential monopoly rent (BUT: uncertainty) * Followers also receive a rent, YET: it declines over time  Invention vs. Innovation: an invention is a new technology and even an improvement of eth existing product  Innovation is introducing teh product in eth market, bt inventors are actually who picks products up and creates something new  Innovation s are a combination of production factors  Why do ppl want to become antrepinures?  Is ppl introduce products in teh market and do well, then they can introduce it in a high price and exploit a lot of rent of tehis  Combination- old and new combinations of old and new products  Teh old view of innovation – 2. Linear model of technological change * Traditional view: innovations result from a discrete sequence of stages * In this model, new products enter markets in their final form * Organisation of research differs * Large firms: multiple R&D laboratories * Small firms: often no laboratory/instead: development focus 2. (a)eaBasic researchhnological change * Generates new scientific knowledge, not necessarily directed towards product/process innovation * Often conducted in universities/government laboratories (b) Applied research * It also takes place in industrial laboratories (c) Product/process development * Adjustment of products to market needs * Closely linked to production locations * Production and then market diffusion Critique of the linear model * Feedback loops in R&D are not considered * Products are never introduced in their final form 3. Product-cycle theory * Leontief paradox: in the early 1950s, exports in the US were surprisingly labour- intensive and imports capital-intensive * According to the Heckscher-Ohlin theorem, one would have expected the opposite * Vernon (1966) developed the product-cycle theory to explain this as an effect of technological aging (technology-gap trade) * Basis: linear model of technological change * Assumption: products follow a natural aging process in a birth/growth/death sequence * Economic characteristics of markets/location factors are subject to systematic shifts in this sequence  Exports are very capital intensive and importats are very labor intensive Why this surprising result- products and tech age over time and production inputes change over time  Innovation stage, maturity- product price decreases, standardisation- consumers will fade out 3. Product-cycle theory (a) Innovation stage * Final/optimal production processes are not clear * No need for cost minimisation * Location: agglomerations in highly developed economies (b) Maturity * Growth in demand * Location: industrial regions of developed economies (c) Standardisation * Economies of scale * Relocation processes to less developed economies * Example: locational shifts from Silicon Valley toAsian regions 4. Extensions and critique * Extensions of the model: from product-cycles to firm-cycles, industry-(profit)- cycles, regional cycles, cluster cycles * Aggregation problem: * Existence of regional cycles assumes that all industries/ firms/products are in the same stage of aging * Problematic product definition: * Is a product at the end of a cycle still the same as at the beginning (e.g. car models)? * Technological determinism: * Products enter markets in their final form * Trend toward standardisation/mass production * Neglect of institutional context * Variations of product life-cycles 5. Interactive model of technological change * As opposed to the linear model, new products do not enter the market in final form * Characteristics of interactive innovation processes * Ongoing changes/improvements/adaptations * This requires constant learning processes * Innovation often as a by-product of production (related to learning processes) * Demand-pull vs. technology-push hypothesis 6. Long-wave theory * Kondratieff (1926) discovered cycles in economic patterns of a length of 40-60 years * Schumpeter (1911; 1961) explained these as long waves of economic development * What causes a downswing? “New combinations” destroy “old combinations” (competition for production factors) * What causes a subsequent upswing? Swarm-like emergence of entrepreneurs * What is the incentive to follow the leaders?Adoption rent * Entrepreneurial capabilities follow a bell-shaped Normal Distribution (initially, only few have sufficient competence) * An empirical study of Mensch (1975) found that clusters of basic innovations occurred in the years before long waves began  Discrete way of development that realy impated the economy  Long cycles can live up to 40-60 years  Why r there upswings and down swings- h explanation is eth same thing- radical innovation- new radically diff technologies- there would be competition of existing tech and new tech  First is a downswing of underdevelopment- som suppliers are stuck in eth old and eth others want to innovate new tech  So theer is declin in eth old sectors that produce products  A huge upswing takes place once more ppl realize its value in the market  Really ni eth innovation cycle that entire cycles r being pushed and tradede 6. Long-wave theory (a) Spatial perspective * Parallel to long waves, spatial cores of production change * Explanation 1: location factors shift with industries * Explanation 2: Rostow (1975) views locational shifts as a process of concentration and subsequent catching-up * Explanation 3: industries/infrastructure/institutions focus on dominant industries, blocking off opportunities for other industries * New industries likely develop in other regions  These technologies have diff location factors and that’s why they shift to diff loations  Why did the UK lose advantage that they has as being the biggest manufacturers- cause they lead a lock in development – they didn’t reinvest in modernization enough and then late commers like Germany came in and innovated and invested in modern industries (b) Critique * Deterministic
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