EconomicsandPolicyofInnova1on
Academicyear2015/2016
Lecture4:March2nd,2016DrClaudioCozza
DEAMS–UniversityofTrieste
Summaryofpreviouslecture
• Neo-classicalvs.EvoluHonaryEconomics• TheinnovaHvefirmsinhistory:– GreatBritain,XIXcentury(chapter2.3)– US,XXcentury(chapter2.4)
• Readings:history(Hobsbawm)andclassicaltheory(AdamSmith)
• Schumpeter:MarkIvs.MarkII
Readings
• DavidRicardo:onmachineries
• KarlMarx:capitalisHcuseofmachineries
• Schumpeter(MarkII,from“BusinessCycles”)
TheJapanesechallenge
• Three insHtuHons: involvement of workers(and managers); bank system; lifeHmeemployment.
• OrganisaHonalinnovaHon(Toyota!).
• MovingfromcopyingexisHngtechnologyfromabroad (like China over the past years) tobecoming top R&D spenders (as in theScoreboard).
Theneweconomymodel(’90s)
Everybody thinks of small new firms in theSiliconValley,butthemodelisalsobasedon:• The large investment by the US Government(and Army) aier the Second World War(remembercoldwar?),
• In collaboraHon with University Departmentsandlargefirms(e.g.IBM)
At the end of ’50s: first generaHon ofcomputers. Then in the ‘60s: ARPANET(INTERNET“father”).
• The development of computers (based onsilicium chips) pushed the demand ofsemiconductors,givingorigintoawaveofnewinnovaHvefirms
• UnHlmid’60s,suchademandwascomingfromtheUSGovernmentonly,thenalsofromanewgeneraHonofventurecapitalists
• Newfirmsinthesectorwereborn,foundedbyengineers and university professors, mainlyaround Stanford University -> Silicon Valley,sincethe’70s
TheinnovaHvefirminhistory:conclusions
Therefore,onlyfollowingthissequence,puqnginnovaHve firms in historical perspecHve(includingsomefeaturesoftheoldeconomy)wecan understand the specificiHes of the neweconomy(kindofSchumpeterMarkIrevised):- Informalnetworksoflearning- Former employees founding their ownventures
- SalariesbasedalsoonstockopHons,notonlyformanagersbutalsoforsimpleemployees
TheinnovaHvefirminhistory:conclusions(2)
However,againalsointheneweconomy:• Manyfirmsdie,• Toponesbecomegiants,• PerforminghugeamountsofR&DandpatenHngtheirinvenHons,
• With many cases of Mergers and AcquisiHons,alsoamonggiants,
• With top managers geqng even richer, sellingtheir stocks just before the bubble started toburst,andmanyemployeesfired…
(moreinlinewithSchumpeterMarkII)
3mainblocks
• ProducHonofscienHficknowledge->
• TranslaHonofknowledgeintoproducts->
• Responsetothemarket
Inchapter4,manyrecallstopreviouslectures
4.2:JosephSchumpeter4.3:AdamSmith4.3.3:thelinearmodel(Input->InnovaHon->Output)4.4.2:ICTpushedbyUSGovernment
Butaddi1onalconceptsareneeded->
Theinnova1vefirmintheevolu1onarytheory
Mainconcepts:
- Technologicallearningandrou1nes
- Pathdependenceandtechnologicallock-in
- AbsorpHveCapacity- Technologicalparadigmsandtrajectories
• Historicalevidence: insHtuHonalisaHonofR&D infirmshasbeenoneofthemostcentralchangeinthewayinwhichfirmscompeteandchangetheirtechnologies
• Nature of the R&D acHvity of the firm: expandtechnologicalpossibiliHesandcreateowntechnology
• But: technology is constrained by a number of factorsandtechnologicalpossibiliHesarenotaninfiniteset
• Linksbetweentechnicalchangeandfirmbehaviour:• Technologicalimbalances• TechnologicalopportuniHes• TechnologicalcapabiliHes
Introduc1on
Evolu1onaryviewIndustrial compeHHon is shaped by the rate anddirecHonsoftechnologicalchangeinasector,whichinturndependonthenatureoftechnologyThe sources and nature of knowledge influences thedecisionstoentertheindustryTechnologicallearningandmarketselecHondeterminethegrowthandsurvivalofafirm
• CumulaHvelearningfromsourcesinsidethesector(e.g.in-house R&D) and knowledge specific to industrialapplicaHons⇒lowentryandhighconcentraHon• New opportuniHes from sources outside the sector (e.g.academic research) and generic and non-systemicknowledge⇒highentryandlowconcentraHon
In a very “extreme” synthesis, for theEvoluHonaryapproach, thekeydrivers forR&DandInnovaHoninfirmsare:A. The evoluHon of scienHfic and technological
opportuni1esB. Research organisaHon and procedures ->
rou1nesC. ThelearningprocessD. Externallinkagesandcomplementari1es
A.TheevoluHonofscienHficandtechnologicalopportuni1es
• Scien1fic and technological contextsoutsidethefirm(e.g.publicresearch)…
• …but also other sources external (suppliers,clients, other firms) and internal (R&D, otherfirmdivisions,etc.):→ Be tween e x t e rna l and i n t e rna lopportuni1es there might be highcomplementari1es;
→ Opportuni1es strongly change acrosssectors.
B.WhatisaROUTINE?
IntheevoluHonaryapproach,firmacHviHescanbe represented with repeHHve behaviouralschemes,usedunderspecificcircumstances.RouHnesarerepe11vepaHernsofac1vityinanenHre organisaHon. In other words, ac,onswhichare:- Recurrent,- Invariable,- Context-specific,- Embeddedinthefirm.
C.Thelearningprocess• AcquisiHon and accumulaHon of knowledgethrough:R&D,producHonandmarkeHng;
• NotasimpleacquisiHonofinforma1on(asintheneo-classicaltheory);
• AcquisiHon and accumulaHon (as rouHnes) arenot just a mauer of Hme passing by: it is anacHvityaimedatsolvingspecificproblems;
• Itisanevolu,onaryprocesswhichis:– mul1dimensional,– cumula1ve (depends on past knowledge andgeneratesnewknowledge),
– with local and contextual characteris1cs(derivingfromdirectexperience),
– Withastrongcogni1vedimension.
Manylearningprocessesdoexist:• Learningbydoing(neo-classicalmodel);• Learningbyusing;• Learningbysearching;• Learningbylearning;• Learningbyinterac1ng.
D.Externallinkagesandcomplementari1es
• Research and innovaHon -> interac,ve andcollec,veprocess
• GeneraHon of new knowledge -> chainprocess,characterisedby:– Interdependence– Complementarity– FeedbacksAmongdifferentphases,both internaltothefirms,and between the firm and external actors(universiHes,researchcentres,suppliers,clients…)