DKE Part 4: Evolutionary Model of Innovation

DKE Part 4: Evolutionary Model of Innovation

1. Two Degrees:

   • Incremental
   • Radical / Discontinuous: new industries created e.g. Tesla car, Electricity, Internet, Smartphones.

2. Conventional Vs Informational

   • Conventional
     • Linear
     • precise
     • emphasis on:
       • tangibles
       • manufacturing
       • knowledge creation
     • Inventions -> Innovation -> Diffusion
   • Informational
     • non-linear
     • non precise
     • info from many sources incl. R&D
     • emphasis on:
       • Intangibles
       • knowledge flow & creation
     • services innovation
     • knowledge as input and output
     • Technology as information

3. Joseph Schumpeter

   • critical of mainstream equilibrium theory
   • capitalism as evolutionary process
     • method of econ change
     • can never be stationary; dynamic & growth oriented
   • Prime Mover = The NEW goods, methods of production, markets, etc. i.e. New Technology & Innovation
   • growth of knowledge processes
   • Innovation occuring in Clusters, not in isolation.
     • creative destruction where obsolete replaced by the innovative
   • Growth: Technological Innovation NOT Price Competition
   • Schumpeterian Entrepreneur: driver of innovation, foundation of growth, development, change within capitalism (the central figure).
     • First person to Implement & Commercialise an innovation (not neccesarily the inventor)

4. Require both Openness & Stability for economic growth

   • optimal Resource allocation (Static Efficiency) will reduce dynamics over long term.
     • i.e. pursuit of static efficienc may lead to inflexibility.

5. Complexity Theory

   • econ = complex evolving system consisting of:
     • Economic Agents / elements
     • Connections between them
   • Systems View: Connections > Agents
     • ITC made connections even more prolific & important.
   • Complex Systems e.g.: brains, ecologies, weather, stock market, economies, electrical network
   • Instability arisees from Structural changes and Sensitive dependence on intial conditions.