Patterns of technological progress and corporate innovation

Waśniewski, Krzysztof (2010): Patterns of technological progress and corporate innovation.

Abstract

The bulk of the global innovative effort takes place in 5 countries: USA, Japan and China as leaders, with France and United Kingdom as immediate followers, which all display, on the long run, a negative marginal value added on innovation. The present paper attempts to answer the following question: why does most of innovative activity takes place in markets apparently hostile to innovation, i.e. giving back negative marginal value added on innovation ? A model is introduced in which any market may be represented as a Selten’s extensive game, subgames of which are played as Harsanyi’s games with imperfect information, by a temporarily finite and changing set of players. The firms’ innovative activity is a Nash’s dynamic equilibrium in which innovating is rational though suboptimal, without premium on innovation being a real economic profit. The model is the theoretical framework for the study of six cases: Ford Motor, General Motors, Honda, Chevron, Akzo Nobel and IBM, which allow to conclude that firms do innovation either because they have to or because this is their comparative advantage and they can do it in an exceptionally efficient way. As economic growth is grounded in efficient business patterns and in some countries those business patterns shape themselves in the context of a strong exogenous pressure on innovation. This leads to the development of economies which, regardless its pace of economic growth and balance of payments, come to a point when marginal value added on innovation is negative. At this point, however, incentives to innovate do not disappear and firms continue to apply the same business patterns and thus do create scientific input which gives back negative marginal real output. This pattern of global technological progress seem to be quite durable, with financial markets that allow to compensate, by successful financial placements, the downturns of innovative projects.

• Item Type: MPRA Paper
• Language: English
• Keywords: innovation; technology; technological progress; corporate strategies
• Subjects: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E22 - Investment ; Capital ; Intangible Capital ; Capacity; L - Industrial Organization > L7 - Industry Studies: Primary Products and Construction > L71 - Mining, Extraction, and Refining: Hydrocarbon Fuels; D - Microeconomics > D2 - Production and Organizations > D20 - General; D - Microeconomics > D4 - Market Structure, Pricing, and Design > D40 - General; L - Industrial Organization > L6 - Industry Studies: Manufacturing > L60 - General; B - History of Economic Thought, Methodology, and Heterodox Approaches > B5 - Current Heterodox Approaches > B52 - Institutional ; Evolutionary; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights; L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L25 - Firm Performance: Size, Diversification, and Scope; D - Microeconomics > D2 - Production and Organizations > D21 - Firm Behavior: Theory; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D81 - Criteria for Decision-Making under Risk and Uncertainty; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L10 - General; C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C70 - General; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L16 - Industrial Organization and Macroeconomics: Industrial Structure and Structural Change ; Industrial Price Indices; D - Microeconomics > D0 - General > D03 - Behavioral Microeconomics: Underlying Principles; L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L21 - Business Objectives of the Firm; D - Microeconomics > D5 - General Equilibrium and Disequilibrium > D52 - Incomplete Markets; D - Microeconomics > D0 - General > D01 - Microeconomic Behavior: Underlying Principles; D - Microeconomics > D0 - General > D00 - General

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