Theory of Innovation: A New Paradigm of Growth

161 Pages·2014·1.065 MB·English

by  Jati Sengupta (auth.)

Jati Sengupta
Theory of
Innovation
A New Paradigm of Growth
Theory of Innovation

Jati Sengupta
Theory of Innovation
A New Paradigm of Growth
123
JatiSengupta
DepartmentofEconomics
UniversityofCalifornia,SantaBarbara
CollegeofLetters&Science
SantaBarbara,CA,USA
ISBN978-3-319-02182-9 ISBN978-3-319-02183-6(eBook)
DOI10.1007/978-3-319-02183-6
SpringerChamHeidelbergNewYorkDordrechtLondon
LibraryofCongressControlNumber:2013948467
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Thatthou art
Onceona fullmoonnightIsawthemoonlightdancingin therain.
Allof a suddenHecameoutandstoodin frontfullofsmiles
Andjoy.Stopnot,Go Forward:saidSriRamakrishna,my Ishta,
myIdeal.MayIfollowhim allmylife.
JatiSengupta

Preface
Moderneconomiestodayhaveundergoneadramaticchange,thankstotheupsurge
of computer and communication technology. Technology frontier today is driven
by the information frontier and innovation provides the key catalytic driving
force. Schumpeter views innovation as challenges: challenge to the Walrasian
competitive equilibrium, challenge to the modern entrepreneurs, and challenge
to management. Managing innovations in many forms and adopting forward-
looking business strategies are important today for success in modern business
enterprise. This new paradigm of industry growth and the impact of endogenous
innovationprovidethe centralfocusof this volume.Technologydiffusion,human
capitaldeepening,dynamicefficiency,andmarketgrowthprovidethekeycompo-
nents of the modern theory of innovation. This theory has several basic features:
(1) to explorea comprehensivetheoryof innovationextendingthe Schumpeterian
perspective, (2) to develop a new theory of management that has been called the
corporatelattice model,(3)to exploretheneedforcollaborativeventuresin R&D
investment,(4)todiscussthemanyprofoundimpactsoftheInternetandassociated
technology,and(5)to explorethe dynamicefficiencygeneratedby the innovation
frontieranditsimpactoneconomicgrowthunderrivalrouscompetition.
Today’sbusiness leadersare aware that in this knowledgeeconomythe quality
of their workforce drives the value of their shares. According to a Brookings
Institution study nearly 85% of a company’s assets are related to knowledge and
talent.Becausetalentworksateverylevelofthebusinesscorporation,thechanges
necessary to develop that talent extend to nearly every aspect of the company’s
activities. The shortage of critical talent now and in the near future is one big
challenge for the managers today. The US Department of Education estimates
that 60% of all new jobs in the early twenty-first century will require skills that
only 20% of the current US workforce possess. Skill developmentand emphasis
on innovative growth provide the key elements of successful management today.
Needforeffectivecollaborationisallthegreaterinthisframework.Giventheever
increasingpaceofglobalbusinessworkingtogethercollaborativelybecomescritical
to keeping pace with innovation-intensive competition. Rather than focusing on
defendinga few key ideas or stocks of knowledge,companiesmust use the flows
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viii Preface
ofknowledgegeneratedbyinnovationtocontinuouslyacceleratenewerandbetter
ideas. This volume seeks to explore a comprehensive view of innovations in all
its aspects. Schumpeterianmodels of innovationare extended in terms of modern
theory and various challenges before modern management are discussed in some
detail.
Iwouldliketotakethisopportunitytoexpressmydeepappreciationtomywife
whoprovidedconstantsupportandtomyGuruforhisencouragement.Bothtoldme
to rememberthatif evenone studentgets benefitfromreadingmy book,I should
continuetowriteit.Mygrandchildren—Jayen,Shiven,Aria,andMyra—helpedme
byalwaysaskingmewhatIamwritingabout.Ihadahardtimeexplainingtothem,
hopingthatonedaytheywouldunderstandwhentheyaregrownup.Maytheylead
aninnovativelife.
SantaBarbara,CA,USA JatiSengupta
Contents
1 TheoryofInnovation........................................................ 1
1.1 TechnologyandEfficiency ............................................. 3
1.2 EndogenousAspectsofInnovation .................................... 5
1.3 SelectionandIndustryEvolution....................................... 9
1.4 InnovationThroughTechnologyConsortium ......................... 10
1.5 EconomicImplications ................................................. 23
2 InnovationModels........................................................... 27
2.1 InnovationDiversity .................................................... 27
2.2 InnovationModelsofIndustryGrowth ................................ 33
2.3 NewIdeasonInnovationModels ...................................... 55
3 SchumpeterianInnovation.................................................. 63
3.1 CreativeAccumulation ................................................. 63
3.2 CreativeDestruction .................................................... 65
3.3 AdjustmentMechanisms................................................ 66
3.4 EvolutionaryFitness.................................................... 68
3.5 DynamicFlexibility..................................................... 71
3.6 InnovationandMarketCompetition ................................... 72
3.7 SharingKnowledgeCapital ............................................ 76
4 EndogenousInnovation ..................................................... 79
4.1 ProfitExpectations...................................................... 79
4.2 Englmann’sModel...................................................... 81
4.3 CoinventionandCoevolution........................................... 85
4.4 SchumpeterianPerspectives............................................ 86
4.5 PublicResearchExpenditure........................................... 90
4.6 EndogenousIndustryGrowth .......................................... 97
5 InnovationDiversity:IndustryApplications.............................. 99
5.1 InnovationTypes........................................................ 99
5.2 ExpansioninVarietyofProducts....................................... 101
5.3 OptimalGrowthwithEndogenousInnovation ........................ 103
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