Avoiding evolutionary inefficiencies in innovation networks

Innovation policy is in need for a rational which allows the design and evaluation of policy instruments. In economic policy traditionally the focus is on market failures and efficiency measures are used to decide whether policy should intervene and which instrument should be applied. In innovation policy this rational cannot meaningfully be applied because of the uncertain and open character of innovation processes. Uncertainty is not a market failure and cannot be repaired. Inevitably policy makers are subject to failure and their goals are to be considered as much more modest compared to the achievement of a social optimum. Instead of optimal innovation, the avoidance of evolutionary inefficiencies becomes the centrepiece of innovation policy making. Superimposed to the several sources of evolutionary inefficiencies are socalled network inefficiencies. Because of the widespread organisation of innovation in innovation networks, the network structures and dynamics give useful hints for innovation policy, where and when to intervene. --innovation policy,innovation networks,uncertainty,exploration and exploitation,evolutionary inefficiencies,policy rational

Classifying Technology Policy from an Evolutionary Perspective

Asked for the most important driving forces of economic development, most economists do not hesitate to state, that it is technical progress which is the main source of quanti-ta-ti-ve and qualitative economic development generated in National Systems of Innovation (NSI). To classify and analyze NSI's the con-cepts of mission- and diffusion-oriented policy designs were introduced. Although, we suppose this taxonomy to be well suited to analyze techno-logy policy, it seems to us in its basic formulation somewhat crude, especially with respect to the supposed characteristics to assign a specific innovation system to the one or the other policy design. To surmount these shortcomings we develop a new classificatory scheme building on a questionnaire approach and suggesting four categories to spread out between the tech-nology and the economic side. This scheme allows for deeper insights and more evident com-pa-risons of different NSI's.

Mapping National Innovation Systems in the OECD Area

The purpose of this paper is to present new findings about the structure and the organization of innovative activities in selected OECD countries. By using the approach of national sys-tems of innovation as a conceptual framework and by applying multivariate data analysis techniques, this paper aims to add new insights into the specific structures of the eighteen national systems of innovation under study. A central result from this comparative study is a categorisation of national systems of innovation into different clusters, with each cluster rep-resenting distinctive cross-national structural similarities. By accounting for sectoral specif-ics, the commonly taken perspective on national innovation systems is extended. Thereby, a more precise picture of the structural composition of the analyzed national innovation sys-tems accrues. Also, a new linkage between the two approaches of national and sectoral inno-vation systems is created.national innovation systems, comparative study, classification

Applying a Comprehensive Neo-Schumpeterian Approach to Europe and its Lisbon Agenda

The paper shows that Comprehensive Neo-Schumpeterian Economics (CNSE) is an adequate theoretical approach accompanying the enforcement of the aims of the Lisbon Agenda. The CNSE approach is based on the principle of innovation and the idea of future orientation penetrating all spheres of economics which can be summarized in three domains of economic life: industry, finance and public sector, the 3-pillars of CNSE. The CNSE approach is applied to an empirical study of 18 OECD countries using a three step procedure: In a first step country patterns of pillars are identified in a cluster analysis. This gives a fine grained picture of institutional and structural set-ups for the countries under study. In a second step within the pillar clusters a performance analysis is exercised in order to rank the countries. Because of the similarities of countries within a cluster this comparative analysis can be done whereas for countries belonging to different clusters this comparison would lead to wrong conclusions. In a final step as a crude representation of macro-economic performance the cluster composition is sorted by the average growth rates of the economies. This allows a first correlation of pillar composition and growth performance.Lisbon Agenda, Comprehensive Neo-Schumpeterian Economics, European Country Patterns, future-oriented indicator-based model

Manifesto for Comprehensive Neo-Schumpeterian Economics

Within the last 25 years large progress has been made in Neo-Schumpeterian Economics, this branch of economic science which deals with dynamic processes causing qualitative transformation of economies basically driven by the introduction of novelties. By its very nature, technological innovation is the most exponent and visible form of novelty. However, Neo-Schumpeterian Economics should be concerned with all facets of open and uncertain developments. A Comprehensive Neo-Schumpeterian approach has to consider not only transformation processes going on on the industry level of an economy, but also those on the public and monetary realms. Our manifesto introduces these extensions and complements towards a Comprehensive Neo-Schumpeterian economic theory, and develops some guideposts in the sense of a roadmap for necessary strands of analysis in the future.Neo-Schumpeterian economics, industrial dynamics, public finance, financial markets

Generalized barriers to entry and economic development

In this paper we are going to analyze the dynamics of barriers to entry at the international level. In our model economic development takes place and continues in the long run due to the emergence of new sectors, which can compensate for the diminishing ability of mature sectors to create employment and growth. Each new sector is created by a pervasive innovation, which creates a new market and into and out of which there are entry and exit of firms. Depending on the inter-temporal coordination of the maturation of older sectors and of the maturation of new ones our model can give rise to development paths with growth rates ranging from high to negative, to fluctuations, to bubbles and to chaos. In the construction of our model we found inspiration in a number of growth models, both endogenous and evolutionary as well as on empirical work on structural change. The model also bears some similarity of style to history friendly models. Its unique feature is that it gives rise to an endogenously variable number of sectors. Unless new sectors are exact substitutes of older ones the model gives rise to growing variety. In fact, the main objective for which the model was initially constructed was to test some propositions implying that variety growth is a necessary requirement for long term economic development. Within our model the ability to create new sectors at the right times is the crucial determinant of the growth potential of an economic system. Thus, inter country differences in the barriers to entry into new sectors can be expected to give rise to different rates of growth and in the end to increasingly skewed world income distribution. --Technological Change,Economic Development,Economic Variety,Entry Barriers

Principles of Neo-Schumpeterian Economics

Within the last 25 years large progress has been made in Neo-Schumpeterian Economics, this branch of economic literature which deals with dynamic processes causing qualitative transformation of economies basically driven by the introduction of novelties in their various and multifaceted forms. By its very nature, innovation and in particular technological innovation is the most exponent and most visible form of novelty. Therefore it is not very surprising that Neo-Schumpeterian Economics today has its most prolific fields in the studies of innovation and learning behavior on the micro-level of an economy, the studies on industry dynamics on the meso-level and studies of innovation driven growth and competitiveness on the macro-level of the economy. From a general point of view, however, the future developmental potential of socio-economic systems i.e. innovation in a very broad understanding encompassing besides technological innovation also organizational, institutional and social innovation has to be considered as the normative principle of Neo-Schumpeterian Economics. In this sense, innovation plays a similar role in Neo-Schumpeterian Economics like prices do in Neoclassical Economics. Instead of allocation and efficiency within a certain set of constraints, Neo-Schumpeterian Economics is concerned with the conditions for and consequences of a removal and overcoming of these constraints limiting the scope of economic development. Thus, Neo-Schumpeterian Economics is concerned with all facets of open and uncertain developments in socio-economic systems. A comprehensive Neo-Schumpeterian approach therefore has to consider not only transformation processes going on e.g. on the industry level of an economy, but also on the public and monetary side of an economic system. Our contribution introduces those extensions and complements to a comprehensive Neo-Schumpeterian economic theory, and develops some guideposts in the sense of a roadmap for necessary strands of analysis in the future in order to fulfill the claim of becoming a comprehensive approach comparable to neoclassical theory.Neo-Schumpeterian economics, industrial dynamics, public finance, financial markets

A Pragmatic Reading of Friedman's Methodological Essay and What It Tells Us for the Discussion of ABMs

The issues of empirical calibration of parameter values and functional relationships describing the interactions between the various actors plays an important role in agent based modelling. Agent-based models range from purely theoretical exercises focussing on the patterns in the dynamics of interactions processes to modelling frameworks which are oriented closely at the replication of empirical cases. ABMs are classified in terms of their generality and their use of empirical data. In the literature the recommendation can be found to aim at maximizing both criteria by building so-called 'abductive models'. This is almost the direct opposite of Milton Friedman's famous and provocative methodological credo 'the more significant a theory, the more unrealistic the assumptions'. Most methodologists and philosophers of science have harshly criticised Friedman's essay as inconsistent, wrong and misleading. By presenting arguments for a pragmatic reinterpretation of Friedman's essay, we will show why most of the philosophical critique misses the point. We claim that good simulations have to rely on assumptions, which are adequate for the purpose in hand and those are not necessarily the descriptively accurate ones.Methodology, Agent-Based Modelling, Assumptions, Calibration

Innovation Networks in the Biotechnology-Based Sectors

The basic theme underlying this paper is qualitative change taking place during economic development. These changes in the composition of the economic system should become one of the most important variables in models of economic growth and development. Our knowledge of the relationship between economic development and qualitative change, however, is still very limited. This paper attempts to shed light on some important aspects of the role played by qualitative change in economic development, by laying the foundations of a model in which changes in the composition of the economic system are endogenously generated by the evolution of the system itself and, in turn, affect its future development. To put it shortly, we can say that economic development is a process in which new activities emerge, old ones disappear, the weight of all economic activities and their patterns of interaction change.economic development, qualitative change, Neo-Schumpeterian-Economics

Innovation Networks in the Biotechnology-Based Sectors

Technological progress in the biological sciences is now advancing across such a wide range and at such a pace, that, irrespective of size, no firm can hope to keep up in all the different areas. Participating in innovation networks, bundling of competencies and capabilities, therefore, offers an alternative to extremely expensive go-it-alone strategies, whether carried out by acquisition and mergers or by isolated R&D. This imbalance between the rate of growth of the biotechnology knowledge base and the capability of individual firms to access it can explain the persistence of cooperative R&D in the biotechnology-based sectors at the end of the 90s. Such imbalance is not due any more only to the lack of absorptive capacity of existing firms, because the large pharmaceutical firms have meanwhile developed considerable competencies in that field. This previous competence-gap was considered to be the reason for cooperative behaviour in the early phases of these industries in the end of the 70s and early 80s. To the extent that this was considered to be the only knowledge gap innovation networks were considered as a temporary phenomenon, which could not persist beyond the period required by large firms to catch up with the new technology. We are then proposing that a new role, that of explorers scanning parts of the knowledge space that LDFs (Large Diversified Firms) are capable of exploring but unwilling to commit themselves in an irreversible way, can be played by DBFs (Dedicated Biotechnology Firms) in innovation networks. Our simulation approach attempts to represent the emergence of these two roles as endogenous changes in the motivation for participating in innovation networks, allowing them to become an important and long-lasting organizational device for industrial R&D. Drawing on a history friendly modeling approach the decisive mechanisms responsible for the emergence of innovation networks in these industries are figured out and compared to real developments.entrepreneurship, human capital, venture capital, social networks, evolutionary economics, swarms of innovations