Is inequality the price to pay for higher growth in middle-income countries?

An evolutionary two-sector model is used to study the impact of skill-biased technological change on the growth and inequality paths of a middle-income developing economy. We present four scenarios resulting from changes in a country’s structural conditions and the characteristics of the shock. We show that wage inequality is neither a necessary nor a sufficient condition for growth. A Kuznets dynamic may emerge in the long run in the case of successful catching-up to the high-growth steady state. However, this only happens if adjustment costs significantly hamper the process of skill upgrade. The business cycle and the process of structural change may give rise to sizeable rises in wage inequality in the short term, even when the economy does not break out from the low-growth steady state.     

The Dynamics Of Localized Technological Changes. The Interaction Between Factor Costs Inducement,Demand Pull And Schumpeterian Rivalry 1

Localized technological change is the endogenous outcome of the interplay between substitution costs. Switching costs and learning processes. New technologies are introduced when market pressures induce firms to change the levels of their inputs and their techniques. The dynamics ol localized technological change is the result us the interaction between three processes: it) the Schumpcterian competition process as analyzed by the replicator dynamics and failure inducement mechanisms. b) factor substitution stemming from changes in factors markets. and c) post-Keynesian demand pull pressures resulting from productivity growth. In such conditions out-of-equilibrium exchanges and localized technological changes drive a recursive process that is path-dependent in two senses, first it is highly sensitive to the initial conditions of the system. and second it is shaped by the interactions of agents.     

The Dynamic ‘Diamond’: A Technological Innovation Perspective

A firm's local environment can constitute a source of national or regional cornpetitive advantage. An important question, therefore, is how these environments come about and how they can be lost. In this paper, we argue that a local environment is a function of the process of technological evolution. It is a function of how certain initial and prevailing conditions, the type of innovation, and chance events, influence the processes of uncertainty resolution, capabilities building, and survivor selection that are characteristic of technological evolution. We also argue that a region can lose its advantage when a dominant design emerges or when a technological discontinuity obsoletes the localized technological capabilities of not only manufacturers, but also of their suppliers, customers and related industries. The environment is dynamic as firms and nations, in response to their performances, also influence it by changing their strategies or policies.     

Functions of innovation systems: A new approach for analysing technological change

The central idea of this paper is that innovation systems are a very important determinant of technological change. We describe that the emergence of a new innovation system and changes in existing innovation systems co-evolve with the process of technological change. Therefore, it is necessary to create more insight in the dynamics of innovation systems. Traditional methods of innovation system analysis that mainly focus on the structure of innovation systems have proven to be insufficient. Therefore, we propose a framework that focuses on a number of processes that are highly important for well performing innovation systems. These processes are labeled as ‘functions of innovation systems’. After explaining this framework and embedding it in existing literature, we propose a method for systematically mapping those processes taking place in innovation systems and resulting in technological change. This method can be characterized as a process analysis or history event analysis. Clarifying examples are taken from the empirical field of Sustainable Technology Development.     

Transforming the Energy System—the Evolution of the German Technological System for Solar Cells

To improve our understanding of processes involved in the formation and growth of new technological systems in the energy sector and to identify the associated key challenges for policy makers managing the transformation process, we examine the development of the German technological system for solar cells over the past 25 years. We use a "technological system' approach in which we will trace the evolution of actors, networks and institutions that have a bearing on the generation and diffusion of solar cells. An initial preparatory stage lasted until about 1989 and was mainly characterized by knowledge build-up induced by a Federal RDD programme. This was followed by a second stage characterized by political struggle over the regulatory framework and a subsequent beginning of a virtuous circle for solar cells. In the concluding discussion, we emphasize four key features of the evolution of the technological system: (1) the role of a coalition of system builders that successfully influenced the regulatory framework so that markets could be formed: (2) the considerable length of the learning period and the large number of actors that need to learn; (3) the importance of policies that form early markets (not only early niche markets, but beyond those) as only markets may induce firms to enter and learn, and (4) the need to run market formation policies simultaneous to policies that maintain technological variety.     

Major transitions in ‘big’ history

‘Big’ history treats events between the Big Bang and contemporary technological life on Earth as a single narrative, suggesting that cosmological, biological and social processes can be treated similarly. An obvious trend in big history is the development of increasingly complex systems. This implies that the degree to which historical systems have deviated from thermodynamic equilibrium has increased over time. Recent theory suggests that step-wise changes in the work accomplished by a system can be explained using steady-state non-equilibrium thermodynamics. This paper argues that significant macro-historical events can therefore be characterized as transitions to steady states exhibiting persistently higher levels of thermodynamic disequilibrium which result in observably novel kinds or levels of organisation. Further, non-equilibrium thermodynamics suggests that such transitions should have particular temporal structures, beginning with sustainable energy innovations which result in novelties in organisation and in control mechanisms for maintaining the new organisation against energy fluctuations. We show how events in big history which qualify as historically significant by these criteria exhibit this internal structure. Big history thus obeys law-like processes, resulting in a common pattern of major transitions between steady-state historical regimes. This common process from cosmological to contemporary times makes big history a viable and relevant field of scientific study.     

The sources of use knowledge: Towards integrating the dynamics of technology use and design in the articulation of societal challenges

This paper reviews three strands of the innovation literature that have presented innovation as a distributed process that combines knowledge of designers and users: user innovations, Science and Technology Studies (STS), and domestication research. These literatures have explored different aspects of the micro-processes through which use and design knowledge are locally embedded. This paper pulls together insights from the literatures, and identifies an important gap: the connections between the local embedding of use and design knowledge, and the meso dynamics of industrial and technological change. The paper then develops a number of integrating concepts and propositions for a framework to study the co-evolution of use and design in innovation processes. It also demonstrates that this framework is most valuable in researching how societal challenges become articulated over time in processes of technological change and innovation.     

The automobile road to technological change : Diffusion of the automobile as a process of technological substitution

Advancement of the motor vehicle and its production methods is analyzed as a process of technological change. In a broader context, motor vehicles evolved as an integral component of road transportation through a series of interlaced substitutions of old by new technologies. Building on a large number of studies that described technological substitution processes, first it is shown how new energy forms replaced their predecessors and how the old marine-transport technologies were substituted by new ones. These examples constitute some of the oldest, empirically documented technological changes and show that many events in the dynamics of energy substitution and marine transport are related to technological changes in road transportation. It is shown that these substitution processes can be described by simple rules and that the replacement of old by new technologies in the energy and transport systems lasted about 80 years. The technological changes within road transportation, however, were more rapid. Replacement of horses by automobiles and older by newer generations of motor vehicles and production methods lasted only a few decades in the United States. Thus, technological substitutions within the road-transportation system were considerably shorter than the expansion of railroads, surfaced roads, all road vehicles together, and the more recent expansion of air transportation.     

Business Civilization in Decline

Technological change is modeled as endogenous in the sense that it is affected by economic, behavioral, and institutional variables. Technological change is especially affected by changes in relative input prices and their level, of which the price of labor is particularly important. Input prices are affected by institutional variables. Such prices also impact on the firm's efficiency, which in turn affects growth rates as well as the rate of technical change. As relative factor prices or their level increase, firms are induced to innovate or adopt extant technology to remain competitive or to maintain current profit rates. High wage firms can be expected to engage in such induced technological change, leading the growth process thereby yielding lower unit costs and increasing the level of material welfare. Relatively low wage economies can be locked into a state of economic inefficiency and laggard technological progress, especially in the long run.     

A reformulation of the technological progress function

In its actual construction, the ordinary technological progress function is concluded to be theoretically defective, because, among other things, (1) it is not in keeping with the dynamic perspective in which technological change occurs, (2) it leaves unaccounted the nonlinearities involved in the learning process, and what is even more important, (3) it is not stochastically specified. Furthermore, it is unsuitable for long-term prediction from time-series data because it ignores a “limit of learning”, which is approached if not reached. Empirically also it is found to be grossly inadequate. A reformulation of the technological progress function is developed here by way of a solution to some of these problems and it is applied to a variety of cases. The role of availability of knowledge and complexity in engineering design process is also investigated in a preliminary way by means of two a priori hypotheses developed in the main body of the paper. Directions of further research are indicated.     

On the conception and measurement of trade-off in engineering systems: A case study of the aircraft design process

One of the most common forms of systems analysis is analysis of trade-off. However, few if any studies have been made of longitudinal trade-off, i.e., process of trade-off over time. An understanding of the process of trade-off would seem to be a prerequisite to development of a theory of the evolution of complex systems. In the present study an attempt is made in this direction. An illustrative case of aircraft design process is studied. Three distinct contributions are offered. First, the Pareto distribution is proposed as a relevant asymptotic model of the process of trade-off. Second, the constant parameter (fixed coefficient) assumption in the existing models of the evolution of complex systems is indicated to be a convenience that is not justified by the evidence. Third, the thesis is advanced that in many cases forseeing a breakthrough in systems design and engineering is possible by means of an analysis of residuals in a “properly specified” dimensional analytic framework. More generally, it is suggested that evolution of complex systems is best understood in a dimensional analytic framework. Implications of the results for the actual systems design, R & D project assessment and establishing engineering standards are noted.     

Innis Lecture: Explorations in medium‐run macroeconomics

Abstract.  Medium‐run macroeconomics refers to aggregate economic phenomena that manifest over periods of 10 to 25 years. This area of research has emerged over the last decade as a new and distinct field of enquiry. In this paper, I overview a set of personal attempts aimed at understanding certain medium‐run phenomena such as: changes in the wage structure, changes in the world distribution of income‐per‐capita, and changes in growth patterns across OECD countries. The goal of the paper is to extract general lessons from these experiences. In particular, I will discuss why models of endogenous technological choice may be a good starting point for studying medium‐run phenomena. JEL classification: E00, O00     

Bounded socio-technical experiments as agents of systemic change: The case of a zero-energy residential building

Large-scale shifts in dominant technologies are the necessary components of a transition toward sustainability. Such shifts are difficult because, in addition to technological innovation, they require changes in the existing institutions, professional norms, belief systems and, in some cases, also lifestyles. In the languages of cognitive and policy sciences, higher order learning on a scale ranging from individuals to professional and business communities, to the society at large, is needed. Higher order learning is especially crucial in the types of innovations that depend mainly on synthesis of existing technologies and know-how to achieve radical reductions in energy and material consumption, as is the case with high performance buildings. One way to facilitate this type of learning is through experimentation with new technologies and services.Drawing on our earlier concept of a Bounded Socio-Technical Experiment, in this paper we propose a four-level conceptual framework for mapping and monitoring the learning processes taking place in a BSTE, and apply it to an empirical case study of a zero-fossil-fuel residential building in Boston. Three major conclusions are that: learning took place both on the individual and team level, that individual learning primarily (but not exclusively) involved changes in problem definitions; and that team learning consisted of participant turnover until congruence in worldviews and interpretive frames was achieved. This case study also shows that we must think of innovating in building design as both a process and a product, and that both must be considered in the future efforts to replicate this building.This study highlights that technological innovation about technology as much as about people, their perceptions, and their interactions with each other and with the material world. Sustainability will not be reached by technology alone, but by deep learning by individuals, groups, professional societies and other institutions.     

Managing technology intelligence processes in situations of radical technological change

For established companies, radical technological change is not only a challenge, but it also constitutes a major source of failure. By establishing effective technology intelligence processes, companies may react to radical trends in time which is a prerequisite for coping with technological change. Therefore, this study analyzes the technology intelligence processes in 25 multinational companies in the pharmaceutical, telecommunications equipment and automobile industries in the context of radical technological change. In the three industries, the technologies combinatorial chemistry, dense wavelength division multiplexing (DWDM) and fuel cell are used as settings to analyze these processes on the technology level against the background of the company-level perspective. By applying this complex view, which allows to take into account interactions between different organizational mechanisms and between different hierarchical levels inside a firm, three types of organizing technology intelligence processes can be identified: the participatory, the hybrid and the hierarchical technology intelligence process. The organization of the technology intelligence process according to the three types is influenced by the corporate culture and the decision-making style of the companies. Furthermore, industry differences are identified which may be explained by different rates of radical technological change in the industries. This study suggests that more complex and differentiated views on radical technological change, on corporate technology intelligence processes and on the variety of organizational structures involved in these processes are required.     

Diffusion of environment-saving technological change— a petroleum refining case study

This paper attempts a theoretical model (Section I) of a dynamic relationship, brought about by environment-saving technological changes over time, between output and water pollution. The improvement in environmental quality is studied in terms of adoption of relatively environment-saving processes in petroleum refining industry. This is done (Section II) by empirically fitting the Gompertz function or the growth rates of diffusion of the processes by the use of multiple regression equations. Social desirability of substituting the relative environment-saving process is examined in terms of social benefit-cost analysis (Section III). Thereafter, (Section IV) an attempt is made to find social policy variables which could be used in order to accelerate diffusion of environment-saving processes. The analysis concludes that both “carrot” (incentives, say, in the form of accelerated depreciation allowances for purchase of environment-saving process equipment) as well as “stick” (in the form of stricter enforcement of water pollution control laws) are necessary for inducing adoption of the desired technological changes over time.     

Organizational Learning in Successful East Asian Firms: Principles, Practices, and Prospects

Guided by Marquardt’s system-linked organizational learning model, this article investigates the nature of and limits to latecomer–catchup learning engaged in by East Asian firms within the electronics industry over the past three decades. This is basically an adaptive, re-active, single-loop form of learning that emphasizes speed and enlargement of market share at the expense of technological depth and breadth. Challenges for the 21st century revolve around the need to make a transition from reverse engineering to breakthrough engineering; from an efficiency-centered to a creativity-propelled mode of competitive stance; and from knowledge exploitation to knowledge exploration in new critical areas such as design, software engineering, new product/process development, marketing, R&D, management of strategic alliances with international partners, and the development of a vibrant local components and capital goods network.     

Combining the technological innovation systems framework with the entrepreneurs’ perspective on innovation

For their technological sustainability innovations to become successful, entrepreneurs can strategically shape the technological field in which they are involved. The technological innovation systems (TISs) literature has generated valuable insights into the processes which need to be stimulated for the successful development and implementation of innovative sustainability technologies. To explore the applicability of the TIS framework from the perspective of entrepreneurs, we conducted a case study in the Dutch smart grids sector. We found that the TIS framework generally matches the perspectives of entrepreneurs. For its use by entrepreneurs, we suggest a slight adaptation of this framework. The process ‘Market formation’ needs to be divided into processes that are driven by the government and processes that are driven by entrepreneurs. There should be a greater emphasis on collaborative marketing, on changing user behaviour and preferences and on the development of fair and feasible business models.     

Historical coevolution of governance and technology in the industrial revolutions

While the relationships between technological change and organisational change have been widely observed in specific cases, little has been done to generalise about such interrelationships over the longer term. The paper uses historical evidence to categorise the principal changes in governance (covering the control, structure and process of systems) in the industrial epoch, which are seen as the successive predominance of markets, (corporate) hierarchies and then networks. These correspond to the successive importance of labour processes, capital processes and information processes. There appears to be a link with the three ‘industrial revolutions’ that have arisen at century-long intervals since the later 18th century, though the causal interrelationships remain uncertain and by no means necessary. Network alignment is suggested as a means for bringing about the coevolution of governance and technology in development processes. A number of mechanisms for matching technological with organisational change are suggested by the governance literature, although no one theory of governance appears able to explain the observed historical phenomena.     

Revolution,tribalism, and the Cheshire cat: Three paths from now

Examination of the time course of the change in numbers of experimental populations of mice, and of the world population of man, reveals abrupt and apparently irreversible phase changes in the processes governing population dynamics. Such phase changes can lead to extinction of the population or to opening up a new era of evolution. For the past 43,000 years each successive doubling of human world population has required only half the time as the prior doubling. Continuation of this process of population increase will shortly lead to extinction of man as a species. This course is the “Cheshire cat” path, during which each individual becomes less aware of less and less as numbers of individuals exceed the upper optimum. Beyond this nonchoice of future direction there are two major options. First, we can intentionally establish a new world tribalism characterized by zero population growth accompanied by a pervading traditionalism that establishes invariant patterns of social, technological, and ideational function. Second, we can choose to design further evolution (Revolution) with emphasis on continuing to expand individual potentiality or capacity. This path will require a continuing decline of world population accompanied by an increase in the effectiveness of technological prostheses for information processing beyond that possible by biological and social brains.     

The changing demand for skillsEvidence from the transition1

Transition has involved major job destruction and creation. This paper examines the skill content of these changes using a detailed three country firm survey. It shows that transition has exerted a strong bias against unskilled labour that has lost employment disproportionately. The skill content of blue collar work has shifted upwards. Shifts away from low‐skilled labour were accelerated by technological change. By 2000, the actual and desired levels of employment were close to each other but we find some evidence that technological changes had given rise to shortages of skilled blue collar workers. Although there is variation across the sampled countries, this appears to be explained by differences in the timing of reforms. The observed changes will have major longer run implications for the level and structure of employment and for inequality through the distribution of earnings.