Innovation,externalities, and the state: a synergetic approach

A politicoeconomic model dealing with the interaction of private innovation and public regulation is presented. Causes and effects of this interdependence are investigated with special regard to the externalities which accompany innovations and make them into a partly public good. Our main hypothesis is that the collective character of inventive activity gives rise to synergetic effects. This hypothesis is supported by a microfoundation based on a nonlinear Markov process. Furthermore, the consequences of such synergetic innovation processes are examined: persistent disequilibrium, multiple equilibria, lock-in, path dependence, and chaos. Finally, some policy implications are derived concerning the effects of ageneral public promotion of innovations and of aselective industrial policy.