| Abstract: | Government support of technological change is a complex issue because barriers resulting in underinvestment exist to some degree in most industries, so difficult allocation decisions for limited government resources are necessary. The structure and timing of government support is further complicated because in any one technological area, the nature and severity of underinvestment phenomena vary during the evolution or life cycles of the relevant industries. This paper focuses on the methods and rationale for government support of two elements in industrial technology: generic technology, from which specific products and processes (i.e., innovations) are derived, and “infratechnologies,” which are necessary for the evolution of the generic technology and its applications. Particular emphasis is given to infratechnologies because they are largely supplied by sources outside the industry and have consequently been largely overlooked in previous discussions of industrial policy. A case study of one major source of infratechnology, including quantitative estimates of industry impacts, is presented. |
