ee eres appropriate the returas (o certain kinds af inventions than to thers. These understandings have enriched. but also is of the forces influencing the rate and directo of indusiial inyention In many cases itis apparent th slots elvaly see ade more complex scientists advanced re other dire some mechanism for assuring that they receiv uuse-value of their innovations, technological change tends tw proceed down those tracks. new understanding that technolo reness tht old in particu n behavior. and industry struc lure, may be moked by the way technology is unfolding. at feast as much as the character of innovation depends on firm behavior and market structure. The causal links go both ways, not just in one. ‘Thus in recent years the natural ways to advance recombinant DNA technology hive, in general, not required massive resourees and giant laboratories, but have been pursuable by small companies, or even by inclividuals with access to moder laboratory equipment. And judicial decisions regarding pa ability have made it possible for small-scale innovators to hold olf large scale potential imitators, and to be in a strong position regarding bi about patent rights. In contsa advance of madern passe feraft technology mis requited Large-scale reyearely and development efforts on the part of teams of experienced scientists and engineers Further, jet engine and air-frame design. while not protectable by patents, is very difficult to reverse-engincer. ‘This is a context in which large « lished firms have a major advantage over ers, ‘The chapters in this section develop various of these th chapter claborates the discussion above, and presents a bre findings on th of the ive prowess. The chapter by Willinger and Zuscoviteh is concerned with the new inforni production systems. They discuss what is required if f effective in their R & D, and effective in their use of these new techno- logies. The chapter by Teece focuses on the firm mare narrowly. and caplures ihe ty, and af techno todo, and the most al options. Kay directions in turn led to es. Dosi’s | picture of are to be profitable way for th focuses on the nature key characteristics that influence t is concerned with the new understanding, between technological advance an! market structure is organized an a jot the Feciproe:tl rekation 10K. The nature of the int Giovanni-Dosi Facute of Suaivies. Universi of Rom SONU, Universi of Susser, Brighton Intraduetion The attempt in this hook to place technic: the centre of theory ‘of economic change can draw from a widening & evidence on the ‘sources, procedures and microeconomic effects of technical change, Here, I shall try to organise and interpret some of that evidence, “The growing attention to innovation-related phenomena is pro to various factors, partly internal to the dynamics of the economics di and partly related to the increasing empirical perception of the impor of technological factors in competitiveness and-growth. For example, an easing number of industrial case studies hi ighted the importance of technological innovation for industrial competitiveness (for reviews, see Freeman, 1982; Dosi. 18d: Momigliano and Dosi, 198%, OECD. 18). Moreover, the experience of Japanese competi i ional trade and the very rapid productivity gains in Japan we focused attention on a number of features of the Japanese ‘nation an’ (Avki, 1986; Altschuler et al, 1985; Freeh Finally, the intuitive perce} erariectronies revolution’, with vi degrees of pessimism on its employment outcomes, has induced a 1 of the possible ‘compensation mechanisms’, on macroceonomic 1¢ Tibour-saving and employment-creating effects of . see Mo IRS: Fees i analyses of innovation and ingly highliglits the ch: ingredient of the pracess of growth ind transformation of the economy. which is discussed fra les in several chapters vf this book eve, | sha 0 what T gansider Some othe ‘styles! Lets” and bind in Gs The sab Staves, Melton, IRE Disa * mnote dette hls ths hap Facute ests sa Pag « sheet iat ee Ih bo koyoa(next section): in doing that, 1 shall draw from several empirical Contributions, over the past decade, on the economies of innovation Including those of Abernathy and Uiterback (1975, 1978). F (1982), Klein (1977). Nelson aud Winter (1977, 1982), Rosenberg (1976, 1982), Sahal (1979, 1981, 1985). Pavitt (1979, 19848). von Hippel (1979, nd also some contributions of the author (Dost, 1982. 198). try to provide an interpretation of technological yelationship with scientific advances, on the one hand. a processes, on the other, Finally, { shall argue that such an interpretation of tive process is useful to the understanding of inter-industry 1 the modes and degrees of innovativeness, which ae [ differences analysed in other chapters of this book Some stylised facts on innovation In an essential sense, innovation concerns the se nd the « covery, experimentation, development, imitation, ani! adoption of new products, new production processes and new organisatio ‘Almost by definition, what is searched for cannot be known with a precision before the activity itself of search and experimentation, so th the technical (and, even more so, commercial) outcomes of inno efforts can hardly be known ex ante, Certainly. activities aré uridertaken by profit-mativated agents. they must involve also some sort of perception of yet unexploited. technical and economic, oppor- tunities. However, such perceptions and beliefs rarely entail any detailed knowledge of what the possible events, states-of-the-world binations, product characte the, Putting it another iow involves a fundamental element of iicertainty, which is not Tack of all the relevant information about the accurrence of known 1, more fundamentally, entails also (a) the existence of tech problems whose solution procedures are unknown (more on it in Nelson nnd Winter, 1982, and Dost dnd Egidi, 1987), and (b) the impossibility of precisely tracing consequences to actions (°. . iLL do this, *,ete.). 1 yy Kcatures of ylised fact’, Of course, the perception or belief that * is there’ is not always disappointed: the record of techuntogi of modern economies, at Teast since the Industrial Re impressive testimony in this respeet. In fact, techn been able to draw. ingly so in this century. from novel ‘opportunities stemming from scientific advances (Iron thennedyn to biology, electricity. qu ff chanics. te), Thee inetcity ing reliance of major new technological opportunities on scientific knowledge is. in my view, the secomd property of eantemporary The nature of the search activities leading to new products andl processes has also changed over the last century: the ing complexity of research ies militates i tions (Hi oratories, government laboratories, tle) as opposed to individual innovators as the most conducive rent to the production of innovations. Moreover, the formal research activities in the business sector tends to be inte more or less ied! manufacturing firms (Mowery, 1983: Ts felson's chap- 4. This if the dird major feature of innovative activities. Tewever, in addition to the previous point, an) in many ways eomple mentary 10 it, a significant am ns and improvements are originated through ‘learning-by-doiny y-using’ (Rose front, 1976, 19H2), “That is. people and organisations. primarily frm Keath hove to usefimprove/produce things by the very process of through their ‘informal’ activities of solving production problems. 1g specific customers’ requirements, overcoming, various sorts of bottlenecks’, ete, This isthe four ‘stylised fact’. Fifth, it seems that the patterns of technologies described as simple and llexible reactions to changes in market conditions: {A) in spite of significant variations with regard to speci Seems that the directions of technical change are often defined by the state of-the-art of the technologies already in use, ite often, itis the nature fof technologies themselves that determines the range within which pro ucts and processes can adjust to changing economic conditions: and ( is generally the case that the probability of making teehnolagical advances in firms, organisations and offen countries. is aniong other things. « func: tion af the t Tevels already achieved by them. In other words, technical change iss cumulative activity ‘How does one interpret these phenomena and fink them with the ina rarticular patterns of innovations find! fecessary condition in some sort of (actual and/or expected) economic Teward to the innovators? How does one account for the possibility for individuals or firms). being systematically *hetter’, on tee Js. than others? What explains the relatively ordered pattern cal change appears to show and its ‘momentum’, seemingly fe diverse and varying q logical grout which (ec propelled by a strong internal legic, des inarket conditions? I shall now turn to these iss ch: technological paradiynes and ledge, apportunities and se trajectories (eg. designing developing a new chemical efficiency nt a production panne with uit, et.) implies the we of pieces of24 knowledge of various sorts. Some elements represent widely applicable dnderstanding: it might be direct scientific knowledge or knowledge felated to well-known and pervasive applicative principles (e.g. on elec tricity, mechanics, more recently, infortnatics, ete), Some other pieces of Knowledge are specific to particular ‘ways of doing things’. ty the exper: ence of the producer, the user, or both ‘Moreover. some aspects of this knowledge are well articufated, even written down in considerable detail in manuals and articles and (aught in Schools. Others are largely tacit, mainly learned through practice ancl practical examples (of course, ‘training’ and ‘apprenticeship” relate als to this aspect of technology): there are elements of bein ‘good designer’, or cven a “good 0 transmitted in an expli Finally, some of the knowledge involved in the use technologies is open and public: the most obviows ex and technical publications. However, other aspects are private, ‘implicitly’ because they are tacit anyway, or explicitly in the they are protected by secrecy of legal devices such as patents ‘All three aspects (universal versus specific, articulated versus ta public versus private) are essential in the concept Technology’. More precisely, technological advances normally ¢ some sub-set of the publicly available knowledge. which and improved upon by the community of engincersap designers, ete, However, in the activities aimed at technological ines ions, such a shared use of highly selected scientific and technological Knowledge (related, for example, to selected physical or chemical p ciples, materials, properties, etc.) is coupled with the wse and developme: of specific and often partly private heuristics and capabilites Elsewhere (Dosi, 1982, 1984) as rec yest broad similarity, in terms of definition and procedures although not in objectives Sreareer structures, between ‘science’ and technology’. More precisely, as modern philosophy of science suggests the existence of scientific paradigms {or scientific research progranimes), so there are technological paradigms ‘A “technological paradigm’ defines contextually the needs th to be fulfilled, the sciemlitic pringiples utilised for the task, the mate technology to be used. In other words, a technological par Wefined as a ‘pattern’ for solution of selected techno-economic problems based on highly selected principles derived from the natural sciences. technological paradigm is both a set of exemplars— basic artefacts which are to be developed and improved (a ear—oF the type we know an integrated circuit, a lathe, ete., with their particular techoo-economic and u set of heuristics "Where da we go from here? ‘On what sort of know Fedge should we drow? general search rules of the kind: ‘strive foran nil improvenn shared ed scientists! are m characte “Where should we search’, ‘ete, (consider, for example, mprove its effectiveness’, ete.). Putting it another way. te paradigms define the technological opportunities for further nd some basic procedures an how to exploit them, Thus they abo channel n directions rather sham athhers: a rechnedagical wajec- er, 1977, andl Dosi, 1982) is the activity of techno- offs defined by WEN. One the efforts in tory (Nelson and W logi I progress along the eco i (Gordon and Munson, 198t fe as fairly evident examples of such paradigms the internal combustion engine, oil-based synthetic chemistry. oF microctectronics. A closer look at the patterns of technical change, however, suggests the existence of ‘paradigms’ and “trajectories’ with different levels of general ity. in many industrial sectors: Freeman and Perez (1986) use the expression “teehno-econo) to deseribe those pervasive technologies which influence the Wustries throughout the econer n (see Chapter 3). Note, however, that a “techno-cconomic paradigm’ (or “tegime’) in Freeman-Perer’s sense, is a macro-techinologival concept a refers to broad clusters of ‘paradigms’ in the sense 1 suggest her example, the electronics ‘techno-econamic paradigen’ or ‘regime’ captures the common characteristics, compleme: nd inter-linkages between several ‘micro’ paradigms related (0 se sctors, computers, indus trial automation, ete. ‘Whatever name is chosen, the concept of ‘paradigm’ points to interpre- Rosenberg's ‘focusing devices’ (Rosenbera 1976) or Saha's “technological guide-posts’ (Sahat, 198, 1985). The crucial hypothesis is that innovative activities are strongly selective, final- ised in rather precise directions, often cwnatative activities. This is very different from the conecpt of technology as information that is generally applicable and easy to reproduce’ and reuse (Arrow, 1962), and where firms can produce and use innovations mainly by dipping freely. into a gencral ‘stock’ or ‘pao! of technological knowledge. Instead we have firms producing things in ways that are differentiated technically from things in ther firms, and making insovatjgns largely on the basis of in-house tech- nology, but with some conteibution from other firms, and from public Knowledge. Under such circumstances, the search process of industrial firms to improve their technology is or T fe they survey the whole stock of technological knowledge Mefore mal techni choices. Given its highly differen improve and (a diversify their technology by se them (er use andl to build upon their existing tee technolo val changes in five processes. too, What the firm ean hape to de techy future iy he 1 by what it the past. Once the em I firm specitic recupnised, its developm time ceases to be tations broadly consistent eee eps ure at ado ily cus ‘af doing in chology is bat is cone226 eiovarn BOSH general, technological progress proceeds throught (ne develop- sof buth public elements of knowledge, shared by all ‘and private. local. partly teil, frm= Thus. ment and exploitati actors involved cumulative forms of knowkedge there are certainly ‘free-good clements in technologi iy stemming fram the free flow of information, realy aw lable publications. etc rorcvreconad aspect of the ‘public’ characteristics of technology relies the tmuraded inverdependences vetween sectors, technologies and fhe and athe form of technological complementarites, synergies and fo of deers and constraints which do not entirely correspond! tw commen awe All of them represent a structured set of technological extern serch ean be a collective asset of groups of firmsfintustries within eves regions (see, for exa Fall, 1981, and Chapter 17 of this book) andor tend to be internalised witl vidual companies (see, [OF Gxample, Teece, 1982, and Chapter 12 of this books Pavit, 1yBAe). In Giher words, technological bottlenecks and oppor (Rosenberg. 1976), experiences and skills ions, capa- bilities and ‘memories’ overflowing from one econo to another, tend to organise contett conditions which (i) are country-spectir. Toe specific or even company-specifc; (i) are a fundamentat i yyrediient in the see ovative process: and (ii) as such, determine different incentivesist nul aanovevjatato innovation, for any given set of strictly economic signals Tear untraded interdependences and contest eonulitions, are: 10 different degeees, the uniutenional outcome of deventralised (but Ve" Versible) processes of environmental organisation ( ne obvious example is ‘Sligon Valley’) andor the result of explicit strategies of public and pr Faire ioma (this sense one cam interpret, for example, he strategic of retical and horizontal integration of elcettical ofigopoties into mice ‘lctonies teclinologies or the efforts of various governments (0 create ‘science parks’, etc.) “To the extent that innovative Jearning is “local” and specific inthe Kens hav itis paradigms bound and Gccurs along particular trajectories. Nn saree Ei different competences and degrees of success —by alt the aaarromic agents operacing ov thal particular techoogy. one is HKeIY fo Sieerve.at the level of whole industries those phenomena ef “dynsiiie Grereaging returns” and ‘lock-in’ into particular weehivaloyies discussed im ‘Arthur's chapter (see also Arthur, 1985; David. 1975. 1985), Conversely, to the extent to which learning is also local and ¢ at the level of individual firms, one is likely to observe aso fv trajectories, involving the cumulative development aml exple Tanatised (and thus private’) technological eompetences. throng ih strategies discussed in Lecce’s chapter eis important to remark that what b scares of the inducement mechanisms to cl progress ative specific n of Paes nee iamply stem just been sa anges of tech niga ff labour to the price of machines (For some recent evidence, ef Sylos- Tabini, 1984) and also to the price of energy and materials, or from hanging demand conditions. On the contrary. these factors are likely to be Tamdanental ones, influencing both the rate and direction of technical progress, but the boundaries defined by the nature of technological Froracigms. Moreover. innovation yields new techniques whieh ace likely 19 be superior to the old ones irrespective of relative prices. cither immed: cly_ as wften is the ease of many enieroelectronics-based processes (see Socks and Desi, 1983), oF after a learning period (as, for example, in the cose of agricultural nnachinery discussed by David, 1975); If the new ted before they would also have been adopted at the Mold: relative prices. In other words, technical progress generally exhibits strong irreversibility feamnres. Take the example of mictoc! jiscusseal at J Socte (1985, 1987), Momighiano (1985), Soete (1983), Coriat (1983, 1984), electronics-bused proxitetion technoligies {in labour-suvings i) fixed-capital saving (i.e. they often induce a fall in the ‘cupitalfoutput ratio (for sectoral evidence Suete and Dosi, 1983}; (ii) circulating-capital saving (i.e. the optim of product Vin the stocks of intermediate inp ‘init of output); (iv) quality-improving (i.e. they inerewse the acura proifuction processes, allow quity testing, ete.) (v) energy-saving (in 30 the evtergy tse generally is also ¢ function of mechanical movements ss. the substitution of inforuration al parts reduces the use of energy) all these char that elect Guction techniques are generally unequivocally superior te (nechsnieal anes irrespective of relative prices. That is, the new Trontiers aysoeiated with the mew techniques do not intersect for any positive value of the “olf” one (see Desi, Pavitt and Soete, IHR) Tes important to distinguish between the factors which induce, simulate ‘or constrain wechnical change from the ouicomes of the changes. the veivce, As we analyse in Dosiy Pavitt and Sucte (1988), and following the suggestions of Rosenberg (1976). inducement rive may involve a broad set of Factors, including “1 al bottlenecks in interrelated tetivitiess ‘or, conversely: inputs (e.g, energy. rH a {aly composition changes and rates of groeth oF eens {ed levels ad changes it + ive price of mnaehines to fab); cuit. als, ete): sof the tech Ah country: on 3. However ale petals ent th i) ean the economic test ale ao eine akeniy af evalcace an the cuke of enc of these fairrespective of the tion present some remark patterns of technological change, t repe defined by specific sets of knowledge continuities in the patterns of change arc associated with changes technological paradigms (as defined above). Third. irreversibility in the technological advances means also that, using a neo-classical language the changes of the production possibility sets dominate over changes witht any given set. More precisely, at any given time, instead of a well-behaved set wwe are likely to observe only one (or very fev) points corresponding to the 1, while, over time. the dominant process of change will imply improvements in these (very few) best-practice techniques: {along the ‘trajectories’), rather than processes of ‘static’ inter-factoral substi The conceptual properties: tend 10 follows “tl J expertise, Second, major dis: of technology amd (echnical change based on ‘paradigms’, ‘uide-posts’ or whatever name is chosen, helps alse in resolv ing the long debate in the innovation out the relative nportance of ‘demand pull” (cf. Schmoukler, 1966; and, for eriticnl cussions, Mowery and Rosenberg. 1979; Freeman, Clark and Soete, 1982) versus technology push: environment-related factors (stich as demand, relative prices, ctc.) are instrumental in shaping (a) the rates of technical progress: (b) the pre nee, within the (limited) set allowed by any given ‘parauligm’; and (c) the selection criteria amongst new potential technologic: ins. However, each body of knowledge, expertise, selected physical and chemical principles, ete. (that is, each paradigm) determines both the opportunities of technical progress and the boundaries within which ‘inducement effects’ can be exerted by the nvironment. Moreover. the source of entirely new paracliyins is i ely coming from fundamental advances in science and in the (related) ‘general’ technologies (c.g. electricity, information-processing. ete.) ‘So far, I have discussed an interpretation of whut I consider tundamental characteristics of the innovative, process itt generat, However, at a finer level of analysis, one empirically observes a significant inter-sectoral variety in the rates of technical progress, modes of search, forms af know: ledge on which innovation draws. In some arcas paradigms are puwerful in that they generate rapid sustained technical change. Others are w that they provide relatively little guidance as to where fruitfully to search, Moreover, the fact that a certain kind of technical advance ean be achieved! cheaply and easily, does not in itself make it profitable for a firm to px that advance, I will now discuss these issues. Opportunities, market conditions and the In innovativeness 1 1 1 | | | “229 SIATI 4. PROCESS Rosenberg, 1976) of the observed differences, over sectors and over time, in the rates and modes by which innovations are generated, diffused and used, (rices them back (o inter-seetoral and iater-temporal differences i ) the eppertunities of inno that each paradigm entails; (b) the degrees to which firms can obtain economic returns to va inds of innovation, that is the degree of appropriability of innovation; and (c) the paiterus of demand that firms face. U have mentioned earlier, among the ‘stylised facts’, the incrensing, reliance of major new technological advances upon scientific progress. However, as discussed in detail in Nelson's chapter, only in some techn logies and sectors is the link direct and powerful: scientific inputs are, there, an essential part of the momentum of technological advances. In other sectors and technologies the links are much more inclirect and may mply relate to the use of science-aased equipment and intermediate puts, or to the generic science-hased! knowledge acquired! by researcher crgincers, ctc., during their formal training. 1. T suggest. the linkages between scientific advances and technological opportunities are likely to be much more direct at the early stage of emergence of new technological paradigms. In these cuses, pro- gress in gencral scientific knowledge yields a widening pool of potential technological paradigms. In another work (Dosi, 1984), 1 analyse the specific mechanisms through which a much smaller set of paradigms are actually developed, economically applied and often become dominant Here. suffice to say that this process of select Js. in general, on (a) the noture and the interests of the ‘bridging iastitutions” (Freeman, 1982) between pure research and economic applications; (b) quite often. especially in this century, strictly institutional factors, such as. public agencies (the military. space agencies, the health system, ete.); (c) trial- d with “Schumpeterian’ enterprencurship: (d) the sele of the markets and especially the techno-econamic requirements of the users (see Chapter 17 by Lundvall). Certainly, new paracligms become attra as the cost and difficulty of further progress within existing paradi increase. However, note that indfeasing obstacles 1 progress witi certain paradigm do ot automatically induce the emergence of new ones; ion of their development ul them, new paradigms reshape the patterns of ofportunities of technical progress. in terms of both the seope of the innovations and the ease with which Fer may think of the clusters ef ies associated! with electriety, these asso oibbased chemistry. or, more recently, micro 1g. Whilst, a period of intensive evelpment, there might be «i 8 1 innovative efforts within the limits of a specific paradigm (the so-called Wall's Law). new il bigengi‘ones— prevent the establish search process for inno beyond their sector of origin a inputfouiput Hows and technological comple grant ac The emergence of we Ht effects throughout the economy is possibly the m decreasing returns do wot set in throughout the economy: on static and dynantic economies of scale are the gencral rule, Contrary to the ost pessimistic expectations of classical economists and eontsary also to many contemporary formalisations of problems of allocation of resources decentralised markets, decreasing returns historically did wot emerge even in vities involving a given an ral? factir sich as riculture oF mining: mechanisation, chemical fertilisers and pe: improved techniques of mineral extra d_purification prevented ‘scarcity’ from becoming the dominant f Feature of these produe- tive activities. A fortiori, this applies to manufacturing, “To summarise: sectors and technologies differ in the ea of technological advances; these varying technological opport Gepend on the nature of each technological paradigm. on the degrees (0 which itis able directly to benefit (rom scientific progress andor from other new technological breakthroughs, and on its ‘maturity’. Int diye Specific opportunities are a frst determinant of the observed inter-sectoral differences in the rates of innovation However, for any level of notional opportunities. private, economically motivated agents will invest resources in their exploration only if there is fan actual or expected market ultimately willing to pay for it, and if these agents (typically firms) will be able to capture a significant (raction of what the market is willing to pay. Tn other words, innovative efforts are function of the structure of demand aud of the appropriability conditions: examples of very low innovative efforis by business firms due to tack of appropriability, despite the existence of significant technological oppor Lunities, are discussed in Nelson's chapter Tn general, appropriability conditions differ between industries and between technologies: Levin er af. (1984) study the varying empirical relevance as appropriability devices of (i) times; (iv) costs and tine required for duplications (v) learning-curve ‘effects; and (vi) superior sales and service efforts. Tw these one should adel the more obvious forms of appropriation of differ al efficiency related to scale economies. Of course, the and duplicate the innovative achievements —in terms of product perform ances oF production efficiency —of firm A. the lower the appropriabilty of innovation, Clearly, with perfect, costless and immediate duplieability 9 business firm w Je any incentive to innovate. Conversely. with very high appropriat y a very little share of the benefits from Or rt kk ees gaan austoem fay: th 1d provide mew so ind the diffusion of reason why he contrary. a” happens in contemporary mixed economies one ubserves, at lest within pan rvtacturing, degrees of appropriability which are generally sufficient to provide Ne to business firnis (© sustain relatively high rates of J progress without, however, preventing, svaner or fater. int ‘lifligion and distribution of economic benefits (o other firms, users a quite loose proposition since one can int, let atone the ‘optimal’. deere of jon would ave been under app different approp: In fat as discus most industries “lead times and learning curve advan Complementary marketing efforts, appear to be the prineipal mecin Orappropriating returns for product Innovations” (p. 33). Moreover, there Sippenrs to be 2 quite significant inter industrial variaiee in the impartance of the various ways of protecting innov nd in the overall degrees of y_ wth around three-quarters of the industries surveyed! by ing the existence of at least one effective means of protect: nore tha 90 percent ofthe industries cleinving iapprnprial the study cla ing process innovation ani the same regarding product innovations. I as suggested. inter-sectoral differences in technological opportunities, appropriability regimes and demand patterns jointly account for the Gheerved inter-sectoral differences in the rates of innovations, these Variables, together with the sectorspecific nature of the knowledge on which are based, explain also the sectoral differences Typical organisational forms of insovative search. For exam ators and technologies may mainly rely on ‘informal’ processes of fearning-by-dloing and design improvements; others rely heavily on for Ir activities undertaken in. & D kiboratories; in some seeters innoy Tians are primarily generated by big firms, in others by relatively st firms. Scherer has recently developed an inter-sectoral matria of the origin and use of R & D in the US economy based on the inter-sectoral generation ind use of a large somple of patents (Scherer, 1982). On the grounds of kaa base on innovation in the United Kingdom fram 1945 to 197) & lected at the ich Unit of the University of Sussex. Sit (198A) has developed a sectoral taxonomy of sectors of production amd ree, and,that from Levin ef al, (19K), seems broaully consistent with the interpreta forward here of why sectors differ in their rates and modes of innovation Davitt (1Ussta) identifies from major groups of sectors, mamely some sectors (which i i products) ies ate (i) “Supplier atominate ” and publishing. process-innoyaition? inno in new varieties of eapital matinee! ally embo fe inputs, these & 0 ee activitycaine ee ee sectors themselves. Th cess of diffusion of be: intermed the process of innovati 0 is primarily a py practice capital-goods and of innovative etic fibres, ete.). The knowledge emental provements in U uuse and to orga technological capabilities is rather low and fi big (with some exceptions in those activi of scale in production oF marke (ii) ‘Scale-intensive” sectors 1 typically not very ies which present economies 1g such as (eatiles and clothing) Innovation relates to both processes. and products; production activities generally involve mastering complex systems (and, often, manufacturing complex products); economics of scale of various sorts (in production and/or design. R-& D, ete.) a significant; various appropriability devices operate (c.g. lead times, product complexity, etc.); firms tend to be big. produce a relatively high proportion of their own process technology. devote a relatively high proportion of their own resources to innovation, and tend to integrate vertically into the manufacturing of some of theit own equipment. This group includes transport equipment, some clectric consumer durables, metal manulacturing, food products, parts of the chemical industry, glass and cement. Moreover, within this group one can make a finer taxonomic distinction, according to the nature of the production process, between (a) assembly-based industries (generally characterised by Taylorist/Fordist automation. such as cars. electrival consumer durables, etc.) ang (b) continuous process. indus (cement, several food product (iii) ‘Specialised suppliers’, Innova primarily to product innovations which enter other sectors as capital inputs. Firms tend to be relatively small, operate in close contact with their users and embody a specialised knowledge in design and equipment-building, Typically, this group inchides mechanical and instruments engincer- ing. Opportunities are generally high and are often exploited through ‘informal’ activities of design improvements, introduct components. etc. Appropriability is based to a good ext tacit and cumulative skills (iv) ‘Seience-based! sectors. This group incluckes the electronics industries and most of the che nis often dircetly tinked to new technologi advances; technological opportunity is very high; appropriability mechanisms range from patents (especially in chemicals and drugs) to lead times ancl learning curves (especially in electronics}: innovative activ formalised in R & D laboratories; a high proportion of their product innovation enters a wide number of sectors ax Capital er lia inputs; firms tend to be big (with the exception of new ‘Schumpeteria ventures and highly specialised producers ns of new {on partly 1 patterns tind! charac ‘Admittedly, the empirical evidenee on the see teristics of the innovation is far from complete. However, my conjecture is 1 patterns ean be interpreted hy means of a few funds fable from the relatively general outlined ove Some conclusions ied to analyse some general characteristics of the process Ieading to the search and economic exploitation of technological prnovations in contemporary mixed economies and to apply such a frame interpretation of the evidence stemming from a growing her af empirieal studies. In this chapter, 1 have has been argued —entaits am intrinsically uncertain activity of search and problem-solving based upon varying ations of public and private (pcople-speeific or firm-specific) know= Teale, yencral scientific principles and rather idiosynchratic experience, wellarticulated procedures and rather tacit competences. | have called a technological paradigm each specific body of k th guides vs, grows Is and firms, and is offen shared by the entire community of and economic actors as the basis upon which one looks for in process eflcieney and proxuct performances, Moreover. plies different opportunities for innovation, defined in terms (of (1) bthe ‘ease’ ey which technological advances, however defined sean’be achieved (2) different possibilities for the innovator to appropriate economic benefits from it in terms af profits, market shares, te; ayil G) atfeent degrees of cummuhativeness of telinolngical advances in ters of dynamic increasing returns to innovative effort and autor correlated probabilities of innovative success, either at the level af single firms or industries. On the basis of this unalytical framework, H have ures an how interstechitilogical differences i tunities. appropriability regi, knowledge bases, modes night explain the observed varlety in the rates and forms of organisation of innovation in contemporary economies. sof the innovative prefeess—which draws heavily from the introduction and throughout the text—hes, in my int implications atthe Feyeks af both theory and histories This interpre the works cited view, also cele analysis. “The theoretical approach with which the present consistent (indeed, iis perhaps # nee sketehed elsewhere indhis buok (see nd Part IV) and also, of course in Nelson and Winter (198 neat mention a few implications which 1 palysis ofsoe ofthe yok. Tra évation_implies nology information_and foregoing survey of the characteristics of tee i ncamental distinction bet nvolved in search and discovery is based on competences, " istics which are a logical precondition to information processing. Thus this view departs also from any theory of production based on a view of technology, based only oF primarily on freely available blueprints (more on this in Winter, 1982; Nelson and ter, 1982; Amendola, 1983; Dosi and Ey 1987), Ct sds related, innovation fy pencrlly base 00 8 jowledge sourees which inevitably specific experiences and other forms of i competences. Thus the institutional analyses of the cl this part und elsewhere in the book are essential fo the wader the ‘anatomy’ of the capitalist machine for technological ha especially Nelson's chapter). Third, as discussed in the chapters by Dosi and Orsenigo, Teece, and Kay;any satisfactory theory of the firm rust i {and history-based) analysis of how organi accumulation of competence \d the appropriation of specific rent- earning assets (on this see also Williamson, 1985; Rumelt, 1987; Teeee. 1982; Kay, 1964; Pavitt, 1984e). . Fourth, innovative opportunities and their economic exploitation co- eben waye that ave at Teast partly eogendisto-the proces of development and production, so that the system very seldont hits any att whereby all available opportunities are fully known aid thoroughly optimised. On the contrary, one is likely 1o observe permanently a variety of search efforts, strategics and results. One nently expect to observe (a) inter-firm asyamueties, in_production rechnologies (cl. the chapters by Metcalfe and ‘As a consequence, valve bilities, as well as inter-sectoral Jifferences in the patterns of tech change, can be considered as parts of the foundation of a rather theory of international trade, whereby the sources of competitive each country are not in any meaningful sense a ‘primary endowment’, outcome af processes of innovation, learning. (see the chapters by Dosi-Soete, Fagerberg and Perez-Soete: Pa 3981; Freeman, 1987) Fifth, and dation of innovative processes briefly emt- Iy complementary with. rey anging economy as ain evolutionary environment (et, in Werbers, Metgalfe, Dosi-Orsenego, Coombs, sentation ol snathcahee ecaans bs Nelson), wherein economic agents continuously ty new things, pay for but also learn from their (and others") mistakes. earn quasi-rents and gain Market shares from their success, and. ullimately, contribute 1 the tenlogenmus evolution of their environment Note 1. For detailed discussions, of appropriability mechanisms, see alsa Taylor and serston (1973), von Hippel (1979, 1980, 1982), and Buer (1982). The rela- ‘cnnts of innovation versus imitation—cleorly a goud proxy for spproprin- eee studied by Levin ef a (1984) and Munsfickd (1981). A detailed aies is preseuted in Wyatt (INS) and wany-tevel Berti References ‘Abernathy, W. J. and) Utterback, J. M, (1975). “A dynamic model of product ‘process innovation, Omega. val. 3. n0. 6. = (197), “Patteras of industria July. pp. 2-29. “Alischuler, A.. Anderson, M.. Zones, D.T., Roos. 1. and Womack. J. (185), The Einure of dhe Automobite, Cambridge, Muss.. MIT Press ja, M (9RN), “A ch perspective i the analysis of the prosuction of weatian’, Memravcontomed, 8h, 38. 00. 3. pp. 201-74 IM, (1986), “Horizontal vs vertical information struc vol, 19. 5, pp HTB jc welfare anelallacation of resources fart oof the Fira. alnmriew Arrow, K. (1962), “Bet BEER (1982). ‘Avtnae, WB. I9RS), Competing Techniques aud Lack The snamics of ‘Allocation Urider Increasing Retr, cstv. CEPR. Baker, MJ. (ed) (1929). Indust era Buer. P. (92). Investigation of Consivent Trcess Machonery in Steced US Munifacturing Indusiten. ential Ph.D. disse ts (19KD}, La Robot, Parl, La Déesvertel —Cimin,“C in eh preted svelte For " Crigiques vient aad E Dy Histrieut stanford, Stanford n dateli Politique minnie Grant. bride, Cambri ity Pres. (HHmSD. “Cliumteteies and QWER EY", Ainerieam Ee anid Proweetigs Dost, G. (URI. Tes 8 estes interpretation 9f the feterminsnts Says Lure rival Change wad Indusval Trunsfovmanen, V0 ane Review