Basic Definitions and Concepts Flashcards
What does “technical” and “technological” change mean?
Definition Technical Change
technical change results in a change in the amount of outputs used to produce the same quantity of input.
Technical change (progress) refers to
- the production of new consumer goods and services,
- the introduction of new inputs in the production process,
- new methods of producing goods and services, or
- new ways of operating and managing organizations,
Definition Technological Change
Technological change is a narrower term that refers to specific innovations in products and production processes –
e.g. a new type of coffee machine, or a new method of etching transistors into silicon chips.
-> products and production processes are socially and institutionally embedded, so technological change can trigger technical change.
What does “localized technological change” mean?
- the change in technology does not affect the entire process of production just the techniques currently being used
=> technological change leads to a shift localized only in one specific technology. - it is rather linked to the two types of biased technological changes: Harrow- and Solow-Neutral.
What is the difference between “adoption” and “diffusion” of a technology?
Definition Adoption
- process of selecting a product for use by an individual or organization.
The term refers to the factors driving the choice of a household or a firm to invest in a specific technology.
Definition Diffusion
- process by which an innovation is communicated through certain channels over time among the members of a social system.
The term refers to the process of adoption unfolding over time and the mechanisms driving it.
What types of technological changes can we observe?
Incremental innovations
=> existing product or service is gradually improved / when subsequent modifications of existing products originate from “learning by doing” and “learning by using”
Radical innovations
= new entrants and new technologies displace incumbent firms, existing products or processes / existing products or processes are drastically changed thus creating new demand in a new market
Technological change / Creative Destruction:
Schumpeter
Change in technology system
=> combination of radical/incremental technology innovations combined with organizational changes resulting in the creation of entirely new sectors (e.g. biotechnology, information technology, etc).
-> can be so revolutionary to determine a change in the entire techno-economic paradigm
Change in the techno-economic paradigm
=> revolutionary changes carried by new technology systems / when the entire style of producing and managing is changed / Kondratiev-waves
- K- waves have four phases: prosperity, recessive, depression, recovery
- Each K-wave is associated with a change in the techno-economic paradigm
Creative accumulation
= incumbent firms look for new technologies and try to integrate them into functioning processes and products together with the established ones
-> producing “evolving knowledge”
What do we mean by innovation?
Where does innovation take place?
Definition:
- when a process or a product previously invented is transformed into something usable.
- commercialization and application of an invention to the development of a new process or product to meet a user or market needs.
Takes place:
Innovations take mostly place at firm level thanks to investments in R&D.
Product Innovation
Product innovation usually ensures firms´ profitability when market expansions are no longer possible
Process Innovation
innovations in processes always ensure that the products are produced in the most efficient way (see also the A-U model in the picture below).
What are the drivers of an innovation?
Drivers of Product Innovation:
a. The demand for a product originating directly in the market (market pull) from the presence of specific needs;
b. A saturation of the current market and the consequent necessity to ensure firms´ profitability through new products (technology push).
Drivers of Process Innovation:
The need to produce in an efficient way
a. A change in the price of input factors (“induced technological change”)
b. A product innovation (A-U model)
Induced Technological Change (ITC)
= approach used to understand the rate and direction at which new technologies are introduced when factor markets change (e.g. due to changes in policy
How can an innovation be measured?
- Global Innovation Index (GII)
- Regional Innovation Scoreboard (RIS)
The Global Innovation Index 2014 (GII) covers
- 143 economies, accounting for
- 92.9% of the world’s population and
- 98.3% of the world’s Gross Domestic Product (in US Dollars).
The GII relies on two sub-indices each built around key pillars:
- the Innovation Input Sub-Index
- the Innovation Output Sub-Index,
Why is the size of the hard disk drive considered to be a disruptive technology?
Why are improvements in capacity or speed considered to be incremental technological changes? (Christensen, 1997)
- it serves the need of a market different from the established and mainstream one originally represented by mainframe computers (14 inches disk drive) or minicomputers (8 inches)
- they work towards improving the performance of an existing product without generating a new market.
- Incumbent firms always led in developing and adopting incremental changes but they failed when trying to enter the market for disruptive technologies
- > performance of the improved product can be easily measured.
Why did the incumbents always fail in producing the disruptive technology?
- Due to a delay in entering the emerging market because they were held captive by their customers in the market in which they were leading
- Due to the fear of cannibalizing sales of the products they were already producing
What are the pillars of GII?
Five input pillars capture elements of the national economy that enable innovative activities:
(1) Institutions,
(2) Human capital and research,
(3) Infrastructure,
(4) Market sophistication,
(5) Business sophistication.
(6) Knowledge and technology outputs
(7) Creative outputs.
Each pillar is divided into sub-pillars and each sub-pillar is composed of individual indicators (81 in total).
-> Sub-pillar scores are calculated as the weighted
average of individual indicators
-> pillar scores are calculated as the weighted average of sub-pillar
scores.
The four measures are calculated as follows:
The Innovation Input Sub-Index is the simple average of the first five pillar scores.
The Innovation Output Sub-Index is the simple average of the last two pillar scores.
The overall GII is the simple average of the Input and Output Sub-Indices.
The Innovation Efficiency Ratio is the ratio of the Output Sub-Index over the Input SubIndex.
At regional level, the Regional Innovation Scoreboard (RIS) is adopted.
