Patterns of technological progress and corporate innovation
AbstractThe bulk of the global innovative effort takes place in 5 countries: USA, Japan and China as leaders, with France and United Kingdom as immediate followers, which all display, on the long run, a negative marginal value added on innovation. The present paper attempts to answer the following question: why does most of innovative activity takes place in markets apparently hostile to innovation, i.e. giving back negative marginal value added on innovation ? A model is introduced in which any market may be represented as a Selten’s extensive game, subgames of which are played as Harsanyi’s games with imperfect information, by a temporarily finite and changing set of players. The firms’ innovative activity is a Nash’s dynamic equilibrium in which innovating is rational though suboptimal, without premium on innovation being a real economic profit. The model is the theoretical framework for the study of six cases: Ford Motor, General Motors, Honda, Chevron, Akzo Nobel and IBM, which allow to conclude that firms do innovation either because they have to or because this is their comparative advantage and they can do it in an exceptionally efficient way. As economic growth is grounded in efficient business patterns and in some countries those business patterns shape themselves in the context of a strong exogenous pressure on innovation. This leads to the development of economies which, regardless its pace of economic growth and balance of payments, come to a point when marginal value added on innovation is negative. At this point, however, incentives to innovate do not disappear and firms continue to apply the same business patterns and thus do create scientific input which gives back negative marginal real output. This pattern of global technological progress seem to be quite durable, with financial markets that allow to compensate, by successful financial placements, the downturns of innovative projects.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 25186.
Date of creation: May 2010
Date of revision:
innovation; technology; technological progress; corporate strategies;
Find related papers by JEL classification:
- E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
- L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
- D20 - Microeconomics - - Production and Organizations - - - General
- D40 - Microeconomics - - Market Structure and Pricing - - - General
- L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
- B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Institutional; Evolutionary
- O3 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights
- L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
- C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
- L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
- D03 - Microeconomics - - General - - - Behavioral Microeconomics; Underlying Principles
- L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
- D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-09-25 (All new papers)
- NEP-CSE-2010-09-25 (Economics of Strategic Management)
- NEP-INO-2010-09-25 (Innovation)
- NEP-KNM-2010-09-25 (Knowledge Management & Knowledge Economy)
- NEP-MAC-2010-09-25 (Macroeconomics)
- NEP-TID-2010-09-25 (Technology & Industrial Dynamics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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