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Innovation and Growth: A Schumpeterian Model of Innovation

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  • Haider A. Khan

    (GSIS University of Denver and CIRJE, University of Tokyo)

Abstract

Following Schumpeter we assume that innovation in specific firms, or groups of firms, can have economy-wide effects. Models based on this idea can be shown to have multiple equilibria. The idea of a positive feedback loop innovation system or POLIS is formalized by picking an appropriate sequence of equilibria over time. It is shown that POLIS has empirical relevance by applying the formal model to an actual economy. The 1997-98 financial crisis in many Asian countries, most notably South Korea, seemed to have reversed the conventional wisdom regarding the East Asian miracle". This paper applies the concept of a POLIS to the case of Taiwan to show that at least in this case, neither the view that the miracle was a mirage nor the view that the growth was a result of factor accumulation only is correct. Ultimately technological transformation - in particular the creation of a positive feedback loop innovation system is what makes the difference between sustained growth and gradual or sudden decline. Although various problems remain in both the real and the financial sectors, the successes of Taiwan in building the preconditions for an innovation system are worth examining. Upon careful examination of Taiwan's system of innovation within the above Schumpeterian model it is found that Taiwan has a fighting chance of building a POLIS in the near future. An interesting feature of the Taiwan POLIS is the modular organizational architecture of some of the high technology firms in Hsinchu science-based industrial park and other centers.

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Bibliographic Info

Paper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-150.

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Length: 44 pages
Date of creation: May 2002
Date of revision:
Handle: RePEc:tky:fseres:2002cf150

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References

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  1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
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  8. Pack, Howard & Page, John Jr., 1994. "Reply to Alwyn Young," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 40(1), pages 251-257, June.
  9. Khan, Haider A. & Thorbecke, Erik, 1989. "Macroeconomic effects of technology choice: Multiplier and structural path analysis within a SAM framework," Journal of Policy Modeling, Elsevier, vol. 11(1), pages 131-156.
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Cited by:
  1. Khan, Haider, 2013. "Bangladesh: Towards a Non-partisan Search for a Pro-people National Political Economic Strategy during Crisis," MPRA Paper 49518, University Library of Munich, Germany.
  2. Khan, Haider, 2013. "Industrialization and Development Strategies in the 21st Century: Towards Sustainable Innovation Systems," MPRA Paper 50168, University Library of Munich, Germany.
  3. Khan, Haider & Patomäki, Heikki, 2013. "A reconstructive critique of IPE and GPE from a critical scientific realist perspective: An alternative Keynesian-Kaleckian approach," MPRA Paper 49517, University Library of Munich, Germany.
  4. Khan, Haider A., 2011. "Bangladesh: National Political Econmic Strategies in Perilous Times," MPRA Paper 40121, University Library of Munich, Germany.
  5. Khan, Haider A., 2011. "Lessons from Korean development experience," MPRA Paper 39387, University Library of Munich, Germany.

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