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Interaction of Drastic and Incremental Innovations: Economic Development Through Schumpeterian Waves

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  • Xiangkang Yin

    (School of Economics, La Trobe University)

  • Ehud Zuscovitch

    (School of Economics, La Trobe University)

Abstract

Technological progress as a major source of economic development stems from the interaction of two types of innovations, drastic and incremental. While the former sets the fundamental pace of economic progress by redefining production possibilities as Schumpeter strongly emphasized, the latter takes the basic framework as given but pushes the production possibilities frontier outwards marginally in production practice. This paper studies the dynamic interaction and effects of these endogenously-determined innovations. Upstream firms in the model "produce" drastic innovation, which turns out brand new technology and obsolescences the existing technology used by downstream firms that specialize in final goods production. After the downstream firms adopt the new technology, they can improve it further by their incremental innovations.

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Bibliographic Info

Paper provided by School of Economics, La Trobe University in its series Working Papers with number 1999.02.

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Length: 31 pages
Date of creation: 1999
Date of revision:
Handle: RePEc:trb:wpaper:1999.02

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Keywords: Economic Development; Technology; Innovations;

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References

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  1. Lee, Tom & Wilde, Louis L, 1980. "Market Structure and Innovation: A Reformulation," The Quarterly Journal of Economics, MIT Press, vol. 94(2), pages 429-36, March.
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  3. Martin L. Weitzman, 1995. "Recombinant Growth," Harvard Institute of Economic Research Working Papers 1722, Harvard - Institute of Economic Research.
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  10. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  11. Yin, Xiangkang & Zuscovitch, Ehud, 1998. "Economic Consequences of Limited Technology Transferability," Australian Economic Papers, Wiley Blackwell, vol. 37(1), pages 22-35, March.
  12. Jovanovic, Boyan & Rob, Rafael, 1990. "Long Waves and Short Waves: Growth through Intensive and Extensive Search," Econometrica, Econometric Society, vol. 58(6), pages 1391-1409, November.
  13. Dosi, Giovanni, 1993. "Technological paradigms and technological trajectories : A suggested interpretation of the determinants and directions of technical change," Research Policy, Elsevier, vol. 22(2), pages 102-103, April.
  14. Elhanan Helpman & Manuel Trajtenberg, 1994. "A Time to Sow and a Time to Reap: Growth Based on General Purpose Technologies," NBER Working Papers 4854, National Bureau of Economic Research, Inc.
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  17. Zuscovitch, Ehud, 1986. "The economic dynamics of technologies development," Research Policy, Elsevier, vol. 15(4), pages 175-186, August.
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