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Reallocating Innovative Resources Around Growth Bottlenecks

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  • Timothy Bresnahan

    () (Graduate School of Business, Stanford)

  • Pai-Ling Yin

Abstract

Economy-wide increasing returns to scale embodied in a general purpose technology (GPT) and its applications are often a key source of long-run growth. Yet the successful exploitation of increasing returns calls for coordination on a particular technological direction, reducing flexibility and choice ex post and potentially creating a growth bottleneck. We examine how such a growth bottleneck can eventually be overcome under certain key conditions. Demand must be fundamentally diverse so that the original GPT does not serve all demanders. Firms barred from entry into the primary GPT market can then reallocate innovative resources to create new markets to meet the unserved demand. The demand in these new markets must be valuable enough to generate a positive feedback cycle that results in considerable technical advance in the alternative GPT. This ultimately can lead to indirect entry by the alternative GPT into the original GPT market if and when it becomes strong enough to compete with the original GPT. We illustrate the role of this sequence in the two most important technologies for automating white-collar work of the last 50 years.

Suggested Citation

  • Timothy Bresnahan & Pai-Ling Yin, 2010. "Reallocating Innovative Resources Around Growth Bottlenecks," Discussion Papers 09-022, Stanford Institute for Economic Policy Research.
    • Handle: RePEc:sip:dpaper:09-022
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    Cited by:

    1. Howell, Bronwyn, 2014. "Separation anxieties: Structural separation and technological diffusion in nascent fibre networks," 20th ITS Biennial Conference, Rio de Janeiro 2014: The Net and the Internet - Emerging Markets and Policies 106840, International Telecommunications Society (ITS).
    2. J. Klinger & J. Mateos-Garcia & K. Stathoulopoulos, 2018. "Deep learning, deep change? Mapping the development of the Artificial Intelligence General Purpose Technology," Papers 1808.06355, arXiv.org.
    3. Uwe Cantner & Simone Vannuccini, 2012. "A New View of General Purpose Technologies," Jena Economic Research Papers 2012-054, Friedrich-Schiller-University Jena.
    4. Vladimir Korzinov & Ivan Savin, 2016. "Pervasive Enough? General Purpose Technologies as an Emergent Property," Working Papers of BETA 2016-49, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    5. Howell, Bronwyn, 2014. "Structural Separation and Technological Diffusion," Working Paper Series 4353, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    6. Isabel Almudi & Francisco Fatas-Villafranca & Luis Izquierdo, 2013. "Industry dynamics, technological regimes and the role of demand," Journal of Evolutionary Economics, Springer, vol. 23(5), pages 1073-1098, November.
    7. Taalbi, Josef, 2017. "Origins and Pathways of Innovation in the Third Industrial Revolution: Sweden, 1950-2013," Lund Papers in Economic History 159, Lund University, Department of Economic History.
    8. Korzinov, Vladimir & Savin, Ivan, 2018. "General Purpose Technologies as an emergent property," Technological Forecasting and Social Change, Elsevier, vol. 129(C), pages 88-104.

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    More about this item

    Keywords

    growth bottlenecks; resources; long-run growth;
    All these keywords.

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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