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Fission, Forking, and Fine Tuning

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  • Richard N. Langlois

    (University of Connecticut)

Abstract

Perhaps because we live in the age of the Internet and social networks, everyone seems agreed that innovation is all about recombination. Although not fully dissenting from this consensus, and perhaps in the end affirming it in an important way, I want to draw attention to some apparently different mechanisms of innovation, both suggested by Adam Smith: subdivision (or differentiation) and fine-tuning. On the surface at least, these – especially the second – do not appear to be processes of recombination. I will attempt to elucidate what I mean by these concepts and try to think about how they fit together with recombination in a full Smithian account of innovation. Whether innovation proceeds from the top down or the bottom up depends crucially on the structure of complementary stages in the process of production. Especially if it takes place in a non-modular way, recombination may require unified decision rights, implying the vertical integration of complementary stages of production, in order to overcome the dynamic transaction costs of change. But the processes of subdivision and differentiation may also require changes in decision rights in order to overcome dynamic transaction costs. I illustrate these points with a case study of three generations of an American family of inventor-entrepreneurs in electricity and electronics.

Suggested Citation

  • Richard N. Langlois, 2017. "Fission, Forking, and Fine Tuning," Working papers 2017-15, University of Connecticut, Department of Economics.
  • Handle: RePEc:uct:uconnp:2017-15
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    More about this item

    Keywords

    Innovation; Decision Rights; Dynamic Transaction Costs; Modularity; Institutions;

    JEL classification:

    • B12 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Classical (includes Adam Smith)
    • B25 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Historical; Institutional; Evolutionary; Austrian; Stockholm School
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • L63 - Industrial Organization - - Industry Studies: Manufacturing - - - Microelectronics; Computers; Communications Equipment
    • L92 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Railroads and Other Surface Transportation
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • N81 - Economic History - - Micro-Business History - - - U.S.; Canada: Pre-1913
    • N82 - Economic History - - Micro-Business History - - - U.S.; Canada: 1913-
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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