Economics of innovation (1) Features Drivers Consequences of innovation Technology diffusion (at company/sectors/economic system levels) Players and institutions involved in innovation dynamics Processes of Learning/Genarating knowledge

Economics of innovation (2) Competition/selection/interaction among economic players (and institutions) Cognitive/ behavioral /organizational/ institutional aspects ** Five key features Dynamic analysis approach Innovation as a process Learning and knowledge as key background Focus on interrelation between subjects Key role played by institutions

Key steps of economic though on innovation Adam Smith Focus on technological development and its embedding into “capital” goods effects on labor productivity (labor division/specialization/learning by doing) David Ricardo Focus on endogenous processes: as price reduction due to technical advancement induces demand growth and employment change (so called “compensation theory”)

Key steps of economic though on innovation Karl Marx Focus on “machines” and on how they determine/codify the production process; attention to the “machinery sector” as specialized sector with its life-cycle; Innovation as a social (classes) story and not as an individual process; Incentives and technological change (from capitalistic competitive pressure and from market enlargement) 1.Charles Bebbage (XIX c.) and 2.Abbot Payson Usher (XX c.) 1. Distinction between “making” and “manifacturing” (large scale and organization; role of apprenticing and specialization for technical progress ) 2. Innovations as cumulative process: problem perception; preparing solution analysis of problem, environment, skills needed; invention (as an individual intuition; economic adaptation of the invention)

Shumpeter (1883-1950) The most known Shumpeter Innovation as key driver of industrial change Innovation differs from invention (purely scientific or technological factor): Innovation can happen without any invention Innovation as a new combination of production means: new goods, new production methods, new organizational forms; mew markets (for input or outputs) Innovation is a creative answer, not an conventional/adaptive one Innovation might take place bot at an individual level (entrepreneur) and at a (large) firm level (two possible “frames”…).

Shumpeter (1883-1950) The most known Shumpeter (2) Competition tends to destroy monopolistic power built on innovation, and it should be actively protected trough “new innovation”. Focus on the historical perspective to analyze the “innovation phenomenon” (cases studies on “changes” applying a single interpretative framework) Key aspects examined: relationships between firm dimension/firm growth/market power/market structure* and innovation (*two ways); Technological change and market entry barriers

Shumpeter (1883-1950) The most known Shumpeter (3) Neglected or under-researched issues: importance of science and technology in determing sectoral innovation rate continuity of technological change; rather he focuses on “discontinuity”, role of individual entrepreneur (as a leader) and radical innovation how innovation diffuse (just partial aspects are discussed) Invention as a merely exogenous facts (scientific activity not internalized within the social and economic process) Some “uncertainness” in interpreting innovation Heavy consequences from the Shumpeter approach on researches about innovation/technological during ’60. Attention to the role played by scientific research and development and related institutions) emerges just later

The Shumpeterian legacy (suggestions for more recent researches) Further key (mainly descriptive “contributes” on: Innovation and its uncertain exits – it can be understood only ex-post Entrepreneur as an agent with bounded rationality (innovation is not an activity founded on rational knowledge – unmeasurable/probabilistic uncertainty, in particular with radical innovation); optimal innovation does not exist! Therefore….heavy differences in innovation paths Innovation concentration in time – new technology induced cycles- and “sectors” = industries (…exploring differences and “aggregations”) Distinction between new (= “innovative”) and old (“conservative”) firms; small and large - Company age is relevant! Focus on the firm life cycle and innovation “conflicts” within any sector; Attention to the (two ways) relationships between market structure and innovation by firms.