1. Technological change as an evolutionary process
Technology and Economic Development:
A comparative perspective by
S. Metcalfe, CRIC WP, 2001

2. Introduction The aim of the article is to analyze the claim that
The connection between technology and development can not solely be understood as a macroeconomic phenomenon
The accumulation of capital, human, intellectual or material are also important
creative destruction and structural change

3. Introduction Development an adaptive evolutionary process:
as a process of the cumulative unfolding of phenomena
as the selective maintenance of superior variants in a population of competing alternatives
Economy as an evolving system and an adaptive, experimental system
The interaction between the growth of knowledge and market process is the key to understanding development and innovation is the manifestation of this process

4. Introduction
The relation between firms, markets and public policies in terms of the use and acquisition of technological knowledge
Why emphasis on the firm?
Due to its uniqueness in the role of
Articulating technologies on the productive effect
Combining knowledge of technology with the knowledge of organization and market
As problem generators and locations for technological and economic learning
A comparison between two views of the firm, “neoclassical”, “evolutionary”
Passive versus creative & learning firm
Resource allocation, given knowledge opportunities versus created ones

5. Introduction Evolutionary theory
Firm being the principal agency in the economy for the creative development and application of technology
Development of a firm as a productive unit versus the development of the wider economy
Economic development: adaptation within and between firms
Creative development process with process of market adjustment
Key words in evolutionary economics: variation, selection and the development of new forms
The problem of development is a problem of the differential access to practical and productive knowledge

6. The production function and the theory of the firm
The production function and the theory of the firm “technology”
Three concepts: activity, transformation, organization
Human dimension in relation to transformation process (that is a technological recipe for production): technologies of management and organization, labor, knowledge
Technology: codifiable and tacit
Polanyi (1962) “we know more than we can say, we can say more than we can write”

7. Technology and Innovation: The neoclassical viewpoint
Technology as a set of fully known blueprints, codified knowledge available from the “universal blueprint library”
Producing the particular level of output at a minimum cost given the knowledge of the relative prices of the factor services (technology)
Link between technical opportunities and economic choices (productivity, the elasticity of substitution, factor intensity)
What determines the production set if not contained in a universal library?
Specified by the knowledge contained within the firm
How about any changes of technique that needs learning and the growth of new knowledge

8. Technology and Innovation: The neoclassical viewpoint
The state of technical arts “ manna from heaven” → knowledge as a non-rival good
Knowledge could be used any number of times by any number of firms to produce any quantum of output or indeed to develop new knowledge
Knowledge costless to transmit but not costless to absorb
Present state of accumulated knowledge matters
Fact: knowledge costly to produce, costly to absorb and absorptive capacity depends on prior acquisition of knowledge

9. Technology and Innovation: The neoclassical viewpoint
Differences in innovation possibility sets are the rationale of different production possibility sets
Learning depending on experience by itself diversifies between firms generating different innovation locus (locally bounded pattern of technological development)
Creativity; local and radical
Why different capabilities to innovate and to produce between firms?

10. Evolutionary approach
How and why do firms differ in their productive capabilities?
The focus on adaptive response that is also creative
Local rationality but variation (not uniformity)
Firm creative, imaginative entity and the outcome of ongoing and unfinished process of organizational design
Penrose “ the capability theory of the firm” → the competence of the firm
The central feature of the capabilities perspective lies in its link with the creation and exploitation of knowledge → continual development of capabilities and creating new ones, “routines”

11. Technical change and development from an evolutionary perspective
Why the technological change and development is an evolutionary problem?
It requires:
Variation in performance relative to international competitors
Structural change in domestic and international economies (selection)
Generation of innovation to keep pace with world developments
Three concepts of building blocks of economic evolution: variation, selection and generation

12. Technical change and development from an evolutionary perspective
Variation
Differences between firms in their economic performance traceable to the differences in their technological and organizational capabilities
Idiosyncratic dimension of firms
Development by imitation and dynamic competition
Selection
The competitive process by which the different technological capabilities acquire different levels of economic significance over time
Variation and selection → generation
Creative capacity “innovative variation”
The nature of the firm as an experimental agency embedded in market process as well as its nature as a productive agency is at the forefront of the evolutionary analyses of technological change

13. The policy dimension
Science and technology policy versus innovation policy
Innovation policy “much broader”
It is concerned with the economic exploitation of practical knowledge with the flow of resources to support knowledge accumulation within and between firms
Classical viewpoint → firms know opportunities but fail to exploit them effectively because of market failure induced divergence in the private and social rates of return from investments in knowledge and innovation
Role of optimizing policy maker is to correct these divergent incentives by fiscal arrangements and grants

14. The policy dimension
Evolutionary viewpoint → also a matter of the knowledge and skill to define a space of possibilities
Policy makers to create a rich ecology of organizational and institutional support for knowledge absorption and generation and to support the development of the associated innovative capabilities → adaptive not optimizing
Innovative capabilities depend on the links between users, suppliers and non-firm organizations
Innovation systems → modular (adaptive and evolutionary)

15. Conclusion
The link between economic development and technological knowledge is difficult to solve
The acquisition of technological mastery depends on
The nature of supporting national innovation infrastructure
The capabilities of individual firms
Firms are unique and crucial in their role of adapting and combining different kinds of knowledge
These distinct capabilities are accumulated and combined and the adaptive evolutionary process in which they are exploited and translated into development makes the process a matter of collaborative learning