Industrial Economics

1
Industrial Economics

• Theories of Innovation

2
Introduction

• The neoclassical theory of innovation
• Measurement and critique
• Systems of Innovation theory

3
Neoclassical

• Production functions and technological
  improvement process innovation
• Technological and institutional change as
  residual Solow
• Patents protection of investment. When is it
  worthwhile?

4
Measurement
Industry (BERD) Industry (BERD) Third Level Sector (HERD) Third Level Sector (HERD) Government (GOVERD) Government (GOVERD) Total RD (GERD) Total RD (GERD)
1997 1999 1997 1999 1997 1999 1997 1999
m 612.4 783.6 178.4 228.1 65.4 63.9 856.2 1,075.6
As a GDP 0.91 0.88 0.27 0.26 0.10 0.07 1.28 1.21
Irelands Rank 15 16 19 21 24 24 17 18
EU Average 1.14 1.21 0.38 0.38 0.27 0.26 1.80 1.86
OECD Average 1.49 1.53 0.37 0.38 0.24 0.24 2.16 2.21

5
Critique

• Basic neoclassical theory
• RD ? new idea ? new product ? market definition
  ? product launch
• Measurement inaccurate, incomplete

6
Systems of Innovation

• The S of I includes all parts and aspects of the
  economic structure and the institutional set-up
  affecting learning as well as searching and
  exploring
• National, regional, sectoral
• Theoretical base evolutionary
• Successful
• knowledge and learning
• high tech and low tech

7
A System of Innovation