Catching-up, Innovation and Diffusion Processes

The present book is a compendium of themes on which I have worked during the last few years. The central focus of the book is the link between technological change and economic growth. The starting point for the first chapter are the catching-up strategies followed by countries that presented a 'technology-gap' in relation to the most advanced countries. Some of these catching-up strategies have been successful, others not, due to the impossibility of reaching that minimum critical threshold which enables continuetion of that ascending cumulative process described by Myrdal. The second part of the chapter is devoted to the convergence theory. In current literature, the term 'catching-up' has also been identified with the so-called convergence controversy. After an exposition of different approaches to convergence, its neo-classical theoretical background is highlighted. The convergence theory is then linked to the recent upsurge of the new growth theory. The persistence of divergence between advanced and developing countries has led new growth theorists to strongly criticise the neoclassical approach. The works of the New Growth Theory have dealt with increasing returns and technological change as a result of things that people do in response to market incentives. The newest part of this approach has also been called neo-Schumpeterian and contrasts with another Schumpeterian approach to the growth and catching-up processes that is very different from the new growth theorists' works, all of which rely on the theoretical background to mainstream economics. This alternative Schumpeterian approach rests on the assumption that growth is an evolutionary process in which technological change plays prominent role. According to this school of thought, the differentials between countries can be accounted for differences in technological capabilities and path-dependencies. The last part of the chapter is devoted to the exposition of a growth model which assumes an evolutionistic perspective. When this perspective is assumed, a learning capability becomes the necessary corollary to explain how agents react and survive in different environments and markets. This Lamarkian learning capability passes through implicit and explicit mechanisms of learning, such as the dynamic economies of production, technology transfer, human capital accumulation and R&D intensity. The model states that these learning mechanisms can be used to counterbalance the Darwinian divergent mechanism deriving from a country's inherited initial conditions. The focus of the second chapter is on the link between technological and structural change at the regional level in a dual economy. Technical progress, which has always received great attention due to its linkages with growth theory and industrial economics, has been underestimated with regard to its role in the development of local economies. In fact, that structural change imposed by technical advancements contributes to modifying not only the sectoral composition of a country, but even regional economies, particularly those which are developing, because it upsets their strategies and technological choices, mainly imported and not already reinforced. The framework of the structural change process described in the chapter in part recalls the adjustment process of an economy in the presence of technical progress as described by Pasinetti (1981). The territorial aspects of this process are highlighted tn this chapter. In a dual economy, the adjustment process tends to be solved in an internal dialogue between the two areas, because the declining sectors that contract in the advanced regions expand in the backward regions, while the new expanding sectors growth in the developed regions. The result is increasing unemployment in the developing regions, as a consequence of differences in the population growth rates and changes in the composition of the labour supply. In addition, it highlights that the feedbacks from technological displacement and structural change mechanisms largely depend on the capability of the technologically laggard regions to move their 'technological frontiers' faster than the technologically advanced regions. Four definitions of local environment as a limit/potentiality for regional growth are discussed in this chapter . The concept of localised technical progress is used to explain regional specialization. The industrial district is being presented as a case of localised technical progress and is described according to its four main features (interactive learning, cooperation and specialisation, knowledge spillovers as social intangible assets, social norms system). The third chapter, after a short introduction to the problems imposed by technical change on a dual economy, introduces some “stylized facts” that influence innovation diffusion at the regional level both from the supply and the demand side. Later in the chapter I return to adoption decisions and the diffusion of innovations in the presence of different types of investment, adopters, innovation, and propensity to risk. The fourth chapter is conceived rather differently from the previous ones. Its scope is limited to the discussion of the diffusion process without any explicit reference to the growth process. The aim of the first section is to consider the diffusion of innovations from a different point of view from either the theoretical or the empirical and, in this sense, the classic scheme to the studies on diffusion of process innovations (intra-firm diffusion, inter-firm diffusion, inter-regional and international diffusion) it is adopted. The second section is an exposition of the main approaches in diffusion theory. According to Stoneman (1987) there are basically three different theoretical approaches to an analysis of diffusion phenomena: (i) the information-based, (ii) the difference-based, and (iii) the game-theoretic model. I have decided to add a fourth approach, (iv) the characteristics-based models, which seems, to me, to match very well with the current diffusion of information technologies. All four approaches are presented and discussed according to their main theoretical features. Most of the themes I have treated in this book have been the subject of seminars I have held during my visits at the Department of Social Sciences of the University of Roskilde, whose members I wish to thank for their warm hospitality and helpful comments.