2 Innovation, Science and Technology Flashcards
What is a technological revolution, according to Perez?
A technological revolution is a cluster of interrelated, radical breakthroughs forming a constellation of technology systems. These systems transform the entire economy and society, not just their originating industries, by introducing a new “common sense” set of practices (a techno-economic paradigm) that rejuvenates productivity, structures, and institutions across the board.
How does a techno-economic paradigm (TEP) influence innovation and organizational practices?
A TEP provides a shared logic of best practices, methods, and principles—spanning from input selection to organizational structure. As it diffuses, it becomes common sense, guiding investment decisions, production methods, consumption patterns, and institutional adjustments. It effectively channels innovation efforts toward directions aligned with the new paradigm’s core technologies.
What roles do key inputs and infrastructures play in a technological revolution?
Each technological revolution features a low-cost, widely available key input (e.g., cheap microprocessors today or cheap oil in the past) and associated infrastructures (e.g., the internet, highways) that enable widespread diffusion. Together, they lower costs, expand markets, and create fertile ground for new industries and continuous innovation.
Why do technological revolutions lead to shifts in institutional and social arrangements?
As new technologies become pervasive, their associated TEP redefines best practices in production, management, and commerce. This shift in economic “common sense” exerts pressure for institutional and societal changes—laws, regulations, education, and norms—ensuring that the full potential of the revolution’s productivity gains and opportunities can be realized.
What main trend do Arora, Belenzon, and Patacconi document regarding corporate R&D since the 1980s?
They find that large U.S. firms have substantially reduced their engagement in internal scientific research. This shift is evident in fewer publications by corporate scientists, especially in high-impact journals, and a decline in the private value attributed to their scientific capabilities.
How has the value of scientific research changed for large corporations over time, according to the study?
The “private value” that investors and acquiring firms place on a company’s scientific research has declined since the 1980s. While the value associated with technical knowledge (patents) remained stable, the value linked to scientific publications fell, suggesting a reduced willingness of firms to invest in upstream research.
Does the decline in corporate science mean that inventions are now less science-based?
No. The study finds that patented inventions are still drawing heavily on scientific knowledge, and the vintage of the cited science has not changed. This suggests that external scientific research remains critical to innovation, but large firms increasingly rely on external sources rather than producing basic research in-house.
What factors might explain the reduced incentive for large firms to conduct internal research?
- Reduced private benefits of internal research: Easier access to external inventions, intensified product-market competition, or shorter investor horizons may lower returns on in-house science.
- Stable or increasing costs: If research costs rise, firms may focus on development and acquisition rather than long-term research.
- Changes in practices: While less likely the sole cause, firms might publish fewer scientific findings due to strategic shifts in disclosure or IP management.
Please mark as True or False the following statements about “Technological revolutions and techno-economic paradigms” (Perez, 2010)
A “techno-economic paradigm” gives rise to new organizational practices
A new product (e.g., digital television) can be classified as a “technological revolution”
The evolution of individual trajectories includes a phase of “incremental innovation” followed by a phase of “radical innovation”
Major innovations induce further innovations, giving rise to a “cluster” of interrelated innovations
A “techno-economic paradigm” gives rise to new organizational practices
True. According to Perez, a techno-economic paradigm is not just about a set of new technologies; it also transforms business models, organizational structures, and social norms.
A new product (e.g., digital television) can be classified as a “technological revolution”
False. In Perez’s framework, a technological revolution involves a constellation of innovations (e.g., steam power, electricity, microelectronics) that reshape the entire economy and society. A single new product like digital TV does not constitute a sweeping revolution of that kind.
The evolution of individual trajectories includes a phase of “incremental innovation” followed by a phase of “radical innovation”
False. Typically, the sequence is the opposite: radical innovation arises first (often establishing a new trajectory or dominant design), and is then followed by incremental improvements over time.
Major innovations induce further innovations, giving rise to a “cluster” of interrelated innovations
True. A hallmark of technological revolutions is that a major breakthrough (or set of breakthroughs) triggers complementary inventions and applications, clustering into an overarching shift in technology and related industries.
Please mark as True or False the following statements about “The decline of science in corporate R&D” (Arora et al., 2018)
Corporate scientists prefer not to engage in the peer-reviewed process needed to publish papers
Large firms are moving away from research and moving towards development
The authors were concerned by the decrease in patents from established companies
Cutting R&D investments does not erode any existing absorptive capacity in the long term
Corporate scientists prefer not to engage in the peer-reviewed process needed to publish papers
False. The article highlights how corporate scientists’ ability (and willingness) to publish has diminished largely because of corporate policies and strategic shifts, rather than because scientists “prefer not to” publish in peer-reviewed journals.
Large firms are moving away from research and moving towards development
True. Arora et al. document how many large corporations have refocused R&D budgets on nearer-term development projects and less on fundamental or basic research.
The authors were concerned by the decrease in patents from established companies
False. The authors’ main concern is the decline in scientific research output (particularly publications) rather than a decrease in patenting activity. Indeed, patenting can remain strong or even increase while basic research declines.
Cutting R&D investments does not erode any existing absorptive capacity in the long term
False. The authors suggest that reduced investment in scientific research can eventually harm a firm’s absorptive capacity to recognize, assimilate, and exploit external knowledge in the longer term.
Why do private firms spend money on R&D? (4 reasons)
Scientific knowledge as an input into invention
▪ The linear model: basic research leads to new knowledge, from which technology
development can draw
▪ Scientific knowledge makes downstream inventive activity more efficient (even
without direct benefits)
Absorptive capacity
(scientific knowledge is publicly available, but not necessarily usable)
▪ Firms need their own scientific knowledge to understand others’ discoveries
(including their competitors)
▪ Complementarities between internal and public research
Attracting talented inventors
▪ Staff with a “taste for science”
▪ Positive relationship between intellectual challenge and innovative output
Signaling to consumers, investors, regulators
▪ Publications build a reputation for quality
▪ Importance depends on sector (e.g. biotech) and maturity (start-ups)
The decline of research: what is happening? (Killing golden goose article)
▪ Investments in scientific research by firms is declining
▪ The implied value of scientific capabilities is declining as well while:
▪ Science remains important for inventions
▪ Absorptive capacity is more important if science is more specialized
▪ Patent and copyright laws have made easier to protect scientific knowledge
Explanations
- Globalizing competition
▪ Driving commercial application and protection of knowledge - Specialization
▪ In scope of activities: knowledge is less likely to be useful the less you do
▪ And to different parts of the value chain (revisited later this course) - Focus on short-term and incremental progress
Not true for AI patents: So, probably, the
‘golden goose article’ is picking up a shift in specialization
