Basic Definitions and Concepts Flashcards

1
Q

What does “technical” and “technological” change mean?

A

Definition Technical Change
technical change results in a change in the amount of outputs used to produce the same quantity of input.

Technical change (progress) refers to

  • the production of new consumer goods and services,
  • the introduction of new inputs in the production process,
  • new methods of producing goods and services, or
  • new ways of operating and managing organizations,

Definition Technological Change
Technological change is a narrower term that refers to specific innovations in products and production processes –
e.g. a new type of coffee machine, or a new method of etching transistors into silicon chips.

-> products and production processes are socially and institutionally embedded, so technological change can trigger technical change.

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2
Q

What does “localized technological change” mean?

A
  • the change in technology does not affect the entire process of production just the techniques currently being used
    => technological change leads to a shift localized only in one specific technology.
  • it is rather linked to the two types of biased technological changes: Harrow- and Solow-Neutral.
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3
Q

What is the difference between “adoption” and “diffusion” of a technology?

A

Definition Adoption
- process of selecting a product for use by an individual or organization.
The term refers to the factors driving the choice of a household or a firm to invest in a specific technology.

Definition Diffusion
- process by which an innovation is communicated through certain channels over time among the members of a social system.
The term refers to the process of adoption unfolding over time and the mechanisms driving it.

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4
Q

What types of technological changes can we observe?

A

Incremental innovations
=> existing product or service is gradually improved / when subsequent modifications of existing products originate from “learning by doing” and “learning by using”

Radical innovations
= new entrants and new technologies displace incumbent firms, existing products or processes / existing products or processes are drastically changed thus creating new demand in a new market

Technological change / Creative Destruction:
Schumpeter

Change in technology system
=> combination of radical/incremental technology innovations combined with organizational changes resulting in the creation of entirely new sectors (e.g. biotechnology, information technology, etc).
-> can be so revolutionary to determine a change in the entire techno-economic paradigm

Change in the techno-economic paradigm
=> revolutionary changes carried by new technology systems / when the entire style of producing and managing is changed / Kondratiev-waves
- K- waves have four phases: prosperity, recessive, depression, recovery
- Each K-wave is associated with a change in the techno-economic paradigm

 Creative accumulation
= incumbent firms look for new technologies and try to integrate them into functioning processes and products together with the established ones
-> producing “evolving knowledge”

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5
Q

What do we mean by innovation?

Where does innovation take place?

A

Definition:

  • when a process or a product previously invented is transformed into something usable.
  • commercialization and application of an invention to the development of a new process or product to meet a user or market needs.

Takes place:
Innovations take mostly place at firm level thanks to investments in R&D.

Product Innovation
Product innovation usually ensures firms´ profitability when market expansions are no longer possible

Process Innovation
innovations in processes always ensure that the products are produced in the most efficient way (see also the A-U model in the picture below).

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6
Q

What are the drivers of an innovation?

A

Drivers of Product Innovation:

a. The demand for a product originating directly in the market (market pull) from the presence of specific needs;
b. A saturation of the current market and the consequent necessity to ensure firms´ profitability through new products (technology push).

Drivers of Process Innovation:
The need to produce in an efficient way
a. A change in the price of input factors (“induced technological change”)
b. A product innovation (A-U model)

Induced Technological Change (ITC)
= approach used to understand the rate and direction at which new technologies are introduced when factor markets change (e.g. due to changes in policy

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7
Q

How can an innovation be measured?

A
  • Global Innovation Index (GII)
  • Regional Innovation Scoreboard (RIS)

The Global Innovation Index 2014 (GII) covers
- 143 economies, accounting for
- 92.9% of the world’s population and
- 98.3% of the world’s Gross Domestic Product (in US Dollars).
The GII relies on two sub-indices each built around key pillars:
- the Innovation Input Sub-Index
- the Innovation Output Sub-Index,

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8
Q

Why is the size of the hard disk drive considered to be a disruptive technology?
Why are improvements in capacity or speed considered to be incremental technological changes? (Christensen, 1997)

A
  • it serves the need of a market different from the established and mainstream one originally represented by mainframe computers (14 inches disk drive) or minicomputers (8 inches)
  • they work towards improving the performance of an existing product without generating a new market.
  • Incumbent firms always led in developing and adopting incremental changes but they failed when trying to enter the market for disruptive technologies
  • > performance of the improved product can be easily measured.
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9
Q

Why did the incumbents always fail in producing the disruptive technology?

A
  • Due to a delay in entering the emerging market because they were held captive by their customers in the market in which they were leading
  • Due to the fear of cannibalizing sales of the products they were already producing
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10
Q

What are the pillars of GII?

A

Five input pillars capture elements of the national economy that enable innovative activities:

(1) Institutions,
(2) Human capital and research,
(3) Infrastructure,
(4) Market sophistication,
(5) Business sophistication.
(6) Knowledge and technology outputs
(7) Creative outputs.

Each pillar is divided into sub-pillars and each sub-pillar is composed of individual indicators (81 in total).
-> Sub-pillar scores are calculated as the weighted
average of individual indicators
-> pillar scores are calculated as the weighted average of sub-pillar
scores.

The four measures are calculated as follows:
 The Innovation Input Sub-Index is the simple average of the first five pillar scores.
 The Innovation Output Sub-Index is the simple average of the last two pillar scores.
 The overall GII is the simple average of the Input and Output Sub-Indices.
 The Innovation Efficiency Ratio is the ratio of the Output Sub-Index over the Input SubIndex.
At regional level, the Regional Innovation Scoreboard (RIS) is adopted.

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