Innovation, Information and the networked economy Flashcards
how is the process of innovation influenced?
by the state of knowledge, individual creativity, public policy, economic institutions and social norms that jointly makeup an innovation system
what do innovators gain?
when capitalist economy working properly they gain economic rents which are lost by imitators
what is an innovation system?
connects networks of users, private firms, individuals, an governed bodies
what is innovation as a process?
fundamental source of change in our life that itself is constantly undergoing change
what is the descriptive analysis/
- why does innovation matter?
- why does innovation arise?
- how much innovation?
- how to promote innovation?
how can public policy be used?
designed so that innovations occur more quickly
what is radical innovation?
inventing new things such as filament lighting
what is incremental innovation?
improves an existing product
what elements are included in successful.l innovation system?
- relationships among private firms, gov, educational institutions, individual scientists
- social interactions are governed by combination of laws, policies, knowledge and social norms
what is diffusion?
spread of innovation throughout economy
what is innovation?
the invention and diffusion of new products or production methods
what are the types of innovation?
- process vs product
- radical vs incremental
what is process innovation?
change in implementation of new improved procession or delivery method
what is a public good?
non exclusive and non rival such as knowledge
what is intellectual property?
IP
creations of the intellect for which a monopoly is assigned to designated owners by law
to protect intellectual property it is protected by some kind of rights
consequences of innovation in production?
- shift from goods manufacturing in to services provision (industrial structure has shifted from goods to services because innovation has changed way we are producing things, more manufacturing the more services are need for provision)
- shift from home production to market production
- a shift from human to robots (destcrutive creation)
- productivity growth and economic growth
focus on product and process
what are the consequences of innovation in distribution?
- inequality across sectors: manufacturing to service
- inequality across genders
- inequality across skilled / unskilled orders
- inequality across generations
what is a complement innovation?
value of innovation depends on the presence of the other
e.g. app and iPhones
what is a substitute innovation?
two innovations are valuable alone, but less valuable when some other innovation has already occurred
what is tertiary sector?
services provision
why are average workers the losers?
they are usually the ones affected by innovation as new technologies allow machines to do routine work
what are the short run effect of using robots?
- labour replacing: worker endowments reduced by technology
- labour enhancing: machines and humans can be complements so endowments enhanced
what are the long run effect of using robots?
- increase in profits
- displace labour: workers go into unemployment
- creates additional employment in other services
- upgrade enfdowmenets
why has inequity of genders been affected?
due to innovation women are now able to have same opportunities
what is tactic knowledge ?
kind of knowledge tat is difficult to transfer to another person by means o writing it down
what is codified or explicit knowledge?
can be readily articulated, codified, stored and accessed
easily transmitted by others
why network and intervention are essential for both systems?
- external effects: coordination failure between innovators
- public goods: economies of scale: network effect
- search matching: asymmetric information
what is the network effect?
phenomenon whereby increased numbers of people or pets improve the value of a good or service, e.g. internet
why should the government intervene?
to encourante innovations
what is a matching market?
- matches two distinct groups of people
- each person in market would generally benefit from being connected to the right member of the other group
what is a n example of how the matching market works?
- likedin
- eBay
links two parties that may have not been otherwise
how does the value of forms of knowledge increase?
when more people use it, the benefit to users increase as the network of users grows
what is a lock in?
example of winner takes all
market gets stuck with standard of technology that may not be the best but makes becomes dependant on it
as the network grows y0ou get a lock in
part of the demand side of winner takes all
what is the importance f matching markets in economics?
the magnitude of network connections now makes these markets possible
what is the network effect?
The network effect is a phenomenon whereby increased numbers of people or participants improve the value of a good or service.
what is a strategy to stop market failure in matching markets?
companies to charge low r zero costs
such as adobe, people read it for free so incentivises the company to pay for adobe
what can public policies do?
encourage useful innovations and accelerate diffusion to lall users who may benefit
what are the two types of policies looked at?
- intellectual policy rights
- subsiding the supply of inputs to the innovation and diffusion process
what are intellectual property rights?
A right that is had by a person or by a company to have exclusive rights to use its own plans, ideas, or other intangible assets without the worry of competition, at least for a specific period of time. These rights can include copyrights, patents, trademarks, and trade secrets.
what is an example of a trade secret?
coco cola recipe 100 years
why might secrecy and barriers as a policy not be effect8ive?
firms my invent the same product indeendnatly or reverse engineer
how do intellectual property rights work?
novel idea must be codifiable and non excludable
what is the economic problem with patents?
how best tp balance the competing objectives of making good use of existing knowledge, ,devoting sufficient eoncomic resources and creativity to creating new knowledge and diffusing new knowledge
what is an optimal patent?
one that best advances the use of knowledge in the economy
how do you work out total benefits of innovation to society?
probability of innovation x benefits to others
what happens if the duration of patent increases?
probability of innovation increases but inly to a certain length and it will decline as long term patents will prevent other potential innovators from using protected knowledge to develop an idea
what is another important role in innovation systems?
the role of the government
hw can competitions and prizes help innovation?
policy for support
award a price for the successful development of solution to a problem that will meet some specifications
prize winner awarded cost of development rather than with monopoly and innovation goes straight into public domain
what is an example of comp and prize policy?
Deepwater horizon oil rig disaster
Prize foundation offered one mil to any team wh could significantly import current tech for the cleanup
how can public policies help innovation?
- increase pace of innovation
- influence the direction of innovation
- address the consequences of innovation
what are the consequences of innovation?
- shift from goods manufacturing to services
- series produced in the market
- rise in robots
- productivity growth slows
why does innovation have unequal effects?
affects people differently, depending on whether their skills nd other endowments could be replicated bu machines or whether machines make endowments more valuable
