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TechnoEconomic Paradigms: Emerging Technologies

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Title: TechnoEconomic Paradigms: Emerging Technologies


1
Techno-Economic Paradigms Emerging Technologies
  • Prasada Reddy
  • Lund University, Sweden

2
Lecture - A definition
  • The art of transferring information from
    teachers notes to students notes without it
    entering either ones mind.

3
Reference
  • Structural crises of adjustment, business cycles
    and investment behaviour (Freeman and Perez,
    1988)

4
Business Cycles 1
  • Kondratiev trade cycles (every 30 to 40 years)
    revival-boom-recession-depression
  • Schumpeter (constellation of innovations in
    recession and depression points)
  • Traditional view output is a function of capital
    labor
  • Robert Solow (1956) role of technology in output

5
Business Cycles 2
  • One of the main reasons for cyclical fluctuations
    in the economy is the instability of investments.
  • Such instability is mainly related to the
    investments in capital goods industries rather
    than consumer goods industries.
  • High capital-intensity and indivisibility of
    investments tend to multiply investments during
    boom and diminish during recession.

6
Business Cycles 3
  • Concept of Equilibrium in Economics
  • Cobb-web theorem
  • Excessive investments upset the equilibrium

7
Investments 1
  • Fluctuations in investments are caused by
  • External factors 1) technological innovation,
    2) dynamic growth of population, 3) fluctuations
    in business confidence and animal spirits.
  • Internal factors Any initial change in
    investment gets multiplied as the employees in
    capital goods industry spend their earnings on
    consumption goods. This increases the optimism of
    investors to invest more.

8
Investments 2
  • Inventions or scientific discoveries may occur
    independently of the business cycle, but their
    appreciable economic introduction will depend on
    business conditions.
  • The periods of stable growth depend more on a
    general climate of confidence, including belief
    in the future potential benefits from technical
    change, rather than on accurate calculations on
    the future rate of return of a wide variety of
    investments.

9
Technical Change 1
  • The crucial importance of technical change for
    investment behavior
  • At certain times technical change appears to
    undermine confidence and stability, while at
    others it has the opposite effect.
  • At the level of individual innovation investment
    in new products and processes has an element of
    true uncertainty and the outcome cannot be known.
  • Source Freeman (1982)

10
Technical Change 2
  • However, from a business cycle perspective, the
    analysis cannot be restricted to individual
    innovation.
  • Qualitative aspects and the systems of
    inter-relatedness of innovations must be taken
    into account, which under favorable conditions
    lead to an economic boom.
  • Favorable conditions include, complementarities
    between innovations and the emergence of
    appropriate infrastructure and institutions that
    do not restrict diffusion of new technologies.
  • On the other hand, as technologies and industries
    mature, diminishing returns and declining profits
    may diminish investments.

11
Taxonomy of Innovations 1
  • Incremental innovations
  • Occur continuously, with varying rates in
    different industries and countries, depending on
    a combination of demand pressures, socio-cultural
    factors, technological opportunities.
  • They are not a result of deliberate RD, but
    outcome of inventions and improvements suggested
    by the production people or proposals by users
    (learning-by-doing and learning-by-using.
  • Although their combined effect is very important,
    no single incremental innovation has dramatic
    effects.

12
Taxonomy of Innovations 2
  • Radical innovations
  • Discontinuous events usually as a result of
    deliberate RD in an enterprise or university
    (e.g. color TVs, electric typewriters).
  • They lead to growth of new markets and
    investments, but relatively small in aggregate
    economic impact.

13
Taxonomy of Innovations 3
  • Changes of technology system
  • Far-reaching changes in technology, affecting
    several branches of the economy, as well as
    giving rise to entirely new sectors.
  • A combination of radical and incremental
    innovations, together with organizational and
    incremental innovations affecting more than one
    or few firms (e.g. synthetic materials,
    petrochemical innovations, machinery innovations
    in injection moulding and extrusion).

14
Taxonomy of Innovations 4
  • Changes in techno-economic paradigm
    (technological revolutions)
  • A major influence on the behavior of the entire
    economy (pervasive effects).
  • Creates new range of products, services, systems
    and industries, as well as affects almost all the
    other branches of the economy.
  • Carries with it many clusters of radical and
    incremental innovations.
  • Changes involved go beyond engineering
    trajectories for specific product or process
    technologies and affect the input cost structure,
    and conditions of production and distribution
    through out the system.

15
Techno-Economic Paradigm 1
  • A new techno-economic paradigm develops initially
    within the old, showing its decisive advantages
    during the down-swing phase of the previous
    Kondratiev cycle.
  • A combination of inter-related product and
    process, technical, organizational and managerial
    innovations, with potential improvement in
    productivity for all or most of the economy and
    opening up a wide range of investment
    opportunities.
  • The organizing principle of each successive
    paradigm is to be found not only in a new range
    of products and systems, but mainly in the
    dynamics of relative cost structure of all
    possible inputs to production.

16
Key Factor
  • In each new techno-economic paradigm, a
    particular input or set of inputs become the key
    factor of that paradigm and fulfills the
    following conditions
  • 1) Clearly perceived low and rapidly falling
    relative cost only major and persistent changes
    have the power to transform the decision rules
    and procedures for engineers and managers.
  • 2) Almost unlimited availability of supply over
    long periods temporary shortages may occur, but
    no major barriers to long-term increase in
    supply. Essential for major investment decisions.
  • 3) Clear potential for the use or incorporation
    of the new key factor in many products and
    processes throughout the economic system, either
    directly or through related innovations, which
    reduce the cost, change the quality of capital
    equipment, labor inputs and other inputs to the
    system (e.g. oil, microelectronics).

17
Kondratiev Cycles 1
  • 1770s to 1830s (industrial revolution to hard
    times).
  • Main industries textiles, Iron-working.
  • Key factors cotton and pig iron.
  • Emerging sectors steam engines, machinery
  • Limitations scale, process control and
    mechanization, limitations of hand tools.
  • Technological leaders Britain, France, Belgium.
  • Emerging countries German States and the
    Netherlands.

18
Kondratiev Cycles 2
  • 1830s to 1880s (Victorian prosperity to Great
    depression).
  • Main industries steam power. shipping and
    railways.
  • Key factors coal and transport.
  • Emerging sectors steel, electricity, synthetic
    dye stuffs.
  • Limitations inflexibility of location in the
    case of water power, scale, reliability and range
    of applications.
  • Technological leaders Britain, France, Belgium,
    Germany, USA.
  • Emerging countries Italy, The Netherlands,
    Switzerland, Austria-Hungary.

19
Kondratiev Cycles 3
  • 1880s to 1930s (Belle epoque to Great
    depression).
  • Main industries Electrical and heavy
    engineering.
  • Key factors Steel
  • Emerging sectors automobile, telecommunications,
    oil.
  • Limitations steel as an engineering material in
    terms of strength, durability and precision.
  • Technological leaders Germany, USA, Britain,
    France, Belgium, Switzerland and the Netherlands.
  • Emerging countries Italy, Austria-Hungary,
    Canada, Sweden, Denmark, Japan, Russia.

20
Kondratiev Cycles 4
  • 1930s to 1980s (Golden age of growth to crisis of
    structural adjustment).
  • Main industries automobiles, aircraft,
    petrochemicals.
  • Key factors Energy (particularly oil)
  • Emerging sectors computers, NC machines,
    pharmaceuticals.
  • Limitations Fordist mass production, limitations
    of scale of batch productions.
  • Technological leaders USA, Germany, Sweden,
    Switzerland.
  • Emerging countries East Europe, Korea, Brazil,
    India, China.

21
Kondratiev Cycles 5
  • 1980s to now (Golden age of growth to crisis of
    structural adjustment).
  • Main industries ICT, software.
  • Key factors electronic chips
  • Emerging sectors biotechnology, fine chemicals.
  • Limitations energy-intensity and
    material-intensity.
  • Technological leaders Japan, USA, Germany,
    Sweden, Taiwan, Korea.
  • Emerging countries Brazil, Mexico, China, India.

22
Features of New Techno-economic Paradigm
  • A new best-practice form of organization
  • New skill profile in the labor force
  • A product mix with intensive use of low-cost key
    factor
  • New radical and incremental innovations
    substituting the new key factor
  • A new pattern in the location of investment
  • A wave of infrastructural investment
  • Emergence of new innovator-entrepreneur-type
    small firms
  • Concentration of the large firms in the branches
    producing the key factor
  • A new pattern of consumption of goods and
    services and new types of distribution and
    consumer behavior

23
Next Kondratiev Cycle?
  • Emerging Competing Technologies
  • Biotechnology
  • New materials
  • Superconductivity
  • Nanotechnology

24
Biotechnology 1
  • Biotechnology is defined as the application of
    biological organisms, systems and processes to
    manufacture products or provide services (OTA,
    1991).
  • Biotechnology is as old as the origins of human
    beings.
  • Modern biotechnology - the application of genetic
    engineering and monoclonal antibodies (e.g.
    Recombinant production of proteins in culture
    (e.g. Insulin) and generation of monoclonal
    antibodies from mammalian cell hybridomas (e.g.
    Rituxan for treating lymphona).

25
Biotechnology 2
  • Pervasive effects (plant-based)
  • Industrial enzymes, pharmaceutical products,
    beauty and healthcare products from plants.
  • Genetically modified, disease-, pest- and
    climate-resistant agricultural products.
  • Genetically modified vitamin rich rice and wheat.

26
Biotechnology 3
  • Pervasive effects (microorganism-based)
  • New-generation vaccines, diagnostic kits.
  • Use of microorganisms for environmental
    applications (e.g. Chakravarthy vs. Diamond
    case).
  • Use of microorganisms in mining activities
    (bacterial leaching).
  • Biological warfare?

27
Biotechnology 4
  • Pervasive effects (human-based)
  • Human genome - DNA sequencing and ability to
    identify target at protein/enzyme level.
  • More effective drugs.
  • Stem cells - potential to replicate human organs.
  • Application of nanotechnology in biotechnology?

28
Biotechnology 5
  • Can biotechnology become next Kondratiev cycle?
  • What are the key inputs?
  • Can these inputs be supplied at sustainable
    levels?
  • Can biotechnology be applied across the economy?
  • Does it require new organizations, practices and
    skills?
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