The Economics of Innovation and Technical Change
“Innovation has become the industrial religion of the late 20th century. Business sees it as the key to increasing profits and market share. Governments automatically reach for it when trying to fix the economy. Around the world, the rethoric of innovation has re-placed the post-war language of welfare economics. It is the new theology that unites the left and the right of politics.”
(The Economist, Survey Innovation in
Industry, 17 March 1999.)
· Instructor: Fidel Pérez Sebastián
· Office: no. 7, Facultad de Económicas, 2nd floor.
·
Tel.: 965903614, ext. 3234.
·
E-mail: fidel@merlin.fae.ua.es
·
Course
web site: http://merlin.fae.ua.es/fidel/docencia/TechChan/sillabus.htm
·
Course
goal: Students will
develop an introductory understanding of the economics of innovation and
technology transfer. Topics covered include the way economists think about
technological change, knowledge spillovers and network externalities, the relationship
between market structure and innovation, the distinction between
learning-by-doing and industrial research, and between tacit and codified
knowledge, the economics of the patent system and technology policies, and the
diffusion of innovations across firms and countries. We will cover histories of
the rise of industrial research and of academic research in its relation to
industry, and industry studies of chemicals and petrochemicals, pharmaceuticals
and biotechnology, the automobile, aeronautics, shipbuilding, electrical power,
steel, telecommunications, computers and software, and the Internet.
·
Prerequisites: An introductory course in
Microeconomics, or the consent of instructor.
·
Method
of evaluation: The final
grade will be computed based on two things. First, 50% of the grade will come
from case studies. I will assign to you five case studies. In each of them, you
will be asked questions about an industry study. You will be able to work on
each assignment for a week in groups of about 5 students. At the end of the
week, every group will have to turn in a report. Collaborations between
different groups will not be allowed. Second, the remaining 50% will be the
result of a comprehensive final examination that will evaluate the student's
knowledge about the material covered in class.
·
Readings: This is the material that I use to
prepare the lectures. You are not required to read it, but if you do, it would
make the lectures more understandable. I will distribute at the beginning of
each lecture a copy of my overhead projector slides.
One book deserved a
special mention, since it will be extensively used during the course: C.
Freeman and L. Soette, The economics of industrial innovation, 3rd
edition, MIT Press, 1997. A couple of copies of the book will be available for
students on reserve in the library. Some of the other reading material can be
downloaded from the course web site (the underlined stuff below); the rest will
be available from the University copy services. I will distribute the case
studies in class.
1.
Microeconomics
of Technology
1.1.
Economic
theory of perfect competition
Reading:
D.W. Carlton and
J.M. Perloff, Modern industrial organization, 3rd edition, Addison Wesley
Higher Education, 2000. Chapter 3.
1.2.
What
is technological change?
1.3.
Market
structure and industrial research
Reading: F.M. Scherer and D. Ross, Industrial
market structure and economic performance, chapter 17: 613-620 and 630-660,
Houghton-Mifflin Company (New York), 3rd edition, 1990.
1.
Network
externalities, knowledge spillovers: The logic of government support of
research
Reading: P. David, “Clio and the Economics of QWERTY,” American Economic Review 75: 332-337, May 1985.
Reading: Z. Griliches, “The search
for R&D spillovers,” Scandinavian Journal of
Economics, Supplement:
S29-S47, 1992.
Case study 1: M.A. Cusumano et al., “Strategic maneuvering and mass-market dynamics: The triumph of VHS over Beta,” Business History Review 66: 51-94, Spring 1992.
2.
The
rise of industrial & academic research
3.1.
The
origins of industrial R&D laboratories
Reading: D.C. Mowery and N. Rosenberg, Paths of innovation: Technical change in 20th century America, Cambridge University Press (Cambridge, U.K.), 1998. Chapter 2.
3.2.
The rise
of academic research in its relation to industry
Reading: N. Rosenberg, Inside the black box: Technology and Economics, chapter 7, Cambridge University Press (Cambridge, U.K.), 1982.
4.
The
Diffusion of Innovations across firms
Reading: Z. Griliches, “Hybrid
corn: An exploration in the Economics of technical change,” Econometrica
25: 501-522, October 1957.
Reading: E. Mansfield, “Intrafirm
rates of diffusion of an innovation,” The Review of Economics and
Statistics 45: 348-359, November 1963.
Case
study 2: “Chemicals,” chapter 4 in Mowery and
Rosenberg.
5.
Learning-by-doing
and technical change
Reading: N. Rosenberg, Chapter 6.
Reading: P. Thompson, “How much
did the Liberty shipbuilders learn? New evidence for an old case study,” Journal
of Political Economy 109: 103-137, 2001.
6.
Technology
policy
6.1.
The
Economics of the Patent System
Reading: Scherer and Ross, Pages 620-630.
Reading: S. Scotchmer, “Standing on the shoulders of giants: Cumulative research and the patent law,” Journal of Economic Perspectives 5: 29-42, 1991.
6.2.
National
systems of innovation, and public policy
Reading: Freeman and Soette, chapters 12 and 16.
Case study 3: D.C. Mowery and N. Rosenberg, “Technical change in the commercial aircraft industry, 1925-1975,” Chapter 8 in N. Rosenberg.
7.
Technology
and economic growth
7.1.
A way
of escaping from the curse of diminishing returns
Reading: R. Solow, “Technical change and the aggregate production function,” Review of Economics and Statistics 39: 312-320, 1957.
7.2.
The
industrial revolution
Reading: Freeman and Soette, chapters 1 and 2.
Reading: J. Mokyr, The lever of riches, Oxford university Press, 1990, Chap. 5.
8.
International
aspects of technology
8.2.
Appropriate
technology and tacit knowledge
Reading: S. Teitel, “On the concept of appropriate technology for less-industrialized countries,” chapter 8 in Industrial and technological development, Johns Hopkins University, 1993.
Reading: H. Pack and L.E. Westphal, “Industrial strategy and technological change: Theory versus reality,” Journal of Development Economics 22(1): 87-128, June 1986.
Case study 4: The Korean automobile industry. L. Kim, Innovation to imitation: Dynamics of Korea's technological learning, Harvard Business School Press, 1997.
8.3.
Trade
and international technology diffusion
Reading: Freeman and Soette, chapters 14 and 15.
8.4.
Foreign
direct investment
Reading: R. Caves, Multinational
enterprise and economic activity, 2nd edition, Cambridge University Press,
1996. Chapter
7.
Reading: J. Dunnig, Multinational
enterprises and the global economy, Addison-Wesley publishers, 1993.
Chapters 11 and 12.
9.
The
ICT revolution (Computers and Software, and the latest wave, the internet)
9.1.
The
economics of information industries
Reading: Freeman and Soette, chapter 7.
Reading: J. Mackie-Messon and H. Varian, “Economic FAQs about the internet,” Journal of Economic Perspectives, Summer 1994.
Case study 5: R.G. Harris and C.J. Kraft, “Meddling through: Regulating local telephone competition in the U.S.;” and L. Waverman and E. Sirel, “European telecommunications markets on the verge of full liberalization.” Both in Journal of Economic Perspectives, Fall 1997.
9.2.
The
New Economy, employment, and the productivity paradox
Reading: P. David, “The dynamo
and the computer: An historical perspective of the modern productivity paradox,”
American Economic Review 80(2): 255-361, May 1990.
Reading: Freeman and Soette, chapter 17.
Reading: R. Gordon, “Does the
‘New Economy’ measure up to the great inventions of the past?” Journal
of Economic Perspectives, Fall 2000.