The Economics of Innovation, New Technologies and Structural Change by Antonelli Cristiano;

Author:Antonelli, Cristiano; [Antonelli, Cristiano]
Language: eng
Format: epub
ISBN: 171381
Publisher: Taylor & Francis Group
Published: 2012-08-15T00:00:00+00:00

Conclusions

The introduction of technological change has complex vertical effects in an industrial structure articulated in industries which provide each other with intermediary inputs and capital goods. Vertical effects have received little attention in industrial organization, much less than the analysis of the horizontal effects within each industry where competition is based on the introduction of rival products as well as new process, cost-reducing technologies.

Not only do vertical effects deserve more attention, but so too does the interplay between horizontal and vertical effects. The introduction of new technologies within each industry alters the competitive arena and as such leads to the creation of new barriers to entry and to exit, transient monopolistic rents and an array of quasi-losses and quasi-rents. The time span necessary for competitive conditions to be re-established depends on both the ability of competitors to imitate the new technology and enter the industry, and the capability of incumbents to adjust to the decline of their old market conditions. Upstream imitation lags and delayed exit have a direct bearing on the evolution of the absolute and relative prices for intermediary products and capital goods supplied to downstream users. Such delayed changes in relative and absolute factors costs in turn may induce firms in downstream industries to change their technologies, either to introduce new technologies or to adopt new available technologies whose adoption was not yet profitable.

Within each industry in turn firms can react to the changing conditions of the market-place, engendered both by the direct introduction of innovations by rivals and competitors in the same product markets, and by the indirect effects of upstream dynamics when the differences in the behavior of upstream industries, across national and regional economic systems that compete in the global economy, matter. The new disequilibrium conditions, engendered both within the industry and across industries by the ripple effects of the introduction of new technologies, leads, because of the inducement mechanisms at work, to the introduction of new technologies.

The patterns of evolution at the system level can be explained by such interplay between horizontal and vertical effects. Adjustment to new technologies can only take place in the long term and in the context of disequilibrium where relative prices keep changing. The joint analysis of vertical and horizontal effects in an industrial matrix of industries also makes clear that the introduction of a new technology at a point in the system is likely to engender ripple effects which include the inducement to the introduction of further innovations in other industries and by other firms with a continual feed-back which constitutes the essence of innovation.

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