Economic and Business History

2017-2018

Lecture 05

Economic fluctuations II

Industrial revolutions, technological revolutions and waves of innovation

Radical innovations, incremental innovations and waves of innovation

Summary of Kondratiev cycles

Industrial revolutions, technological revolutions and waves of innovation

The main transformations of economic life along modern economic growth as:

• industrial revolutions

= the expression draws attention to the relevance of industrial transformations,

but should not blind to the importance of transformations in other sectors – even
agriculture =

• technological revolutions

= the expression draws attention to the importance of technological aspects of

innovations, but should not blind to the importance of other aspects of
innovations – even to allow technology to produce all its effects =

=> the expression waves of innovations is more suitable

Radical innovations, incremental innovations and waves of innovation

•  waves of innovation … a systemic process

= each one linked to a Kondratiev cycle (next slide) =

•  radical innovations, contrary to incremental innovations, have an

impact on sectors in general and force all elements of economic life to
adapt

•  thus, they usually trigger innovations in all domains of economic life …

… and its full impact usually takes some time to be felt.

 On the nature of technological progress

= technological creation requires investment

= deliberate channelling of resources to technological creation is recent

= technologies are non-rival in their uses …easily transferable

= embodied technological progress …

… replacement of capital goods (physical capital)

… replacement of human capital (recycling knowledge)

=> high investment rates and and stock of human capital may lead to catching up
processes
Readings

Chris Freeman, Francisco Louçã (2001), As time goes by, Oxford: Oxford
University Press, pp. 139-151.
Based on this lecture and its readings students should be able to:

• Understand the true meaning of the expressions ‘industrial revolution’,

‘technological revolution’ and ‘waves of innovation’

• Define what are radical innovations, incremental innovations and

explain why innovation cluster into waves

• Identify the main innovations that triggered each Kondratiev cycle,

namely their technological and organizative aspects