Innovation &

Economic Growth

Group 2
Abhinav Walia 21PGDM124
Khushi Jain 21PGDM143
Nikita Jain 21PGDM153
Rashi Jain 21PGDM164
Ria Arora 21PGDM165
Shashank Singh 21PGDM173
Shashwat Gulati 21PGDM174
Shivang Agarwal 21PGDM175
Shivansh Sabharwal 21PGDM176
Shreya Gupta 21PGDM177
Stories of Development
There are three stories of development:
Neoclassical Story
Structuralist Story
Marxist Story

These stories illustrate the diversity of views about

economic growth.

The neoclassical story left out the class differences in

contribution to economic growth, the triumph of market-
based analysis left the power of business class invisible.
This was the entry of Karl Marx's Analysis.
Economic Growth
According to 18th-century economists, economic growth depends on the widening
of the market and the accumulation of stock.
Walt Rostow claimed that societies need to save at least 10% of their income to take
off into self-sustaining growth.
The pre-modern rulers invested in god, instead of investing in productive facilities.
The rate of economic growth depended on:
-> Surplus from production
-> Depriving landlords of their rents
-> Keeping wages at subsistence
Role of State:
Most of the economic growth has been state-led, not market-led.
Trade was an instrumental state policy.
In the eye of the economist, the state's standing was low as it was corrupt.
Example of Toyota
Why some countries become rich
and some stay poor?
Three theories that explain this:
1) Free Trade Theory:
David Ricardo's theory of Comparative Advantage
However rich one country is, and however poor another is, there is always a trade
that will make them both better off.
Adam Smith and Ricardo have a different point of view.

Globalisation would enable poor countries to exploit their comparative

advantage in cheap and abundant labour.

2) Structuralist Theory:
Capitalism is a world system and free trade locks rich and poor countries into
their pre existing positions.
Prebisch had an argument for this.
Why some countries become rich
and some stay poor?
3) Exploitation Theory
Unequal exchange isn't something contingent that can be
remedied by changes in policy within the world of the capitalist
system.
To free countries from unequal exchange, a revolution is a
must

Rate of profit has a been linked to exploitation.

Main stream economics only accepts the first theory i.e. free
trade story.
Direct Elements in Innovation

Science

Technology

Research

Invention

Innovation Wave
- 4 Stages

Valley Of Death
Solow Model

Classical Approach
Solow focus on technology
Capital a supporting Player
Exogenus Growth
Romer Model

Endogenous Growth
Growth per worker
Romer's 3 premises

Technological Knowledge
Human Capital
Prospector theory
 Global
Competitiveness
Index
Elements considered-
Factor Driven Economies
Efficiency Driven Economies
Innovation Driven Economies
Global
Competitiveness
Index 2021
Complex Technologies and
Innovation Organisation
Complex technologies drive economic performance
'Lone inventor in the garage working solo'- a myth
Focus of US technology policy on R&D- not
necessarily right anymore
Actual Key: self-conscious networked learning
environment
Complex Technologies force the
Innovation System to Network
Dominate world exports
-> 82% in 1995 compared to 43% in 1970
Rise in complex organizational models
Need for innovative networks grow in parallel
Technological progress in this phase really requires-
network learning, integrating, and applying a whole wide
variety of new science and technology knowledge and
know-how
Complex Technologies force
New Learning Environments

Core concern of the innovation system- Neglect of the

processes of knowledge and their diffusion and application
Innovation Networks have special education needs – how to
function in groups, teams
Need for 'shared network learning'
Need
for 'institutional engineering
Co-evaluation between complex organizations and the
technologies
New Kinds of Network Learning for
Complex Technology Innovation:
Need
learning by doing –for conscious network experimentation
Need
learning by using – collaboration with potential users
Need
learning from sci/tech advances – networks to
understand advances in diverse but potentially related areas –
intelligence system for emerging science and technology (S&T)
Need
learning from spillovers – for reverse engineering, or from
leakage of knowledge
Need
learning by interaction – build competence in interaction
so collaborative, interactive learning throughout network
Tangible and lntagible Assets
Old economy was a world of tangible asset- plant, equipment, land,
physical resources, product inventory, infrastructure, support system,
and physical stuff
21st century of a new economy- intellectual and intangible assets,
those are key.

19th century accounting system can really value the old economy but
can't value the new economy. The inability to measure intangibles
undermines the willingness of firms to invest in innovation because
they can't really score it and get gains from it, and it limits the
investment flow into innovation as a result.
 Accounting System for
Intangibles
Need new metrics
We now have:
- Total company R&D investment
- Company patent filings
We don't have data on:
- Customer Satisfaction
- Customer Relationships
- IT investment
- Employee's ongoing education
- Employee recruitment
- Incorporation of advanced Business Processes
- External research access
- Participation in technology alliances and networks
 VENTURE CAPITAL

Built on the idea that introducing new technologies delivers

much higher investor return than stock market.

William Shockley invented a transistor.

His employees however weren't happy with him
so left his company to start their own.
They approached Arthur Rock, a Wall street
financier for funds and he arranged it for them.

 Future of Venture Capital

Will be anchored in technology because of the scalable nature of

technology i.e. , it's ability to defy conventional financial analysis.

VC rather than inflexible regular markets will fund innovation

because innovation is time intensive not capital intensive, and capital
can' t substitute for time if you want sustainable co. s.
 Schultz view of the
Solutions

Economies benefit from simulative macro economic policies.

Industrial policies are majorly inefficient.

Idea of isolating winners and losers might result in market
failure.
 Proposed Solutions

Pick winners of the market.

Promote growth of the winners by directing technology and capital.

Pick losers of the market.

Protect their growth by providing them capital for growth and enacting
policies which are defensive.