Definition of Terms

- body of knowledge about techniques

- methods employed to produce and distribute commodities and services

- new knowledge of such techniques *technical change

- identifiable discrete contributions to technological change


- inventions which are introduced into the regular INNOVATION system of production and PROCESS provision of services - introduction of new techniques which may often be followed by a spread process of diffusion

- systematic activity directed to the advance of technology

- research for new knowledge which does not necessarily have a technological objective, but which ultimately may very well influence technology


- constitutes an important but not unique source of technological change

• Classical Economics • Neoclassical Economics John Maynard Keynes others who followed Keynesian views • Developmentalists • Institutionalists • Structuralists

Economic Thoughts
on Technological Change

Historical Review on

Classical Economists .

Adam Smith .

” The Wealth Of Nations. or the baker. the brewer. 9 . Paragraph. p. 456. Book IV. and never talk to them of our necessities but of their advantages. not to their humanity but to their self-love. but from their regard to their o w n i n t e r e s t .“It is not from the benevolence of the butcher. that we expect our dinner. We address ourselves. Chapter II.

Time Saving 3. Increases Capital and Labor Ratio. This increases dexterity of labor. . 2.Adam Smith Division of Labor 1. Increase in specialization and capital result in an increase of productivity.

Thomas Malthus .

. 3. Growing severity of crises. •Advocated for population check as worried by his assumption that population grew in “Geometric Progression” but output grew only in “Arithmetic Progression”. Instability of Investment and Technical change.Thomas Malthus • Monopolies are product of competition itself. Class Conflict. 2. 1.

David Ricardo • Also sought to support accumulation of capital as it increases productivity. • Introduce the Theory of Comparative Advantage .

Neoclassical Economics .

•It assumed homogeneity of output. one product industry. . Both classical and neoclassical approaches relied on savings and investments as driver of growth.• Technology means productivity increases. •Technological improvements were exogenous but in their models but was seen beneficial.

. he recognizes the importance of the role of government especially in times of economic slumps. • Unlike the classical and neoclassical minimalist view of government.John Maynard Keynes • Technological change was the main source of economic progress.

Joseph Schumpeter • Competition based on innovation is of greater importance. . • Innovative processes change as giant corporations rise.

• recognized that the long-term view towards investment now normally implies a deliberate long-term strategy for the firm’s own R&D.John Kenneth Galbraith • strong emphasis upon the influence of science and technology on modern industry and government. .

Developmentalists .

.Ragnar Nurkse • Balanced Growth There is a need for a coordinated increase in the amount of capital utilized in a wide range of industries.

• Create Overcapacity in some and supply bottleneck in other industries. .Albert Hirschman • Unbalanced Growth Supported industrialization through large scale capital formation.

Arthur Lewis Unlimited Supply of Labor Problem: How to shift labor from unproductive to productive industries? Labor intensive technologies are desirable in early stages of development. .

Take Off 4. Maturity 5. Traditional Society 2.Walt Whitman Rostow • Stages of Development 1. High Mass Production . Pre-Conditions 3.

Stages of Development .

Insitutiontalists .

.Clarence Ayres • Technological Progress = Economic Development • But this could be thwarted by ceremonialism that should be overcome through education for example.

. • Spread effect must overcome backwash effect for development to happen. Backwash Effect – weaken a region 2. 1.Gunnar Myrdal • Cumulative Causation – dynamic economic effects that progressively moved a society away from equilibrium. Spread Effect – linkages across sectors/regions.

Structuralists .

• An example of Growth and Structural Change in Modern Analysis: East Asian Dragon Countries – Hong Kong.Structuralists • Advocates rapid technological catch up • Government Export Orientation • Industrialisation – Import Export Substitution (Singer-Prebisch). South Korea. Taiwan modernisation in the past 25 years . Singapore.

• Product Life Cycle • Causes of New Technologies • Demand & Science Push • Consequences of New Technologies • Diffusion • Technological System • Technological Waves • Economics of Research & Development • Implications for Gov’t Policies Science &Technology Economic analysis of .

. some continue to grow and some rise and fall. maturity to its decline or reduce in demand in the market. growth. Not all products reach this final stage. From its introduction to the marketing.THE PRODUCT LIFE CYCLE Product life cycle is the stages through which a product or its category bypass.

science-based enterprise .THE PRODUCT CYCLE 1 INNOVATIVE PHASE • Product: “new good • tends to happen in advanced economies • Prices are high but tends to have a very rapid growth of output and sales • As patents run out. integrated. advances innovative firm to the larger. competitors arise • Production moves out of the small.

THE PRODUCT CYCLE • Output steadies to a normal growth rate • Rate of science now becomes the more standard one • Internalization of production takes place 2 IMMEDIATE PHASE .

THE PRODUCT CYCLE • Product becomes fully mature in the sense that its production technology is now completely understood and standardized 3 MATURE PHASE • Innovations are rare. monopolies are eroded. output falls off and price falls to a minimum competitive level • Phase wherein transfer of technology usually takes place .

CAUSES OF NEW TECHNOLOGIES • Innovation: scientific progress • inducements offered by the high cost of one particular input • production processes that gave rise to greater output/unit of time • “new combinations” .

DEMAND PULL • Technology is the index of productivity • Innovations are not equally available at equivalent costs for all industries • According to Malthus. demand and supply were the results of decisions by “different sets of people” or institutions • Theory of Demand-led Technical Change of Jacob Schmookler .

SCIENCE/SUPPLY PUSH • All innovations stem mainly from advances in scientific research  a certain technology seeking an application • The role of professional R&D is given primary place • Attempts to bring out the much more complex nature of industrial innovations which relate to basic science • It acts as a necessary condition for industrial survival .

which he thought would be capitalsaving rather than labor-saving .CONSEQUENCES OF NEW TECHNOLOGIES Attention of classical economists shifted from PRODUCTION to DISTRIBUTION Jean-Baptiste Say .saving time in both distribution and production.

blueprints.DIFFUSION OF TECHNOLOGY • Competitive pressure  Economic profitability • network proven into a variety of designs. systems and subsystems of machinery all held together by a common technological thread which has shown some promise in economic production TECHNOLOGICAL SYSTEM .

Technological Waves Modern Theories of Fluctuation .

Research & Development •Research and development was seen to be very relevant factor leading to economic growth. Improvements in economic performance leads to greater expenditures on R&D •LIMITATIONS of R&D: -Causal factors -Differential receptivity to R&D of industries -Statistical problems -Unmeasurable effects of R&D .

etc. and this can be possible without formal R&D activity . suppliers. universities. competitors. the firm must often obtain knowledge from many different sources: customers.Sources of Invention and Innovation Industrial invention and innovation implies the importance of pluralism in sources of new technology that is to introduce a new product or process..

Technological acquistions by large firms (acquiring smaller firms relative to their technological endeavors) are c .Sources of Invention and Innovation R&D is highly concentrated in large firms in all the industrialized capitalist countries.


taxes and regulations) to regulate market condition and economic welfare. which was likely to be dominated by the former. patents.g. copyrights) and disincentives (e. . unlike the political system.Implications for Gov’t. Also the gov’t provides for incentives (subsidies. Policies The legal system was the main device for preventing the powerful market or other forces to harass the weak.

• Micro-level Taxonomy • Basic Concepts • Firm Behaviour and Technological Change • Business Architecture Science &Technology The Firms and .

Why MICRO-LEVEL TAXONOMY? • By analyzing growth and change at the micro-level . we may be in a better position to understand longer-term macroeconomic development • focus on labor and capital process .

capitalize on and relate technologies to products and processes of a firm.research and education on how to manage. innovation and diffusion of technology or processes .BASIC CONCEPTS • Technology.a means to do something • Technology Management . combination of the elements of business management and engineering • Technological Change -a term that is used to describe the overall process of invention.

quality.what sets a firm apart from other firms.Competition • Primary goal of a firm is to maximize profit and minimize cost. • Competitive Advantage. May include price.leadership -differentiation -focus . availability. • Strategies to achieve goals may include the ff: -cost. etc. why customers choose a certain product/service over another.

Competition • Linking Technology to Competitive Advantage -Technology Strategy Advanced Manufacturing Management –management techniques such as TQC. Advanced Manufacturing Hardware Technology – “actual” technologies such as computer-aided manufacturing/design.) . Kanban pull system. Just-In-Time. computer-integrated manufacturing. etc. etc. flexible manufacturing systems.

.Evolutionary Theory of Firm Behavior and Technological Change Technological change takes place in an evolutionary fashion where firms are constantly in competition with each other in an unstable environment.

that form a chain to achieve business goals. they identify the business parameters to help in decision-making and planning. • Technology Research & Transfer . • Together.Business Architecture • Consists of functional steps .identify major dev’t steps with corresponding business parameters .critical steps tied to business functions .success will be achieved if both dev’t steps and parameters are met Technology Research & Transfer Product Development Market Segmentation Customer Payoff .

Marketing.Research and Development Phase R&D Product Development Phase Product/Technology Proposal Competitive Analysis Creativity and Innovation Product Design/Technology Technological Research Manufacturing and Software Development Technological Transfer Payoff Market Release. Servicing .

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