1. 'A model which took account of all the variegation
of reality would be of no more use than a map at the scale of one to one'
(Robinson, 1962, with a reference to Lewis Carroll, 'Sylvie and Bruno').
2. Sanjaya Lall has shown in a series of important papers that,
from 1979 onwards Indian technological capabilities have accumulated to the
point where India is an exporter of technologies. (See, for example, Lall,
1984a.)
3. Dosi, Pavitt and Soete (1°90) suggest that Marshallian
competition might be a limiting cave appropriate to situations in which
innovation teas ceased.
4. Economic theory teas often lagged behind changes in economic
systems, or changes in policy. There are many examples, of which the Prebisch
justification for import substitution is especially well known. For speculation
along these lines about the Prebisch-Singer thesis, see Cooper and Fitzgerald
(1989, p. 12). More appositely, it is worth noting that changes in perceptions
of the innovative process are quite frequency ascribed to historical changes
affecting industry structures. See, for example, Freeman (op cit., p. 10) on
Schumpeter's change in view on sources of innovation, in particular his
recognition of the role of intrafirm research and development.
5. There are useful surveys in Dosi (1988) and Dosi, Pavitt and
Soete (1990).
6. The concept of 'quasi-monopoly' as applied to the temporary
advantage of an innovating firm was first used by Vernon (1966).
7. The specifications which follow are drawn in part from the
discussion in Dosi, Pavitt and Soete (1990, Chapter 4 on 'The Innovative
Process'), which in turn draws on a large body of theoretical and empirical
literature.
8. Frances Stewart and Jeffrey James (1982, pp. 9 ff.) apply the
idea to the context of developing economies. Elsewhere Stewart (1979) used the
localization of technological change in the Atkinson and Stiglitz style to
explain why technology from industrialized countries is inappropriate for
developing countries.
9. David makes much wider inferences, well beyond the idea of
localization: 'Choices of technique become the link through which prevailing
economic conditions may influence the future dimensions of technological
knowledge' (op. cit., p. 4). There is a useful discussion of these ideas in
Rosenberg (1982, p. 166 et seq.).
10. Rosenberg (1982, pp. 120 ff.) broadens the concept to cover
'reaming by using'. The automaticity of the learning process as formulated by
Arrow (op. cit.) has been strongly criticized by a number of authors, including
Bell et al. (1982, 1984).
11. Or what Dosi describes as 'cumulation ... in the acquisition
of problem solving capacities' (Dosi, 1988, p. 1128).
12. In his first formulation of the economics of innovation,
Schumpeter was much concerned to explain monopolistic rents from innovations as
a return to entrepreneurship (Schumpeter, op. cit.). In a modem setting, the
role of these rents is much simpler to understand: they are perceived by
businessmen as the 'return' to the (often massive) allocation of resources (like
R&D resources) to the production of innovations.
13. The history of industrialization (and of industrial
technology) is in a sense an account of sectoral patterns of innovation which
change over time: innovations ID the United Kingdom during the Industrial
Revolution were centred in the textiles vector itself. Later, as the capital
goods sector emerged, innovations in textiles machinery and many other types of
equipment came more and more from machine-making sectors. Further in response to
bottlenecks in textile inputs (bleaching agents and dyestuffs in the first
instance), the chemicals industry-the first 'science-based' vector- emerged. The
story continues: it is hardly surprising that there should be intersectoral
differences in innovation in modern industry which is a product of the historic
process.
14. Discussions of these chapters of Capital can be found in
Rosenberg (1982, Chapter 2, an essay reprinted from the Monthly Review, Vol. 28,
July-August 1975). See also Cooper (1971). Marshall also reflects on the
emergence of new forms of industrial organization and their relationship to the
application of science to production (Marshall, 1899, Book IV, Chapters VIII and
IX).
15. Freeman (1989) points to the relationship between innovation
and product differentiation. He describes 'defensive' innovation (which is
highly R&D intensive), as follows: 'Defensive R and D is probably typical of
most oligopolistic markets and is closely linked to product differentiation' (p.
176).
16. Cooper et al. (1974) attempted to link the Sylos-Labini
framework as developed by Modigliani (1958) to explain barriers to entry and
intra-industry patterns of competition.
17. See Mansfield et al. (1981): 'It has long been recognised that
the costs of imitating new products have an important effect on the incentives
for innovation.... If ... firms can imitate an innovation ... substantially
below the cost to the innovator of developing the innovation, there may be
little or no incentive for the innovator to carry out the innovation'.
18. On the importance of incremental improvements to production
processes see Enos (1962).
19. In fact, Freeman distinguishes six typos. His sixth category,
'Opportunist strategy', is not necessary for our discussion.
20. Freeman may understate the significance of innovation in the
traditional sectors, or at least the technological pressure under which such
firms have come, especially in recent times. Traditional firms are generally
'supplier dominated', and may from time to time be faced with a critical need to
adopt new technologies as a matter of survival (or as an interim measure to
drive costs down as far as possible by real wage reductions). This is evidently
happening in a number of vectors because of the incidence of new microelectronic
control systems, which widen the range for mechanization (see Hoffman and Rush,
1988, for a discussion of the garments industry).
21. An early attempt to specify 'Channels and Mechanisms of
Technology Transfer', which draws this distinction, is given by Cooper and
Sercovich (1971). There is a survey of literature on this question in Stewart
(1981).
22. There is some evidence that European technology-supplier firms
to Indian industry are increasingly sensitive to the creation of potential
compositors, especially in view of increasing composition in their home markets
from the newly industrialized countries (see Cooper, 1988). But Bell and
Scott-Kemmis (1988) express doubt whether this is two of British firms.
23. 'It is obvious that there is no room in economics for long
chins of deductive reasoning' (Marshall, 1899, edition 1966, p. 644). It is a
little unclear whether Marshall intended this as a statement of fact or as a
normative judgement. As 9 statement of fact, it has not boon borne out by recent
developments in economics, many of which bear witness to a willingness to pursue
long chains of deduction, to the almost total exclusion of embarrassing facts.
Since Marshall was well aware of the methodological weaknesses of economists, it
seems to me more reasonable to regard this as a normative statement-a stern
warning in fact.
24. An important qualification to this is implicit in Freeman's
further remarks that 'Unless imitators enjoy significant market protection or
privilege they must rely on lower unit costs of production', and, in relation to
innovative strategy in developing countries, 'even a successful imitative
strategy, although it may lead to industrial development, will reach a point
where export competitiveness in labour costs may increasingly conflict with the
goal of higher per capita incomes' (op. cit., pp. 170 and 184). These arguments
as they apply to trade patterns will be developed more fully below.
25. See, for example, Dahlmann and Westphal (1982), and Bell d al.
(1982) for a review of some of these. See also Dahlmann et al. (1987), and Pack
and Westphal (1986).
26. Subsequently, arguments about tendencies to sub-optimal
investments as a justification for interventions by a social welfare state were
largely brushed aside by the crude empiricism that 'bad markets are better than
bad governments'. This of course is just as impossible of proof as was the crude
delinking argument of the descriptive Dependency school.
27. The best known attempt at superordination is Chenery, 1961.
28. For a detailed history of Indian policy and experience see
Nayar (1983). A critical accounts of Indian policy is in Desai
(1988).
