NDLI: Technological Change, Market Rivalry, and the Evolution of the Capitalist Engine of Growth

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Technological Change, Market Rivalry, and the Evolution of the Capitalist Engine of Growth

Content Provider	Springer Nature Link
Author	Peretto, Pietro F.
Copyright Year	1998
Abstract	In the early stages of Western industrialization, innovation was the domain of individuals who devoted their entrepreneurial talents to the development of a new product or process, typically setting up a new firm in order to take the innovation to the market. Today, commercial R&D is almost exclusively carried out by corporate laboratories affiliated with manufacturing firms. The corporate R&D lab, however, did not exist in its modern form until the late nineteenth century. The history of Western industrialization, thus, suggests that a fundamental change in the structure of incentives, and consequently in the nature and the organization of the R&D process, occurred around the turn of the century. Three questions arise. What is the nature of this change? What economic forces caused it? What are its implications? To answer these questions, I construct a model where this change is endogenous to the evolution of the economy toward industrial maturity. The change in the locus of innovation—from R&D undertaken by intventor-entrepreneurs, to R&D undertaken within established firms in close proximity to the production line—results from the interaction of market structure and technological change. This interaction captures the essence of the evolution of the capitalist engine of growth and provides an economic explanation of a “stylized fact” that has received no attention in the theoretical literature. The endogenous market structure generates dynamic feedbacks that shape the growth path of the economy and determine the structural change it undergoes, including the endogenous formation of corporate R&D labs. The evolution of market rivalry explains when and how established firms become the major locus of R&D activity.
Starting Page	53
Ending Page	80
Page Count	28
File Format	PDF
ISSN	13814338
Journal	Journal of Economic Growth
Volume Number	3
Issue Number	1
e-ISSN	15737020
Language	English
Publisher	Kluwer Academic Publishers
Publisher Date	1998-01-01
Publisher Place	Boston
Access Restriction	One Nation One Subscription (ONOS)
Subject Keyword	Economic Growth International Economics Macroeconomics/Monetary Economics
Content Type	Text
Resource Type	Article
Subject	Economics and Econometrics

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