Techno-Economic Paradigms: Emerging Technologies


6 Δεκ 2012 (πριν από 5 χρόνια και 5 μήνες)

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Techno-Economic Paradigms:
Emerging Technologies
Prasada Reddy
Lund University, Sweden

Lecture - A definition

The art of transferring information from
teacher’s notes to student’s notes without
it entering either ones mind.


Structural crises of adjustment, business
cycles and investment behaviour
(Freeman and Perez, 1988)

Business Cycles 1

Kondratiev trade cycles (every 30 to 40
years) – revival-boom-recession-

Schumpeter (constellation of innovations
in recession and depression points)

Traditional view: output is a function of
capital + labor

Robert Solow (1956): role of technology in

Business Cycles 2

One of the main reasons for cyclical fluctuations
in the economy is the instability of investments.

Such instability is mainly related to the
investments in capital goods industries rather
than consumer goods industries.

High capital-intensity and indivisibility of
investments tend to multiply investments during
boom and diminish during recession.

Business Cycles 3

Concept of Equilibrium in Economics

Cobb-web theorem

Excessive investments upset the

Investments 1

Fluctuations in investments are caused by:

External factors – 1) technological innovation, 2)
dynamic growth of population, 3) fluctuations in
business confidence and ‘animal spirits’.

Internal factors – Any initial change in
investment gets multiplied as the employees in
capital goods industry spend their earnings on
consumption goods. This increases the optimism
of investors to invest more.

Investments 2

Inventions or scientific discoveries may occur
independently of the business cycle, but their
appreciable economic introduction will depend
on business conditions.

The periods of stable growth depend more on a
general climate of confidence, including belief in
the future potential benefits from technical
change, rather than on accurate calculations on
the future rate of return of a wide variety of

Technical Change 1

The crucial importance of technical change for
investment behavior:

At certain times technical change appears to
undermine confidence and stability, while at
others it has the opposite effect.

At the level of individual innovation investment in
new products and processes has an element of
true uncertainty and the outcome cannot be

Source: Freeman (1982)

Technical Change 2

However, from a business cycle perspective, the
analysis cannot be restricted to individual innovation.

Qualitative aspects and the systems of inter-relatedness
of innovations must be taken into account, which under
favorable conditions lead to an economic boom.

Favorable conditions include, complementarities
between innovations and the emergence of appropriate
infrastructure and institutions that do not restrict diffusion
of new technologies.

On the other hand, as technologies and industries
mature, diminishing returns and declining profits may
diminish investments.

Taxonomy of Innovations 1

Incremental innovations:

Occur continuously, with varying rates in different
industries and countries, depending on a combination of
demand pressures, socio-cultural factors, technological

They are not a result of deliberate R&D, but outcome of
inventions and improvements suggested by the
production people or proposals by users (‘learning-by-
doing’ and ‘learning-by-using.

Although their combined effect is very important, no
single incremental innovation has dramatic effects.

Taxonomy of Innovations 2

Radical innovations:

Discontinuous events usually as a result of
deliberate R&D in an enterprise or
university (e.g. color TVs, electric

They lead to growth of new markets and
investments, but relatively small in
aggregate economic impact.

Taxonomy of Innovations 3

Changes of ’technology system’

Far-reaching changes in technology, affecting
several branches of the economy, as well as
giving rise to entirely new sectors.

A combination of radical and incremental
innovations, together with organizational and
incremental innovations affecting more than one
or few firms (e.g. synthetic materials,
petrochemical innovations, machinery
innovations in injection moulding and extrusion).

Taxonomy of Innovations 4

Changes in ‘techno-economic paradigm’

(technological revolutions)

A major influence on the behavior of the entire economy
(pervasive effects).

Creates new range of products, services, systems and
industries, as well as affects almost all the other
branches of the economy.

Carries with it many clusters of radical and incremental

Changes involved go beyond engineering trajectories for
specific product or process technologies and affect the
input cost structure, and conditions of production and
distribution through out the system.

Techno-Economic Paradigm 1

A new techno-economic paradigm develops initially
within the old, showing its decisive advantages during
the ‘down-swing’ phase of the previous Kondratiev cycle.

A combination of inter-related product and process,
technical, organizational and managerial innovations,
with potential improvement in productivity for all or most
of the economy and opening up a wide range of
investment opportunities.

The organizing principle of each successive paradigm is
to be found not only in a new range of products and
systems, but mainly in the dynamics of relative cost
structure of all possible inputs to production.

Key Factor

In each new techno-economic paradigm, a particular input or set of
inputs become the key factor of that paradigm and fulfills the
following conditions:

1) Clearly perceived low and rapidly falling relative cost – only major
and persistent changes have the power to transform the decision
rules and procedures for engineers and managers.

2) Almost unlimited availability of supply over long periods:
temporary shortages may occur, but no major barriers to long-term
increase in supply. Essential for major investment decisions.

3) Clear potential for the use or incorporation of the new key factor
in many products and processes throughout the economic system,
either directly or through related innovations, which reduce the cost,
change the quality of capital equipment, labor inputs and other
inputs to the system (e.g. oil, microelectronics).

Kondratiev Cycles 1

1770s to 1830s (industrial revolution to hard

Main industries: textiles, Iron-working.

Key factors: cotton and pig iron.

Emerging sectors: steam engines, machinery

Limitations: scale, process control and
mechanization, limitations of hand tools.

Technological leaders: Britain, France, Belgium.

Emerging countries: German States and the

Kondratiev Cycles 2

1830s to 1880s (Victorian prosperity to Great

Main industries: steam power. shipping and railways.

Key factors: coal and transport.

Emerging sectors: steel, electricity, synthetic dye stuffs.

Limitations: inflexibility of location in the case of water
power, scale, reliability and range of applications.

Technological leaders: Britain, France, Belgium,
Germany, USA.

Emerging countries: Italy, The Netherlands, Switzerland,

Kondratiev Cycles 3

1880s to 1930s (Belle epoque to Great depression).

Main industries: Electrical and heavy engineering.

Key factors: Steel

Emerging sectors: automobile, telecommunications, oil.

Limitations: steel as an engineering material in terms of
strength, durability and precision.

Technological leaders: Germany, USA, Britain, France,
Belgium, Switzerland and the Netherlands.

Emerging countries: Italy, Austria-Hungary, Canada,
Sweden, Denmark, Japan, Russia.

Kondratiev Cycles 4

1930s to 1980s (Golden age of growth to crisis of
structural adjustment).

Main industries: automobiles, aircraft, petrochemicals.

Key factors: Energy (particularly oil)

Emerging sectors: computers, NC machines,

Limitations: Fordist mass production, limitations of scale
of batch productions.

Technological leaders: USA, Germany, Sweden,

Emerging countries: East Europe, Korea, Brazil, India,

Kondratiev Cycles 5

1980s to now (Golden age of growth to crisis of
structural adjustment).

Main industries: ICT, software.

Key factors: electronic chips

Emerging sectors: biotechnology, fine chemicals.

Limitations: energy-intensity and material-intensity.

Technological leaders: Japan, USA, Germany, Sweden,
Taiwan, Korea.

Emerging countries: Brazil, Mexico, China, India.

Features of New Techno-economic

A new best-practice form of organization

New skill profile in the labor force

A product mix with intensive use of low-cost key factor

New radical and incremental innovations substituting the new key

A new pattern in the location of investment

A wave of infrastructural investment

Emergence of new innovator-entrepreneur-type small firms

Concentration of the large firms in the branches producing the key

A new pattern of consumption of goods and services and new types
of distribution and consumer behavior

Next Kondratiev Cycle?

Emerging & Competing Technologies


New materials



Biotechnology 1

Biotechnology is defined as “the application of
biological organisms, systems and processes to
manufacture products or provide services” (OTA,

Biotechnology is as old as the origins of human

Modern biotechnology - the application of
genetic engineering and monoclonal antibodies
(e.g. Recombinant production of proteins in
culture (e.g. Insulin) and generation of
monoclonal antibodies from mammalian cell
hybridomas (e.g. Rituxan for treating lymphona).

Biotechnology 2

Pervasive effects: (plant-based)

Industrial enzymes, pharmaceutical
products, beauty and healthcare products
from plants.

Genetically modified, disease-, pest- and
climate-resistant agricultural products.

Genetically modified vitamin rich rice and

Biotechnology 3

Pervasive effects: (microorganism-based)

New-generation vaccines, diagnostic kits.

Use of microorganisms for environmental
applications (e.g. Chakravarthy vs.
Diamond case).

Use of microorganisms in mining activities
(bacterial leaching).

Biological warfare?

Biotechnology 4

Pervasive effects: (human-based)

Human genome - DNA sequencing and
ability to identify target at protein/enzyme

More effective drugs.

Stem cells - potential to replicate human

Application of nanotechnology in

Biotechnology 5

Can biotechnology become next
Kondratiev cycle?

What are the key inputs?

Can these inputs be supplied at
sustainable levels?

Can biotechnology be applied across the

Does it require new organizations,
practices and skills?