Macro-Innov 12: innovation studies an assessment

Reading the blogs on innovation at the moment and you would believe that business innovation is all that matters. Read the academic journals articles at present (well for the last 10 years) and you would not be aware that we are in the midst of what is shaping up to be the most turbulent period of change in recorded economic history. The most pressing challenges contra to the journals are not measuring whether Universities are making a difference to 'innovation' commercialisation. Somehow we got stuck in the late 1980s.

Technology change and economic growth a poor fit

Innovation studies is primary couched within a standard economic reference point. True, the rebels have always wanted to reform economics - that old war cry that neo-classical models do not even include technology in growth models, but this reinforces a point I want to make the goal of the literature is trying to account for technology within framework that wasn't built for it. That is like trying to put a modern car engine into a Model T - it just doesn't work.

Some examples:

• Long wave technology theories are used to explain economic growth cycles, yet there was never a single 'technology' being adopted, it was always a new ecology emerging which changed the nature of the economy has much as it changed growth;
• Most of the effort on technology has been to explain 'competitiveness'; and
• Even more work is focused on corporate success and strategies

The whole NIS excursion started as account of why some economies preform better (Japan and Germany - principally) and then wandered off into some interesting new territories which became unresolvable. The fact that Japan's economy fell apart for rather old fashioned boring macro-economics 101 reasons has never really been focused upon within innovation studies, nor has the other rather boring but rather important physical resources economy. Those same resources promote growth in the economies at the top of the tree and conflict at the bottom. This isn't just 'the resource curse' this is conflict minerals. We need to explain why Canada, Australia and Norway do well out of being resource economies and Argentina and Brazil for example do not do as well and the Congo does really badly.

1. Technology and innovation change the character of economies, the way it works but we have no neat mathematical equation for this.
2. Innovation (new combinations as well as new tech) seems to operate on an orthogonal plane to conventional economic management. At the same time that it changes the character of economies it does not violate the problems of managing national budgets and unemployment issues etc. There is no Schumpeterian economics in this sense - unlike some of what the ITIF seems to imply.

These two together mean that that we should stop the current labeling of a lot of current research as pessimistic or optimistic. If the technologies are genuinely new then it is fair to try and look ahead and ask what might they do to change the economy. Saying that 'pessimists' were wrong before is not legitimate debating.

I have never seen a stocktaking a meta study of innovation studies but lets try one.
I have organised it along the lines of ecological pyramids with actors (consumers of energy) at the top and resources and energy at the bottom.

Innovation Studies Assessment

Macro-economics

	Concept
Inflation / interest rates/ monetary policy	Innovation studies has had little to say on conventional monetary policy.
Unemployment	Surprisingly, ‘innovation studies’ has been marginal in debates on unemployment except for policies that engage with new industries.
Fiscal policy	Other that policy mixes for support for industry or new technologies innovation studies has had very little to say on government finances in general.
Measures of economic growth	Has innovation studies contributed the new ways of calculating growth or decomposing growth. We now add R&D into national accounts but that is not even close to innovation.
Macro-economic money flows	Macro-economist have found it useful to track money flows in the economy between industry, households and government. Innovation studies has been largely disinterested in this.
Welfare	What does it mean for the rich to be getting richer – what are the social welfare implications of new technologies. Finally this is beginning to be an interest but still too little. For example there are very serious issues at stake with apps like Uber but there is still too much hype around the sharing economy. Conventional economies of course too varying degrees has been very bad as well.
Overall health of the economy	This can be conceived of in various ways, but at its simplest macro-economics has provised a conceptualisation of the issue.

	Macro-economics	National Innovation Systems	Regional Systems + Clusters etc
Inflation / interest rates/ monetary policy	CCC	DDD	DDD
Unemployment	CCD	DDD	DDD
Fiscal policy / debt to GDP etc	CCC	DDD	DDD
Measures of economic growth/ what is growth	CDD	CDD	CDD
Macro-economic money flows	CCD	DDD	DDD
Welfare	DDD	CDD	DDD
Overall health of the economy	CDD	DDD	DDD

Actors

This is where innovation studies is strongest. It still has weaknesses in the global sphere but on producing data on institutional actors and how business innovative, patent etc there is a mountain of material.

Actors	Explanation
Business	Who innovates, how much do they spend, how do they network
Government	What is the involvement in the economy of evolving government systems?  Level of government, ‘national’ is still too little problematized scales of interaction are all problematic.
Non-profits and social innovation	Where do non-profits, charities, social innovation fit into the picture? There is an emerging focus on social innovation but we now little about it and we know even less about the world of non-profit organisations, foundations and charities.
Other actors	We know surprising little about people in the economy – macroeconomics treats them as numbers for the jobs machine but the institutions are changing and there is no way of accounting for that.

	Macro-economics	Other Economics	NIS	RIS + clusters etc	Innovation Studies
Business innovation	D D D	D D D	C D D	CC D	CCC
Global business trade & patterns	D D D	C D D	D D D	D D D	C D D
Government innovation and promotion of innov	D D D	D D D	C C D	C D D	CC    D
Non-profits	D D D	D D D	D D D	D D D	D D D+
Universities	D D D	D D D	CC D	CC D	CC D
Other actors – consumers etc	D D D	D D D	D D D	D D D	C D D

Innovation and New Combinations in Economic Orders

I increasingly have a sense that beyond traditional industrial structure measures there is an emerging sense of structure that we hardly have words to describe yet. We know that technology is very simply changing how the economy works  - even the Economist is talking like this but what do we measure and how do we measure. Here I am concerned with whether the innovation studies literature saw this development coming and expressed a concern before it emerged in the public discourse.

National Incentive structures	Why is that some economics get pulled in certain directions and others towards somewhere else. Physical geography, location on the globe resources access etc all seem part of the picture. On the assumption that economies move generally to the most profitable easiest wins – a somewhat contestable idea (but lets contest it) then whole economies could generally gravitate to particular trajectories. But how do we measure these inventive structures?
New products – share of economy	The Schumpeter idea of new products. Innovation systems has championed data collection and we know a lot more than we used to.
New Processes – influences on productivity and production geography	What are new processes how do we measure them – they keep changing. It was fashionable to do advanced manufacturing technology surveys and then they slowly faded because they weren’t that advanced anymore. It is an area of interest but not enough.
New Inputs	European surveys of innovation as I undertand it include this topic but never seen an analysis.
New markets	European surveys of innovation as I undertand it include this topic but never seen an analysis.
New Organisation of firms	Surveyed but does anyone use the data?
Configurations of labour markets	Increasing speculation but hard to measure see the Economist report http://www.economist.com/news/special-report/21621156-first-two-industrial-revolutions-inflicted-plenty-pain-ultimately-benefited
Configurations of new technology creation and marketing - entrepreneurship	There is obvious growing disquiet with the looming application of driverless cars and other machine age technologies but we need more serious foundations to work from.
Configurations of technological influences	Technology ecologies – there is growing interest. We have known about this for a long time but there beginning to be serious activity.
Configurations of economic organisation	The Schumpeterian idea of new combinations – but what are they? Technology – macro-economics still can’t really cope with technology on its own terms and innovation systems deals with technology not on its own terms terribly often but more usually as an economic class of activities (industries etc) that are valuable to sell. Very little of the literature has tried to understand how the nature of the technologies themselves were changing the way economies performed. In that way the existing macro =-economic assumptions were still underlying the thinking. Today, with books like the Second Machine Age there is real interest in system transformation, but that book hardly fits with the innovation systems paradigm.

	Macro-economics	“Innovation Studies’ broadly	NIS	Regional Systems & Clusters etc
National Incentive structures	DDD	DDD	DDD	DDD
New products – share of economy	DDD	CCD	DDD	DDD
New Processes – influences on productivity and production geography	DDD	CDD	DDD	DDD
New Inputs	DDD	DDD	DDD	DDD
New markets	DDD	DDD	DDD	DDD
Configurations of labour markets	DDD	CDD	DDD	DDD
Configurations of new technology creation and marketing - entrepreneurship	DDD	CDD	DDD	DDD
Configurations of technological influences	DDD	CDD	DDD	DDD
Configurations of economic organisation	DDD	DDD	DDD	DDD

In reviewing the Handbook of Innovation Indicators and Measurement, edited by Fred Gault
Krishna Ravi Srinivas - Science and Public Policy 41 (2014) p. 405 doi:10.1093/scipol/scu021
Advance Access published on 17 April 2014 said this.

However, the volume has no chapter on how developing countries such as China are
addressing these issues, or on efforts in developing countries to revise manuals and enhance coverage of data. It tells us nothing about initiatives to assess and measure inclusion, access and equity in science, technology and innovation, or on measuring the gender dimension in that field. The breadth of indicators need not necessarily result in plural policy understandings and options as they are not explicitly oriented towards this. We need indicators that open up science and technology policy and these indicators should not result in narrow outputs from broad inputs. The normative choices and assumptions underlying these indicators need to be debated. This volume does not address such issues, giving an impression that revisions in methodologies and changes in data collection methods and the development of new indicators are sufficient. In that sense, it does not capture the full dynamics of the debate on science and technology indicators.

Natural Resource Issues

Innovation and Resource Economy

Just as natural economies (ecological systems) need resources to survive and thrive so to do human systems but innovation systems work rarely touches on these issues.

Natural resource flows	Innovation systems being captured by economics shows little interest in physics. While it is possible to argue that technological change moves the limits and structures we have actually done little to measure this. If the ‘limits to growth thesis’ was wrong what were the contributing technological dynamics. The field of industrial ecology exists which is trying to measure many interesting phenomena so innovation systems doesn’t have to reinvent the wheel, just ride it.
Resource cycles	We know that growth drives up prices and this creates the opportunities for new technologies. But we have seen classic studies of sailing ships etc that the old technologies hang on. More focuss on resource based activities would be appreciated.
Induced Innovation	What is the scale and when does induced innovation kick in.
Institutions research structures	Natural resource industries are not just a mine or a farm there is constant innovation at the elading edge but how are they adopted, where are they adopted etc

	Macro-economics	“Innovation Studies’ broadly	NIS	Regional Systems & Clusters etc
Natural resource flows	DDD	DDD	DDD	DDD
Resource cycles	DDD	DDD	DDD	DDD
Induced Innovation	DDD	DDD	DDD	DDD
Institutions research structures	DDD	DDD	DDD	DDD

Energy

At the base of an ecological system there is of course energy. The majority of the innovation studies literature on energy focus on industries and the competitiveness between this location and that (Denmark and California for wind turbines. However, there is very little focus on energy itself.

Two exceptions. The first is not from innovation systems

The Sante Fe Institute  (SFI) http://www.santafe.edu/templeton/hidden-laws/ has been investigating for sometime now the biology of cities. This is fascinating work.

Here is an excerpt from the website.

In biology, comparing species as disparate as mice and whales reveals that much of their physiology and life history follow the same mathematical rules, but at different scales. For example, across mammalian species, metabolic rate -- the amount of energy needed per day to stay alive -- grows by only about 75% with each doubling of body size. Other measurable traits such as life expectancy and heart rate show similarly predictable patterns as species body size increases. In cities, analogous patterns are observed. With each doubling of city size, almost any socioeconomic statistic that is measureable (wages, patents, and crime rate, for example) increases by about 15% per capita on average. At the same time, the material infrastructural networks that facilitate city life (transportation systems, energy distribution, etc.) decrease in size by about 15% per capita, reflecting economies of scale. These systematic behaviors result from the increasing intensity of human interaction as city size grows.

The second piece of work that I know of is from John Foster an evolutionary economist (so from within the school).  J Evol Econ (2014) 24:209–238 DOI 10.1007/s00191-014-0348-6

Energy, knowledge and economic growth

John Argues.

that the explosive growth experienced in much of the World since the middle of the 19th Century is due to the exploitation and use of fossil fuels which, in turn, was made possible by capital good innovations that enabled this source of energy to be used effectively. Economic growth is viewed as the outcome autocatalytic co-evolution of energy use and the application of new knowledge associated with energy use. It is argued that models of economic growth should be built from innovation diffusion processes, unfolding in history, rather than from a timeless aggregate production function. A simple ‘evolutionary macroeconomic’ model of economic growth is developed and tested using almost two centuries of British data. The empirical findings strongly support the hypothesis that growth has been due to the presence of a ‘super-radical innovation diffusion process’ following the industrial deployment of fossil fuels on a large scale in the 19th Century. Also, the evidence suggests that large and sustained movements in energy prices have had a very significant long term role to play.

Overall

I worry that the excessive focus on business creativeness and innovation (actors) in this analysis fundamentally distracts from analysing what is happening. We don't have the tools because we have so far excepted that everything kinda fits into economics rather than economics fitting within the study of technology.