Macro-Innov 2: structures of the debate

The point behind this series is that innovation studies has been virtually reduced to a sub-discipline of economics and business. While the growing focus on innovation in all its conventional forms (products, processes, supplies, markets and organisation) is welcomed it reveals an underlying problem - what counts is business / economic success and, in fact, a de facto support of increasing consumerism.

What matters now in innovation studies are flows and turnover. What will be the latest disposable high tech gizmo be? What is the production of new energy technologies? etc etc. The stocks (capital) in the system and the cost of those gizmos is not well accounted for. So:

1. If we rely on the myopic view that innovation only counts at the level of business then there is only limited room for governments to structure innovation and markets in necessary ways to support sustainability;

2. This micro presentation also ignores the growing phenomena of the linkedupness of our technological systems. Discipline of innovation studies needs to be more aware of how connected technological change is to the way we design cities, to way we live etc; and then

3. Innovation policy has concentrated on the production of innovation, we thus need a macro-economic revolution in innovation studies to pay attention to the disruption, adaption and management.


Thus the big themes of this blog series will be.

1. The technosphere;

2. Wealth, growth and Competitiveness;

3. Sustainability; and

4. Innovation policy.


Lets begin ......

Macro-Innovation: 1. An Introduction

Earlier this year, I came to the realisation that practically all innovation policy was either promoting the production of ‘innovation’ or is concerned with the efficiency of its production in the public sector complex (labs and universities etc). A very small percentage of innovation policy focuses on the uptake of advanced technologies. None is concerned with the post-innovation event - understanding the disruptive effects on employment, industries or government programs and resulting impact on existing policy structures.

That in turn led to this thought.

The long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is past the ocean is flat again. John Maynard Keynes, A Tract on Monetary Reform (1923) Ch.3 English economist (1883 - 1946) http://www.quotationspage.com/quote/38202.html

Neo-Schumpeterians (innovationists) set themselves too easy a task, too useless a task,  if they say that the maximisation of the production of innovation will be good for growth and competitiveness but can give no guide to governments on transitions in periods of disruption (Brian Wixted).

We need an understanding of innovation that goes beyond just economics but which also worries about transitions – that is the destruction in Schumpeter’s creative destruction equation.

I have been increasingly struggling with conventional notions of ‘technology’, ‘macro-economics’ and ‘innovation’ in the 21^st century world. With increasing disruption to industries, labour markets, together with globalisation, climate change and resource use, is it possible to begin to simply and logically analyse some of the issues. Is there a framework like macro-economics has provided for so long that we can develop to frame the issues for better analyses?

In this forthcoming series I started with the idea of trying to apply the idea of innovation systematically to macro-economics and quickly ran into some significant conceptual problems. So I began to rethink how the economics of innovations is currently developed as a discourse and came to conclusion that to get different answers we need to break with some of the fundamental assumptions.  I can promise that this series will not be a series of completed thoughts in book ready shape – far from it. But I think that by scratching away at some macro topics, perhaps I can learn something and you the reader will benefit from the journey.

Along the way I already know that I will introduce some ideas such the ‘technosphere’ which I have begun to mud map out.

Secondly, while in a business we categorise the micro-economics of innovation has extending its market (new products or new markets), reducing costs (new supplies, processes, or organisation) or re-arranging internal affairs (organisation, supplies, markets) to keep fit with changing market environment configurations applying this to nation-states is not so simple. For starters, companies can externalise their costs relative to societies. A business needs to downsize, it sacks people. Hopefully they can find new jobs but if they can’t society needs to bear the transition costs. Or as another example there is little equivalent in the economy of a firm for housing booms or busts – unless it is managers over investing in capital.

Macro-economics is simply different to micro-economics and macro-innovation is different to macro-economics.

At the 2013 DRUID conference they debated the motion that national innovation systems was no longer a fruitful line of academic research (this succeeded). Instead the future is framed as the micro-foundations of innovation. You can watch the video here. This just re-enforces the point that we need a new macro paradigm.

I am not quite sure how the series will develop except that at the moment there are 2 parts envisaged.

In Part A, I want to introduce the idea that part of the problem we face is that in the economics of innovation we are only interested in the rate of change – the rate of innovation. This leaves us unable to notice the degree to which there is significant technological change occurring simply in the way our technological society works.

In Part B, I want to analyse the main structures embedded in conventional macro-economics from an innovation perspective (GDP accounting, input-output structures, land, labour, capital, and other topics (entrepreneurship?).

So let the games begin.

GEM Conference (20-21 June 2013)

Following DRUID, I attended a mall conference sponsored by the Global Entrepreneurship Monitor team in Spain to promote the use of GEM data.

The use of GEM data is clearly evolving. One of the impressive features of conference was the increasing use of pooled data (compiling the data across a number of years and countries) to build impressively large numbers of observations.

Still a number of the papers were naive or misguided in their choice of variables.

The highlight of the day was a keynote by Professor Xavier Sala-i-Martin of Columbia university.  http://www.columbia.edu/~xs23/home.html It was nice to hear an economist focus attention on adoption of innovation not newness per se.

Day 2 brought forth a number of quite interesting papers including one on rent seeking behaviour in MENA countries and another on the role of high tech entrepreneurship across factor driven, efficiency driven and innovation driven economies.

The papers are in early stage development, so I won't reference them.

An interesting conference, but clearly to me GEM is running out of data for interesting academic work, and needs to ask bigger questions like to ones Burton was asking in her DRUID conference talk, see the previous blog for details.

DRUID Day 3 (19 June)

Today the DRUID debate was whether 'innovation systems' was still a promising line of research. Disappointingly, I felt the team arguing for 'innovation systems' gave up without much of a fight. Both teams converged on the micro-foundations of innovation being the way forward.

Watch the debate here http://www.druid.dk/streaming/ds2013/june19/player.html#course=BE101&unit=1&video=3&language=en-US

What profoundly disappointed me was the lack of courage. At a time of global economic crisis and massive industry disruption the innovation scholars are effectively retreating to micro-economics. We know from a century of micro-economics that it does help with macro questions. Economics lacks the unifying 'string theory' and so does innovation. With 50 per cent unemployment in host country for the conference Spain, I personally thought the debate was actually an insult to the populations that pay for academic research.

It doesn't bother me that most of the papers at DRUID were econometrics, that is the standard development of fields of research, it is the development of greater rigour and that is GOOD. BUT when I couldn't see a single paper on unemployment, macro-innovation or industry disruption I am actually angry at the direction of research in my field.

What made it worse, was the presentation by Diane Burton, a labour market economist was brilliant! It highlighted a bunch of issues about our notions of entrepreneurship - big fundamental questions that the previous debate had overlooked. It used to be that Schumpeterian researchers were the ones to ask the tough questions of the patterns of economic development. I think that is true no longer.

Watch the talk here: http://www.druid.dk/streaming/ds2013/june19/player.html#course=BE101&unit=1&video=2&language=en-US

Paper session.

Papers 1: evolutionary pattern of change requests to telecommunications technical standards during the 3G and early 4G development process.

Paper 2: using a classification of service innovation types (ie. that is different to product process etc) the paper mapped the changes through time as a service organisation changed one service which then led to another change etc etc... Seemed interesting and I will probably read the paper.

Paper 3. Entrepreneurship, market novelty, econometrics.

DRUID Day 2 (18 June)

I had intending posting updates as the conference progressed but that didn't happen, still the summaries are worthwhile.

The debate of the first day was on whether financial performance measures lead to poor strategic decisions.
Watch it here. http://www.druid.dk/streaming/ds2013/june17/player.html#course=BE101&unit=1&video=5&language=en-US


The highlight of day 2 was the DRUID debate on scientific fraud. The examples are breathtaking and it seems the situation is getting worse. This is the first time I have opening heard serious criticism of the metrics of academia and how these are probably creating the perverse incentives behind fraud. In some European countries in an effort to get the paper count in A journals up, authors are paid CASH bonuses.

Watch the debate here, it is a vitally important issue. http://www.druid.dk/streaming/ds2013/june18/player.html#course=BE101&unit=1&video=3&language=en-US

The plenary for day 2 was interesting, but I am not that much into exploitation/exploration issues.

Papers. I only attended 1 parallel session.

Paper 1: Entrepreneurship, local knowledge, Italy, Econometrics.
Paper 2: Global (Regional) Entrepreneurship Development Index - uses GEM and other data to map entrepreneurship system in countries or regions.
Paper 3: Structural change, skill cohesion, individuals employed at plants at the municipality level in Sweden (this was my top pick of the conference papers).

Day 2 result - avoided econometrics and 'high technology' papers successfully.

DRUID 2013 Day 1

Wes Cohen did the opening address to the conference reviewing the empirical research on the 'economics of innovation' across 50 years (late 1950s ro 2010ish). The term 'the economics of'' is usually meant, as it was here, in a very technical sense - the tools of standard neo-classical economics applied to whatever.

I am always stunned by the narrowness of the topics 'true' economist rather than those who are rather more heterodox and more problem focussed are. The economists start with the topics which seem to cause the most pain for their modelling of the economy. Rather than focussing on the bigger issues within the topic and trying to understand those better.

So economists have spent 50 years looking at firm size and RandD amongst other topics.

However, onto other things. I thought I would keep a tally of the topics and methodologies of the papers I heard.

Paper 1: Pharmaceticals in India, econometrics.
Paper 2: Semi-conductor industry, world, econometrics
Paper 3: U.S. trucking industry, econometrics
Paper 4: Patents, eco-energy, descriptive
Paper 5: establishment data, geography, econometrics
Paper 6: Photovoltaics, patents, Germany, descriptive
Paper 7: Multinational corporations in Portugal, labour market data, econometrics.
paper 8: Knowledge theory /descriptive paper.
Paper 9: Biopharma firms, USA, spatial analysis, econometrics

So the Pharma industry with 2 of 9 papers wins day 1.

The World of Tomorrow 2013 ads for Emirates Airlines

Lately  in The Economist, the airline Emirates has been running a series of advertisements which centres on a picture of Dubai.

But every time I see the ad my mind recollects the cover of a book called The World of Tomorrow.
Obviously, they are not identical - but there is something intangibly similar.


The Emirates ad.

The cover from the book.