Impacts of functionality development on dynamism between learning and diffusion of technology

Abstract

Under a long-lasting economic stagnation, a significant increase in R&D investment has become difficult. A practical solution could be found in a systems approach, maximizing the effects of innovation as a system by making full utilization of potential resources of innovation. At the same time, under the increasing significance of information technology (IT) in an information society, which emerged in the 1990s, functionality development has become crucial for stimulating the self-propagating nature of IT-driven innovation. Stimulated by these understandings and prompted by a concept of institutional innovation, this article attempts to analyze the interacting dynamism of innovation in a comprehensive and organic system. Theoretical analysis and empirical demonstration are attempted, focusing on the dynamism between learning and diffusion of technology taking place in Japan’s PV development, which follows a similar trajectory to IT’s functionality development, over the last quarter century. The effects of functionality decrease on learning coefficient and the consequent impacts on technology diffusion and its dynamic carrying capacity are analyzed. Fear of a vicious cycle between functionality decrease, deterioration of learning, stagnation of technology diffusion and its carrying capacity in the long run is demonstrated. Thereby, the significance of institutional dynamism leading to a dynamic interaction between learning, diffusion, and spillover of technology is identified.