The forms and determinants of technological change in US manufacturing†

Abstract

An evolutionary model of process-induced technological change is outlined. The model identifies processes of innovation, imitation, selection, and entry and exit. The theoretical impact of these processes on the rate and direction of technological change is specified. The model of technological change is estimated for the US manufacturing sector between 1965 and 1990 and for 20 individual manufacturing industries. The post-war history of process-induced innovation in the manufacturing sector of the US reveals that the pace and direction of technical change has been dominated by the effects of selection and by the entry and exit of marginal firms rather than by innovation and imitation. Thus, the movement of production costs has been driven more by changes in the structure of the market within which manufacturing firms operate than by changes in the pace of‘real’ technical change. Most accounts of technological change, at least in the case of the US manufacturing sector, exaggerate the impact of innovation and imitation on unit costs.