The technology element model, path-dependent growth, and innovation policy

Abstract

ABSTRACTThis paper uses a multi-element model of technology-based growth, including characterizations of both private and public components of such elements, to assess expansion paths for high-tech industries. Such a technology element model (TEM) maintains the traditional proprietary (excludable) technology element that directly results in innovations, while adding the ‘technology platform’ – a quasi-public (non-excludable) proof of concept that bridges the gap between an industry's science base and proprietary technology development, and a diverse technical infrastructure that has substantial impacts on industry productivity. These three elements are related to each other and to the production of technical knowledge by a homothetic technology production function. The TEM is then applied to assess the concept of constrained expansion paths. Such path dependence is shown to be a natural evolutionary process in that the evolving character of a technology over time is not necessarily the result of market failures. Finally, the TEM and the concept of path dependence are combined to assess the factors affecting both adaptive and allocative efficiency with respect to the expansion path, thereby better informing innovation policy.