What Drives Technology Change?

Transcription

1 What Drives Technology Change? The theory of technology change is far from complete. McMeekin et al (2002, p. 1) wrote that there is growing interest, especially among economists, in trying to understand the patterns and drivers of technological innovation. Economists and social scientists are attempting to understand how demand is affected by shifts in the macro forces of society, how demand can be generated by companies, and how markets react to innovations (McMeekin et al, 2002). This essay discusses some of the primary economic models of technology change, and identifies their deficiencies which have repeatedly prompted further investigation. It then proposes a new conceptual model which aims to convey the complexities of technology change in a way which has clarity and scope for further development. Innovation as an external factor Neoclassical economics the predominant school of thought in the early 20 th century states that there is a tendency in firms to increase production efficiency through technology, thereby increasing profit (MacKenzie, 1996, p. 50). Innovation is regarded as an externality: an unpredictable supplier of economic advantage, or a technological black box (Rosenberg, 1982, p. vii). This view of technological progress as an industrial deus ex machina has been disputed, notably by Sidney Winter, who argued that since innovation requires investment there is no way to ensure increased profits will result from it: information comes at a price (Elster, 1983, pp ). Understanding the inner workings and ways in which the technological black box responds to variables and feedback is essential if an accurate model of technology change is to be devised. Creative Destruction In the mid-nineteenth century Joseph Schumpeter departed from neoclassical economics by establishing innovation as a key factor of economic development (Grupp, 1998, pp. 53-4). Schumpeter asserted that capitalism not only never is, but never can be stationary, and that its movement is driven by new products, new manufacturing and new distribution techniques (Schumpeter, 1942, pp. 82-3). Central to Schumpeter s theory is the concept of creative destruction, which describes the process by which an entrepreneur may gain a temporary advantage and in some cases a monopoly through innovation. Upon devising a new process, product or service, the enterprising individual has the opportunity to command higher prices until the market reaches a new equilibrium. Thus, a new industry landscape is created. Creative innovations repeatedly destroy the status-quo by way of rendering established commercial operations obsolete. Having recognised that simple models are rarely capable of explaining the complexity of industrial trends, Schumpeter modified his initial 1934 concept of creative destruction by adding that older firms often benefit from complimentary assets, meaning that the technological

2 advantages of newer businesses are not always sufficient to gain a competitive edge over established institutions (Tripsas, 1997, pp ). An example of an industry which has endured repeated waves of creative destruction is that of typesetting (Tripsas, 1997). The mechanical typesetting method of 1886 gave way to analogue photo-typesetting, then digital CRT phototypesetting and finally laser imagesetting in 1949, 1965 and 1976 respectively (Tripsas, 1997, p. 124). In the case of this industry, the complimentary assets were the manufacturing capacity, trade and utility connections, and collections of fonts which the businesses possessed. Due to these assets, only one of the three waves of disruption saw the established market players replaced with new competitors. Linear models and their limitations Innovation s inclusion in economic theory saw the development of two linear models: technologypush, and demand-pull (Dosi, 1982, p. 147). The technology-push model that of the technological determinist is underpinned by the idea that science changes society, and can be illustrated by a line of influence passing from scientists, through technologists and marketers to users, where the chain of influence is exerted (MacKenzie, 1996, p. 24). The innovation is not a result of an established demand in the market, but is pushed towards the user in the expectation that it will satisfy an as-yet un-manifested need. The scientific progress in this model is often external to the firm. The theory of demand-pull innovation rearranges the line of influence so that it begins with market needs and passes through research and development before reaching the manufacturing process, and finally, users (Dosi, 1982, p. 149). Factors which may create a demand-pull scenario are often rooted in social trends, revolving around anticipated advantages to the user, whether in product or service design, or in value for money. Non-user-centric variables such as competition, supplier or distributor demands and internal motivations including risk reduction are also contributors. Demand-pull innovation often relied on in-house research and development departments. Dosi (1982) sought to address deficiencies of technology-push and demand-pull theories. Of the former, his main concern was that the absence of any economic considerations in the theory of technological progress is a significant oversight: technology-push theory fails to recognise market feedback. Of the latter, Dosi pointed out that the theory assumes the direction of pull is known before it is addressed, whereas in reality this information is not available without investment or research. This is similar to the aforementioned black box problem of neo-classical economic theory. Dosi also wrote that any innovation theory should describe not only evolutionary progress, bus also revolutionary changes, or in his words, major and minor breakthroughs (Dosi, 1982, p. 150). He explains that demand-pull theory does not successfully address the second of these requirements, since given that there is an almost limitless array of potential needs, there is no explanation as to why a particular innovation happens at a certain time. In addition, Dosi asks why, if technological improvements are available to satisfy any identified need, they have not already been taken advantage of. Avoiding this conundrum, he points out, requires consider[ing technological] information as an expensive commodity (Dosi, 1982, p. 50).

3 We can conclude that technology-push and demand-pull theories are overly simplistic. They lie at opposing ends of a scale based upon the direction of influence, and neglect the realities of the relationship between economic and technical change which inevitably fall somewhere in-between these two extremes. By their very definitions, both models fail to take into account what is a complex and multi-directional system of influences. Paradigms and trajectories Dosi (1982) suggested an alternative theory of innovation, based upon technological paradigms and technological trajectories. He describes the former as an outlook, a set of procedures, a definition of the relevant problems, and of the specific knowledge related to their solution (Dosi, 1982, p. 148). It is important to note that here Dosi recognises that only a restricted vision of technological possibilities is possible: knowledge and foresight is not perfect. This contrasts with the all-knowing assumption of demand-pull theory. The technological trajectory which Dosi describes is evolved from that of Nelson & Winter (1977), and concerns the pattern of normal problem solving activity (i.e. of progress) on the ground of a technological paradigm (Dosi, 1982, p. 152). The trajectory in another notable departure from previous linear theories relies on the short-term economic planning of the organisations involved, based upon recognised limitations and envisaged economic rewards. According to Dosi (1982), the determination of trajectories is shaped by the socio-economic environment in two ways: firstly, development is aimed in a direction which is anticipated to take advantage of the environment, and secondly, the market decides whether the technology survives. In my opinion it is unwise to attempt such an amalgamation of numerous factors. It may be convenient to assume that environmental factors affect the development in so few ways, but it risks missing other important influences, such as the staff working on the development (whose training and selection has no doubt been influenced by socio-technological externalities), or development which is mothballed or transferred to another project. The multi-level perspective Theories of innovation and technological progress have followed a trend of taking an increasing number of factors into account. Geels (2005) looks at socio-technical systems, which encompass numerous related aspects of an interaction between technology and society. Geels uses a Multi- Level Perspective (MLP) to investigate how and why one socio-technical system gives way to another (Geels, 2005). The MLP aims to address several deficiencies of previous models. Hughes theory of the seamless web (Bijker et al. 1987) of physical artefacts, organizations, natural resources, scientific elements and legislative artefacts considers the rise of large technical systems, rather than transitions between them (Geels, 2005, p. 446). Similarly, systems of innovation theory covers the operation and not the transitions of systems, although it does consider systems of differing size and scope (Geels, 2005, p. 446). Geels (2005, p. 447) also questions concepts such as path-dependence, which describes the process by which one innovation wins over another leading to a certain

4 trajectory being taken at the expense of its competitive equivalent. Geels argues that the winner in such a case is not decided by luck, but by other factors, drawing upon the example of the gasolinepowered car versus steam and electric equivalents. Other examples of path-dependence include the format wars between VHS and Betamax, and later Blu-ray and HD-DVD. The reasons for the success of VHS and Blu-ray are arguably less obvious than the refuelling advantages of the gasoline-driven car, but nevertheless, according to Geels, the market decisions are based on reason, not chance. It is worth noting how similar this notion is to that of complimentary assets which Schumpeter identified half a century earlier. The models discussed so far, from demand-pull to the seamless web, have experienced difficulty explaining transitions between systems. This is the shortcoming that technological substitution theory attempts to address. The main principle of the substitution theory, as presented by Nakićenovic (1986) and Grübler (1998), is that new technology competes with old technology, and that the combined market shares of both technologies has a growth (or decline) rate independent from its internal old/new competition (Geels, 2008). However, this falls into the familiar trap of over-simplification. Substitution theory neglects intermediary technologies; it neglects the policies and intervention of external organisations; and it neglects the possibility that the new technological product or service is not directly replacing the old one (Geels, 2008). A proposed model: technological gravity I would like to propose a conceptual model of technology change. Each element of the system whether it is an inventor or an organisation, government policy or a consumer has a certain mass. This mass is a measurement of its ability to influence other elements in the system. The sociotechnological landscape is a multi-dimensional space in which these elements are arranged. Technologies move through this space, and their trajectory (of development) is changed by the gravitational fields through which they pass. The principle characteristic of this model is that every aspect of the system has an influence on all other aspects of the system (to varying degrees). Similarly to Newton s law of universal gravitation, the force between different entities is proportional to their multiplied masses (influences), and inversely proportional to the distance between the entities (here the equivalent of distance is a combination of both geographical distance and conceptual distance between two technologies, thus a development in the manufacture of microchips has a large impact upon the trajectory of graphics cards, for example, but a small but not necessarily negligible impact on greenhouse design). In a departure from Newton s laws, mass, or rather influence must be maintained through continuous investment. In the case of the consumer, the investment is the purchasing of goods (voting with their wallets, so to speak). In the case of corporations, the investment is research and development, which has the capability to dramatically influence the trajectory of technologies. Governments must also invest in research initiatives if they are to remain influential. Much like the physical universe, the socio-technological system increases in entropy: there is a tendency for improvement.

5 In conclusion There is no one driver of technological change. Linear theoretical models which rely on one-way influences do not take into account the interactions which are taking place. Socio-technical theories do come closer to explaining technological progress, but are hindered by their inability to predict breakthroughs. Similar to the increasing entropy of the universe, technological change is inevitable in a capitalist society, and the direction it takes is influenced not only by research and development or government policy, but by the combined forces of these and all other aspects. Technology is not a black box: all possibilities exist as potential trajectories, as far as science allows. The unpredictability of technological discovery is a result of three realities: (1) individuals within firms, government and markets make decisions based upon incomplete knowledge, and for differing reasons (such as personal gain and philanthropy) (2) the process of discovery is an organic one which depends heavily upon previous events (3) science only explains that which is known. The proposed model is not meant to replace earlier theories, nor is it intended to provide concrete measurements of influences from various factors. Rather it is presented as a demonstration of the substantial complexity of the interactions between the aspects of sociotechnological systems. It is interesting to consider the similarity of this model of interacting forces to Google s Page Rank algorithm for determining the relevance and authority of web-pages. Perhaps a mathematical model is not out of reach!

6 Bibliography Books Elster, J. (1983) Explaining Technical Change : A Case Study in the Philosophy of Science. Cambridge: Cambridge University Press. Grupp, H. (1998) Foundations of the economics of innovation : theory, measurement, and practice. Cheltenham: Edward Elgar. Howells, J. (2005) The Management of Innovation and Technology : The Shaping of Technology and Institutions of the Market Economy. London: Sage Publications Ltd. MacKenzie, D. A. (1996) Knowing machines: essays on technical change. New Baskerville: MIT Press. McMeekin, A., Green, K., Tomlinson, M., Walsh, V. (2002) Innovation by demand : an interdisciplinary approach to the study of demand and its role in innovation. Manchester: Manchester University Press. Parker, J. E. S. (1974) The economics of innovation : the national and multinational enterprise in technological change. London: Longman. Rosenberg, N. (1982) Inside the black box : technology and economics. Cambridge: Cambridge University Press. Schumpeter, J. (1942) Capitalism, Socialism and Democracy. London: Routledge. Articles Dosi, G. (1982) Technological paradigms and technological trajectories. Research Policy, 11(3), Geels, F. (2005) Technology Analysis & Strategic The dynamics of transitions in socio- technical systems : A multi-level analysis of the transition pathway from horse-drawn carriages to automobiles The Dynamics of Transitions in Socio-technical Systems : A Multi-level Analysis. Technology Analysis & Strategic Management, 17(4), Genus, A., Coles, A. (2008) Rethinking the multi-level perspective of technological transitions. Research Policy, 37(9), Henderson, R., Clark, K. (1990) Architectural Innovation: The Reconfiguration of Existing Product Technologies and the Failure of Established Firms. Administrative Science Quarterly, 35(March), Nelson, R. R., Winter, Sidney G. (1977) In search of useful theory of innovation. Research Policy, 6, Norberg, A. L. (1990) High-Technology Calculation in the Early 20th Century: Punched Card Machinery in Business and Government. Technology and Culture, 31(4), Rosen, P. (1993) Industry The Social Construction of Mountain Bikes : Technology and Postmodernity in the Cycle Industry. Social Studies of Science, 23(3), Winner, L. (1993) Upon Opening the Black Box and Finding It Empty: Social Constructivism and the Philosophy of Technology. Science, Technology, & Human Values, 18(3),