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The financial crisis and the future of innovation: A view of technical
change with the aid of history |
Download - Contents - Introduction
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This essay locates the current financial crisis and its consequences in a historical context. It
briefly outlines the difference in patterns of innovation between the first two or three decades
of each technological revolution –regularly ending in a major financial collapse– and the next
two or three decades of diffusion, until maturity is reached. With this historical experience in
mind, the essay discusses the opportunity space for innovation across the production spectrum taking into account the specificity of the Information and Communications Technology
(ICT) paradigm and the increasing social and environmental pressures in the context of a global economy. Finally, there is a brief look at the sorts of institutional innovations that would
be required to provide adequate finance to take full advantage of those opportunities.
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Table of contents |
| INTRODUCTION: The mixed consequences of major bubble collapses |
3 |
GREAT SURGES OF DEVELOPMENT: Two different periods in the propagation
of technological revolutions and their paradigms |
4 |
The Turning Point and the need for institutional innovation
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6 |
Installation and Deployment: different drivers of innovation
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8 |
THE NEW DIRECTIONS FOR INNOVATION: Sources of criteria for gleaning
the trajectories of technical and social change |
12 |
The hyper-segmentation of markets: differentiation and adaptability
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13 |
The hyper-segmentation of production units: networks and
specialisation
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17 |
The shaping power of the energy and environmental challenges
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20 |
The coming redesign of globalisation
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21 |
The gestation of the next revolution
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24 |
THE POLICY CHALLENGES: Taking the paradigm and the period transition
into account |
25 |
The implicit innovation policies
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27 |
The direct policies: innovating in the financing of innovation
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29 |
SKIEs, SMEs and networks
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30 |
Recognising intangible value
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32 |
Providing continuity of support along the life-cycle
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33 |
The roles of R&D in the present and for the future
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35 |
| CONCLUSION |
36 |
| References |
38 |
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| INTRODUCTION: The mixed consequences of major bubble collapses |
Major bubbles in the market economy are complex processes with mixed consequences. The NASDAQ boom, the collapse of which brought a two year recession and permanently wiped out half the illusory value of the inflated technology stocks, facilitated enough over-investment in telecommunications and fibre optic cables to interconnect the global space digitally and bring hundreds of millions of people into Internet use.1 The 2008 meltdown is having and will have a much deeper and more widespread negative impact on the global economy. The upside of that is made up of two very different consequences: One is the fact that from 2004 to 2007 there was a definite impulse to global growth. At the centre of it were the Asian economies, especially China and India, which through their lower costs for products and services increased the buying power of salaries in the already industrialised world and also gave a respite to the energy and materials exporting countries through a major increase in prices. This had as a counterpart, though, that the boost in consumption in the more advanced economies that facilitated this global growth was fed by the export surplus funds coming back from Asia. This inflated the housing bubbles that nabled growing consumer credit on the back of the asset price gains. The bursting of those bubbles has brought the whole network down and turned the positive feedback loop into a vicious downward spiral. Nevertheless, globalisation is a fact and the new emerging economies will change the shape of the world to come.
The other consequence of the bust, which could in some sense be defined as ‘positive’, is that by revealing all the crooked ways of the financial world during the boom, it has broken the myth of an ideal ‘free market’ and brought back the State into an active role in the economy. Such a come back is not limited to restraining the abuses of finance but extends to favouring the expansion of production and job creating activities over speculation and to spreading the benefits of growth more widely across society. This happened in the past after each of the major technology bubbles, with different intensity and in varying manners depending on the historical moment and on the specific technological revolution that underlay the boom. The most recent and strongest case of State intervention in these directions is, of course, the Welfare State and the Bretton Woods agreements and institutions, after the war and the long depressive years of the 1930s. The set of institutional innovations adopted then was very well adapted to the requirements of the mass production technologies of the time, which were able to bring consumer prices down to the level of workers’ wages, as long as the market was large enough to reap the full economies of scale.
The current meltdown will require, after the initial rescue of finance, an equivalent set of institutional innovations at several levels: global, supranational, national, regional, local and community. The governance structure of societies is likely to experience changes as profound as those that turned the rigid pyramidal and strictly hierarchical and compartmented organizations of
giant corporations into relatively flat, highly flexible and dynamic networks
spanning the globe. Rather than strictly separate single-function departments
with interaction only at the top, these nimble giants now count on innumerable single-purpose (though often multi-function) units that are small, agile,
creative and empowered to pursue the defined objectives in their own chosen manner and to respond immediately and autonomously to changes in
context or in clients’ demands. A transformation of equivalent magnitude
and direction is now in order for the State at all levels, though taking into
account the difference in criteria, guiding principles and goals.
This essay begins by briefly summarizing the path followed by the operation of the market system in the process of installing and deploying successive technological revolutions and locating the current historical moment
in that recurring sequence. A second section examines the sources of criteria to ‘foresee’ the directions of innovation in the next two or three
decades and the final section discusses the policy challenges posed specifically by the need to foster the pursuing of those directions.
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The Internet really only began in 1994 but by 2000 there were already more than 300 million people using it. The estimate now is one and a half billion. From http://www.internetworldstats.com/stats.htm downloaded April 13, 2009 |
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Crisis_and_innovation_TUT-TOC_WP_No2_8.pdf (208 kb)
