Innovation technology and
long cycles of economy:
Kontratiev Theory
Lesson 5
Innovation
Innovation can be defined in many different
ways and can be synonymous with many
concepts:
change
changing the selection mechanism
everything that enables organizations
surviving and growing
Technology
The complex of knowledge, skills,
procedures,
equipment and technical solutions that are
applicable to any functional activity which
takes place in the organization at the end of
the production / distribution.
(Porter M., 1985; Rispoli M., 1991)
Schumpeter (1912)
5 types of innovation:
1. product innovation (the production of new goods);
2. innovation of production (new production method);
3. commercial innovation (new methods of marketing);
4. innovation in supply (the conquest of a new source of raw
material);
5. market innovations (reorganization of the supply of an
industrial sector);
L’INNOVAION TO 360°: INNOVATION’S ICEBERG
Resource
&
Technology
Organization
Human capital
Internazionalization
Public and Private Investment in R&S
Education, spin-off etc.
Efficient use of technology
Total quality
Innovation leadership
Social and
Environmental
development
Sustainability
Law and Regulation
Competition and markets and
public policies
Source: Confindustria. Our revisitation
GAP ITALY-EUROPE
(UE4*=100)
propensity to innovation of enterprises
innovation of process
innovation in marketing
innovation of product
innovation in management
* The first four countries for the share of innovative companies are Germany, Belgium, Austria and
Sweden.
Source: CSC on Eurostat, CIS-3.
us
jp
4,
27
%
4,
98
%
4,
75
4, %
71
%
6,
93
%
7,
32
%
6,
05
%
7,
61
%
6,
87
%
6,
54
%
6,
44
%
6,
54
%
6,
31
%
6,
07
%
5,
94
%
5,
59
%
7,
79
%
9,00%
8,00%
7,00%
6,00%
5,00%
eu
15
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i
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irl a
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da
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gn
o
Benchmarking internazionale
degli investimenti in ICT
Spesa ICT in % PIL
(dati eurostat 01/2005)
4,00%
3,00%
2,00%
1,00%
0,00%
2003
2004
Kondratiev Cycles
• Focus on price system
• Cyclic emerging clusters of innovations, among them
related directly or indirectly, able to systematically
change the whole system of prices
• The "clusters" (techno-economic paradigms) are not
simply collections of scientific discoveries, but it is
essential that they are applied to the production and
organizational innovations are also
The clusters
(techno-economic paradigms)
1.
2.
3.
4.
5.
New energy sources or significant changes in energy
production;
New materials used in the production of strategic products;
New sectors of production or otherwise taken off than the
previous stage;
New organizational forms of production cycles and labor
markets;
New procedures for the movement of goods and
information.
Kondratiev Cycles
The advent of a new techno-economic paradigm
produces overheating of prices that can last for two
decades,
since it requires the system to fully renew its
industrial structure (factories and machines), as
Schumpeter called "creative destruction storms."
This produces huge investments, as the sum of a countless
number of individual investments that naturally move
on prices.
Kondratiev Cycles
• Time differentials
• Geographical differentials
Kondratiev Cycles
The depreciation of investments in replacement of
production cycles,
faster for the pioneers and innovators in places,
requires a longer time at a global scale before
the system has full (or at least significantly)
converted, can spend a relatively long period,
after which, the future depreciation (accounting
and real) along with the maturation of the
technology (economies of scale) tend to cool
prices,
until the advent techno-economic paradigm of the
next, pushing prices to rise again (phase A +
phase B = 50/55 years).
Kondratiev Cycles
• Stage A “expansion”:
rising prices, investment
demand growth,
confidence and
optimism
virtuous circle of investment / demand
– Stage A “recession” :
• Stage B “expansion”:
– Stage B “recession” :
rising prices,
overestimation of demand,
lack of market direction,
increased competition,
heavy cost structure
failures,
job loss,
decline in demand
decreasing prices
fewer producers,
completion of technological substitution,
standardized technologies,
reducing production costs,
lower prices,
increased demand
overestimation of demand and technological obsolescence of the bunch.
Kondratiev cycle
…not just the
“accumulation regime”
but also
“ways of setting”…
Kondratiev Cycles
• Stage A “expansion”:
organization of production,
question,
Investment
distribution between wages and profits
rules governing the market-state relationship,
behavior and individual and collective habits.
Decoupling without conflict
– Stage A “recession” :
Social conflict and conflict of interest which
may itself be due to the crisis.
The recession eases the resistance that lead
to an adjustment of the control mode and then make a new pair.
• Stage B “expansion”:
the new techno-economic paradigm
brings maximum benefits
– Stage B “recession” :
overestimation of demand,
technological obsolescence of the bunch.
Kondratiev Cycles
The timing of each cycle can not be fixed precisely
During the transition between these two cycles coexist
The cycles start differently in various economies
Kondratiev Model is able to show how the economic
Development of systemic reaction to the introduction of new
technologies but does not explain the precise chronology
of the various developments
Conclusions
•
•
•
•
There is a succession of periods long enough and internally consistent, in
which the organizational forms of market and society (but also of politics and
culture) are seriously affected by new clusters
The change also involves the "rules of the game" to economic, social,
political, must bear, put up a new framework of constraints and
opportunities. Each geographical economy changes, even if it is at the heart
of technological change
Each geographical economy system (local, national) demand for change, but
each will react in the measure and is permitted by his organization,
specialization, quality and quantity of resources. The speed of adjustment
resulting in economic benefits, especially where the new cluster was formed.
If the new rules of the game is incompatible with the specific geographical
economy, this could be "ordered" not to intercept the change
It is not enough to be predisposed to the new techno-economic paradigm, it
must also evolve positively and quickly adjust mode, otherwise the economic
advantage may dissipate and the decline begins
First Kondratiev cycle
• Time: 1790 (Industrial Revolution) - 1840 (Hungry Forties)
• Leading sectors : textile (cotton), ceramics and metallurgy
• Power Sources : Hydraulic and Steam (Textiles, Pumps,
Coal Mines)
• Infrastructure development: river networks, channels, and toll
roads
• Economic Geography: regional markets (capital, inputs, labor and
local market)
• Business models: factories mechanized and modernized
workshops (steam power)
Second Kondratiev Cycle
•
•
•
•
Time: 1840-1890 (economic dumps)
Leading sectors : iron metallurgy (steel, copper), machine tools
Power Sources : steam engines, coal
Localization : Great Bretain, Prussia-Russia, Belgium, France, USA
Japan
• Infrastructure development : Railing and Shipping (transportation)
• Economic Geography: oligopolistic markets (protectionism to the
outside and the banking system, labor force, national market)
• Business model : factory large precedence over modernized
workshops (industrial districts in Sheffield, Lyon, Darmstadt, etc.,
where the industrial revolution is "imported")
Third Kondratiev Cycle
• Time: 1890-1945 (crisis in ’29)
• Leading sectors : chemicals, plastics, automobiles, telegraph, radio,
cinema, air (the first war bombing of Libya 1912)
• Power Sources : internal combustion engine, electrical machinery,
petroleum
• Localization : transition from British to American industry further
spread in Western Europe, continued growth in Japan
• Infrastructure development : railways, roads, telecommunication
networks
• Economic Geography : urban-industrial development
• Business model: Taylorist model of the assembly line by Henry Ford
(Fordism, conflict management, mass consumption)
Fourth Kondratiev Cycle
• Time: 1945-1990 (crisi anni ’70)
• Leading sectors : electromechanical (electrical goods), transport
equipment, chemicals, aerospace, television, telephone,
• Power Source: Oil, Nuclear
• Localization : USA, Europa, Soviet Union.
• Infrastructure development: information systems, highways, airports
• Economic Geography : Fordist regions (Triangle MI-TO-GE),
Manufacturing Belt, Tokyo-Yokohama, West Midlands, Ruhr, Ile de
France)
• Business model: Fordist model of globalization, cooperation between
state, employers and trade unions (Welfare, afavore free resource
consumption)
Fifth Kondratiev Cycle
….
• Time: 1990-?
• Leading sectors : new economy, biotechnology,
microelectronics, nanotechnology
• Power Source: oil, nuclear
• Localization : Increased competition
new emerging countries like China and India
• Economic Geography: the geographic scope of business is
global optimum.
Companies are organized in network.
• Business Model: enterprise transnational network