Technical Progress introduction • The technical progress in the Solow model, the exogenous cause of the growth of per capita income steady state. • Before explaining the causes of technical progress (growth theories endogena), this raises the problem of its measurement. • The 'approach' growth accounting 'is proposed to decompose the growth rate of the economy in the contributions of the accumulation of factors of production on the one hand and technical progress on the other. Technical Progress The Production Function • The product of an 'economy is represented by: Y f ( K , L, t ) • The increase of production may 'be due to: • Increase in the factors of production, capital (K) and labor (L). • Technological change. The shape of the production function changes over time (t). Technical Progress The representation of the output through isoquants • The isoquants of the production function provide a geometric representation of the production function are the pairs of K and L that produce a given output Y. K Y=200 Y=100 L Technical Progress The representation of the output through isoquants • The production increases for the following reasons: • Increase of only one of the factors. But given the diminishing returns of the single factor, that increase will stop. • Increase of both factors: • Constant returns, increasing or decreasing. • The Solow model assumes constant returns to use the theory of marginal distribution • Technological improvement. Technical Progress taxonomy Initial date technology with an infinite number of production techniques (possible combinations of K and L), technical progress is said: - 'Labor augmenting', or Harrod neutral, if it increases the productivity 'of the work of all production techniques leaving the productivity' of capital unchanged. (Hypothesis of the Solow model). Yt f ( K t , (1 ) Lt ) t where γ and 'the growth rate of productivity' of work - 'Factor augmenting' or Hicks neutral, if increases in equal measure productivity 'of labor and capital of all production techniques, leaving the ratio K / L unchanged. Yt f ((1 )t Kt , (1 )t Lt ) f ((1 )t Kt , (1 )t Lt ) (1 )t f ( Kt , Lt ) Technical Progress growth accounting • Separates the effect of the accumulation of factors from that of technical progress on the rate of growth of the economy • DY = f DK + f DL + f , f = df / dx : K L t x ft Y f K K K f L L LK Y Y K Y L Y • The growth rate of the economy and 'equal to the sum of the growth rates of factors, each multiplied by the relative elasticity of production, and a measure of technological change. • Note that the elasticity of production are not directly observable, but under the assumptions of the Solow model, same as the percentage of national income of the factors. • where χ and 'the growth rate of productivity' of capital Technical Progress growth accounting • TFP, or measure of technical progress, is measured as a residual: • ft gY g K (1 ) g L Y where π and 'the share of profits in national income, eg expressing growth rates. • This method, first suggested by Solow (1957), is typically applied using the Cobb-Douglas production and Hicks neutral technical process: Y AK L1 • Where α turns out to be both the elasticity 'of production to capital, and the share of profits in income. Technical Progress growth accounting –results• The first estimates for the United States for the first half 'of the century ('56 Abramovitz, Solow '57) show that TFP is responsible for almost 90% of the growth of output per capita. • However, this result is' vitiated by errors of measurement in the quality of the factors that tend to underestimate their impact. Technical Progress growth accounting – insights – 1) Technical progress embodied in capital goods. The new technologies, at least in part, are incorporated in the new capital goods. Need 'to measure the stock of capital in units' efficiency (τ): t t K i (1 k ) i i 0 where λk and 'the rate of improvement of the quality' of capital goods. The growth rate (τ) depends on: the growth of the stock of physical capital, the rate of improvement of the quality 'of goods, changes in the age' average stock of capital. Technical Progress growth accounting –insights 2) Improvements in the quality 'of the work. Each one unit 'of physical work can' increase its efficiency by: - Accumulation of human capital (eg education) - job experience (learning by doing) These two channels have become the starting point of the analysis of endogenous growth Technical Progress growth accounting – insights 3) structural change in the use of factors in favor of the activities 'more' productive. The aggregation of the factors K and L hides the different productivity of the various capital goods quality and heterogeneous work. The contribution of a factor shifting resources from one sector with low productivity to high productivity increases (ex from 'agriculture industry). Technical Progress growth accounting – developing countries • Main trends (1960-94): • The key role of accumulation of factors • Important but limited compared to developed countries TFP • Important role in the reallocation of resources between sectors. • interpretation: • The industrialized countries are more 'close steady state and have to resort to technical progress in order to grow, on the contrary the developing countries can use the initial benefits from capital accumulation Schumpeter’s entrepreneurship, business cycles and the new growth theory MJ Timeless writers: Joseph Alois Schumpeter and some of his well-known followers • • • In the beginning of the 20th century, when Joseph Alois Schumpeter, a member of the German Historical School and, later, the father of entrepreneurship started his academic career, and, somewhat later political career in Vienna, the dominant doctrine of neoclassical economics was laid down. Joseph Schumpeter wrote Theorie der wirtschaftlichen Entwicklung in 1911 that was published it as Theory of Economic Development in 1934. Schumpeter tried to introduce the concept of entrepreneurs into the set-up of neoclassical economics or the Walrasian System. Schumpeter could easily define the function of his type of entrepreneurs in this manner, but the analysis of the overall process of evolution required a radical reinterpretation of the system of general economic equilibrium. He made clear that he could not accept the standard interpretation of the quick Walrasian process of adaptation. Schumpeter distinguished innovation as the function of the entrepreneur. During his career, Schumpeter insisted on the discontinuity between the Walrasian mathematically perfect model and innovative entrepreneurship. • • • • • • Schumpeter made clear that he could not accept the orthodox interpretation of microeconomics. Although a general equilibrium system is observationally equivalent to a system in which everyone is a completely rational optimizer, Schumpeter declares this to be an illusion. Schumpeter distinguished innovation as the function of the entrepreneur. Since that there has been the “unfortunate” discontinuity between the orthodox microeconomics and the Schumpeterian entrepreneurship. Schumpeter was the most influential Harvard professor in the 1930s and 1940s. Schumpeter has been mentioned as the father of entrepreneurship and (irregular) growth theories. Schumpeter have never received the Nobel Prize. Schumpeter is today more important than never earlier. Today, clustered multinationals (MNCs) are powerful players in the global markets. Because (MNCs) dominate the global markets of commodities, they can collectively determine the rules of the game in the core market segments. The global economy is in expansion. We need new radical innovation and, thereby, economic growth. There are one billion young people (15-24 years old), 80% in developing countries, in the labor market with few opportunities for productive work. Capacitybuilding is the major instrument that the World Youth Report 2005 by the UN stresses. We point is that the Schumpeterian entrepreneurship is the key area of capacity-building to resolve the global crisis. • His writings were, at least temporarily, ignored by many brilliant Nobel prize-winners, economists like John Maynard Keynes, Wassily Leontief, Milton Friedman and Paul Samuelson. Schumpeter admitted that the Walrasian model is a beautiful construct and, therefore, the dominant theory of the firm. • Joseph Schumpeter proposed that an entrepreneur, as innovator, creates profit opportunities by devising a new product, a production process, or a marketing strategy. An entrepreneurial discovery occurs, when an entrepreneur makes the conjecture that a set of resources is not allocated to its best use. Schumpeter did not define what an entrepreneur looks like. • Perhaps, the reason to that was that Alfred Marshall focused the interest of neoclassical economists on the concepts of representative firm instead of innovative entrepreneur. • Marshall was British economist at Cambridge, where he exerted great influence on the development of economic thought of the time Marshall was concerned with theories of costs, value, and distribution and developed a concept of marginal utility. His book Principles of Economics from the year 1890 was for years the standard work. • • • • • • In his book Business Cycles, Schumpeter now a Harvard professor referred to the fundamental problem of economic change. He argued that entrepreneurs create innovations in the face of competition and thereby generate (irregular) economic growth. By contrast of Walras, Schumpeter gave much credit to human agency. Although a general equilibrium system is observationally equivalent to a system in which everyone is a completely rational optimizer, Schumpeter declared this to be an illusion (Schumpeter 1934, p. 40). Schumpeter (1939) proposed a three-cycle model of economic fluctuations or waves: Kitchin inventory cycle (3-5 years) Kuznets infrastructural investment cycle (15-25 years) Kondratieff long cycle (45-60 years) What are the relevant waves of today in the emerging global economy? We might say that there are continous chaos in the markets like Tom Peter has exposed it in his book Thriving on Chaos What is evident is that all kinds of waves are much more shorter than in the 30s when Schumpeter wrote his book. Especially, Alfred Chandler, a wellknown economic historian has discuss about economies of speed in this excellent book Scale and Scope. What is important to notice and what I know from experience is that various types of industries are different. When Schmpeter’s definition of entrepreneurship is genarally applicable, the fundamental problem of economic change is very much industry or even continent specific. Schumpeter redefined the function of entrepreneurs in a society • • • He believed that an entrepreneur is motivated by the temporary monopoly profit that is the return on the entrepreneur of the innovation that leads to increased productivity and is the fundamental source of wealth in a society. (Lahti, 1991; Lintunen, 2000) Innovations are considered as the major driver of an economy. Following Schumpeter (1934), contributors to the scholarly literature on innovation typically distinguish between invention, an idea made manifest, and innovation, ideas applied successfully in practice. Since the social returns of innovations exceed the private returns the factors that facilitate innovativeness are considered to be critical to policy makers in any of market economies. The key to innovativeness is to allow firms to appropriate more of the social benefits of their new products or processes, as through broadening intellectual property rights or relaxing post-innovation antitrust enforcement. This is what happened in the U.S. in the early 1980s (Haour, 2003). Innovations are not continuously distributed in time • • • Innovations are not continuously distributed in time, but proceeds by leaps which upset the existing equilibrium in markets and generate (irregular) economic growth (Schumpeter, 1939). A parallel explanation of long waves in economics lies in the Kuhn’s (1970) model of scientific development. Kuhn used the term paradigm shift to refer to the mark of maturity of a science or techno-economic paradigm that refers to an innovation or an innovation chain that affects the whole economy, e.g. electric power or computers (Freeman and Perez, 1988). Schumpeter defined the innovative transformation as a relatively slow and conflict-ridden process and, thereby, distinguished innovation as the function of entrepreneur that is separate from the administrative function of manager (compare Penrose, 1959). This reinterpretation helped him outline his theory of business cycles as reflecting the wave-form process of economic evolution. entrepreneurs create radical innovations in the face of competition • Schumpeter regards technological uncertainty as neither a sufficient nor a necessary determinant of fluctuations but postulates that fluctuations are caused by supply shifts based on uneven technological changes. • Schumpeter (1939) argued that entrepreneurs create radical innovations in the face of competition. His notion has been generally accepted. In Schumpeter’s (1939) economic system, business cycles, waves are the major catalyst of economic growth. • Schumpeter (1939) proposed a typology of business cycles according to their periodicity, so that a number of particular cycles were named after their discoverers or proposers: Kitchin inventory cycle, 3-5 years • The Kitchin cycle is related to time lags in information movements affecting the decision making of firms. Andrew Tylecote who has contributed to the long wave economic theory viewed the Kitchin cycle as endogenous (Tylecote, 1992). Firms build up their inventories to anticipate future sales, but as sales sink over time the stocks pile up. As a result, within a certain period of time the market gets flooded with products whose quantity becomes gradually excessive. The demand declines, prices drop, the produced commodities get accumulated in inventories, which informs entrepreneurs of the necessity to reduce output. After the balance is achieved and demand grows, the firm will again build up its inventory. Since the 1980s, the wide adaption of the “Just in Time” (JIT) production strategy (or modification of it) have helped firms to improve their financial returns on inventories by reducing in-process inventory and associated carrying costs. Today, the e-commerce model makes it easier to balance inventories. Juglar fixed investment cycle, 7-11 years • Clément Juglar (1819- 1905) was a French statistician. A Juglar cycle can be observed in periodic fluctuation of investments into fixed capital and not just changes in the level of employment of the fixed capital and respective changes in inventories. The firm behavior is based on their mutual dependence. In this respect the Juglar fixed investment cycle can be viewed as endogenous. Firms in the same business use to invest heavily in their infrastructure with the desire of expanding and modernizing their capacity. In the end of the cycle, firms’ infrastructures need to be modernized again. A reason for this kind of periodic fluctuations in investment is the strong believe in technology as the main competitive edge that was signaled by organizations like the WIPO, the World Bank and the WTO. As Solow (1980) has noticed, technology and know-how is the most important contributor on GDP growth by nations. Neoclassical economists have traditionally viewed technology as the exogenous production factor. Robert Solow (1987) and Paul Romer (1989, 1990) are examples of economists who have accepted Schumpeter’s view that certain elements of technology are endogenous. The recent research employing spectral analysis has confirmed the presence of Juglar cycles e.g. in the EU (Sellaa et al, 2012). Kuznets infrastructural investment cycle, 15-25 years • Simon Kuznets (1901-1985) was a Russian economist who won the 1971 Nobel Prize "for his empirically founded interpretation of economic growth which has led to new and deepened insight into the economic and social structure and process of development" (www.nobelprize.org/nobel_prizes/... As the professor at the Wharton School in the U.S. Kuznets connected these waves with demographic processes, in particular with immigrant inflows/ outflows and the changes in construction intensity that they caused, that is why he denoted them as demographic or building cycles. The Kuznets cycles have been also interpreted as infrastructural investment cycles that are primarily exogenous. Referring to the U.S history, Kuznets (1940) suggested that US population growth, with its large immigration ratio between the 1870s and the 1920s, caused fluctuations in the construction of houses and investments in the railways. Kondratieff long cycle, 45-60 years • Schumpeter used the findings of Russian economist Nikolai Kondratieff (1892-1938) who was a proponent of the New Economic Policy (NEP) in the Soviet Union. He proposed a theory that Western capitalist economies have long term (50 to 60 years) cycles of boom followed by depression. The logic of long waves is that in times of slow growth entrepreneurs are reluctant to apply new innovations and so they pile up. When growth picks up these innovations are exploited and inserted into the production process causing the rapid growth of the business (Kondratieff, 1935; Barnett, 2002). In this way, the dynamics of the Kondratieff long cycle is views as endogenous. Kondratieff himself could not enjoy of long life. When writing his major publication, he was the director of the Institute of Conjuncture, and he worked on a five-year plan for the development of Soviet agriculture. He was also allowed to visit universities travel in England, Germany, Canada and the U.S. However, during the dark 1930s Kondratieff was arrested and executed. (Wikipedia) “Cycles” do not tend to repeat at regular time intervals. • The business cycle refers to the ups and downs in the economy, measured using mainly the real gross domestic product (GDP). The cycle involves shifts between growth periods (recovery and prosperity), and stagnation periods (contraction or recession). To call fluctuations "cycles" can be misleading. “Cycles” do not tend to repeat at regular time intervals. As Chiarella et al (2008) pointed out the word "fluctuations" should be used instead of “cycles” since in capitalist economies there are not similar mechanisms that generate recessions and/or booms. The problem of how business cycles come about is therefore inseparable from the problem of how a capitalist economy functions. • Business cycles in the OECD countries after World War II have been more restrained than the earlier business cycles. Economic stabilization policy using fiscal policy and monetary policy has dampened the worst fears of recession, and automatic stabilization due to the aspects of the government's budget also helped mitigate the cycle even without conscious action by policy-makers (Elwell, 2011). • An exception is Russia that experienced prolonged depressions, following the end of the Soviet Union in 1991-1998. Business cycles are a type of fluctuation found in the aggregate economic activity of nations that organize their work mainly in business enterprises. Business cycles are not merely fluctuations in aggregate economic activity. The critical feature is that the fluctuations are widely diffused over the economy. The economy of the western world is a system of closely interrelated parts. This was the main concern of Schumpeter during his entire career. The Keynesian school argues for endogenous causes of fluctuations • The main framework for explaining fluctuations is Keynesian economics (Minsky, 2008). In the Keynesian view, business cycles reflect the possibility that the economy may reach equilibrium at various levels of employment. If the economy is in recession and unemployment is high, the Keynesian theory states that monetary policy and fiscal policy can have a positive role to play in smoothing the fluctuations of the business cycle. The neoclassical school is arguing for exogenous causes of business cycles. Neoclassical economists, such as Paul Krugman and Joseph Stiglitz, argue for minimal government regulations (laissez faire) since efficient markets and competition are the best ways to win a recession. The Keynesian economists largely argue for larger government policy and regulation, as absent regulation, the market will move from crisis to crisis. Schumpeter’s (1939) theory of business cycles is difficult to apply to the global economy • Although Schumpeter’s (1939) theory of business cycles is difficult to apply to the global economy, there is no doubt of the fact that the ongoing technology revolution will impact on the global markets, although we may not know the full implications (see Peters, 1990). Jensen (1993) made an elegant study of the Schumpeterian dynamics. Comparing the growth of GNP with R&D statistics, Jensen noticed that since the chock of the oil crisis in the mid 1970s the growth of R&D expenditures in the industrialized countries has been approximately double higher than the growth of GNPs. This trend has accelerated during the two decades of globalization, the 1990s and the 2000s. The revolution of information technology (IT) was the major source of Schumpeterian dynamics in the industrialized countries in the 1990s. The Schumpeterian market chock created new waves of innovative growth firms, and destroyed the obsolete ones. • In the early 90s, Finland was hit by serious crisis in the bank industry and about 20% of the firm population was lost. During the crisis the positive entrepreneurial event was the unexpected global success of Nokia. Two decades later Nokia is in a crisis signaling the new kind of creative destruction of today. In the EU crisis countries (Greece, Italy, Spain, Portugal and Ireland) the Schumpeterian market chock may be in full force. The negative end results are already known by economists. Hopefully, the positive end results are somewhere waiting for the growth boom in the near future. Period Description Period The key factors of technological change First Kondratieff 1780s–1840s Industrial Revolution: factory production for textiles Cotton Second Kondratieff 1840s–1890s Invention of steam power and its application in railways Third Kondratieff 1890s–1940s Invention of electricity, steel, etc. and their applications in the process industry Fourth Kondratieff 1940s–1980s Mass production of automotives and synthetic materials, especially petroleum Fifth Kondratieff 1980s -2010s Digital information techniques, the internet and micro-electronics Sixth Kondratieff 2010s-??? Nano-engineering and nano-manufacturing Schumpeter held two different approaches • Schumpeter held two different approaches. Schumpeter (1934) emphasized the role of entrepreneurs entering niches of markets. By innovating, entrepreneurs challenged existing firms through a process of “creative destruction”, which was regarded as the engine of economic progress. Schumpeter (1942) paid attention to the key role of large firms as engines for economic growth by accumulating non-transferable knowledge in specific technological areas and markets. There is a strong positive feedback loop from successful innovation to increased R&D activities leading to renewed impulses to increased market concentration (Gilbert, 2005, 2006, 2007). The neo-Schumpeterian approach • The neo-Schumpeterian approach analyses the generation, implementation and diffusion of knowledge and technology, putting emphasis on the decisive role and impacts of entrepreneurship and innovation on dynamics and qualitative changes in structures of industries or markets to which the innovation dynamics is targeted and thereby the society as the whole (Freeman, 2008). Unfortunately, Neo-Schumpeterian economists scarcely analyze the “destructive” part of the “creative destruction” processes nor consider the destinies of the people who are not lucky or able to take advantage of innovation dynamics (Hartmann, 2009). • Looking at Schumpeter writings (1934, 1939, and 1942) it is possible to distinguished two different types of mechanisms underlying innovation by firms: Creative destruction • Schumpeter (1934) gave economists food for thought with the concept of creative destruction. Creative destruction creates economic discontinuities, and in doing so, an entrepreneurial environment for the introduction of innovation, and earning monopoly profits. Competition is a self-destructive mechanism that normalizes profits when the innovation effect has been utilized. Creative destruction is associated with innovation of entrepreneurs (or small firms) entering unexplored market where there are low entry barriers for new entrants utilizing the common pool of knowledge stock. Creative destruction • Creative destruction is a microeconomic process by its nature but has considerable macroeconomic implication for economic growth (Aghion and Howitt, 1992, 1998). In creative destruction competition between firms and sectors is mainly driven by technological factors when technological innovations overturn the existing dominant technologies and shakes the status quo in the market (Christensen, 1997; Hart, 2005). An example is the meteoric rise of Linux operating system, which can be traced to Linus Torvalds, and the subsequent creation of the Linux community. The Linux community of volunteers, like ad hoc programmers, has fostered the rapid development of the Linux software without firm-centric product development budgets. Creative accumulation • Creative accumulation is associated with institutionalized innovation by MNCs that carry out innovation along established technological trajectories and even try to prevent the entrance of newcomers (Schumpeter, 1942; Pavitt et al, 1989; Malerba and Orsenigo, 1995; Paap and Katz, 2004). MNCs dominate global commodity markets (Karlinger, 1997, 2005; Kumar, 1994, 1998). By providing world-class technologies and logistics, MNCs are important partners for local entrepreneurs (Markusen and Venables, 1997; Lööf, 2009), MNCs are claimed to utilize monopoly power to create high barriers to entry of new entrants (Scherer and Ross, 1990), and impact on industry life cycles (Klepper, 1996) and market structures (Scherer, 1999; Chandler, 1990). Creative accumulation • When entrepreneurs under creative destruction draw from the public domain only to place their own innovations within the reach of imitators, large firms under creative accumulation appropriate and build on proprietary knowledge stocks through in-house R&D departments. Thomas Edison (1847-1931) owned over a thousand U.S. patents. Edison himself was a pioneer investor creating technological breakthroughs. In the 1890s he established General Electric (GE). GE was among the first ones organizing creative accumulation built on its proprietary knowledge stocks through wellorganized R&D departments, including lighting, transportation, power transmission, and medical equipment. (GE) GE is still continuing the infinite quality-improvement process (Cheng and Dinopoulos, 1996; Bingham, 2003). The influence of the degree of concentration on R&D expenditure • The Schumpeterian analysis is confined to the influence of the degree of concentration on R&D expenditure (Cohen and Levin, 1989; Cohen and Klepper, 1996). The heterogeneity of industries is the reason why the relation between concentration and innovative output has often found to be non-significant (Scherer, 1986, 2001, 2003) or even negative (Koeller, 1995; Koeller and Lechler, 2006). Relying on historical analyses, Chandler (1962, 1990) claimed that the strategy process is the key managerial innovation by which large firms integrate the core elements of vertical production system or value chain (Porter, 1985). Large firms with integrated manufacturing and R&D can be successful in generating radical product and process innovations (Freeman, 2008; Mowery and Rosenberg, 1989; Greenstein and Ramey, 1998; Gilbert, 2006, 2007) although the “escape competition” strategy is common in the global patent race by MNCs. Vertical integration is the most valid strategy for MNCs • As Buckley and Casson (1976, 1985) have noticed, internalizing, e.g. vertical integration is the most valid strategy for MNCs. Schumpeter’s (1942) argued for a positive relationship between the rate of R&D investments and the firm size. According to the prediction of Schumpeter (1942), large firms would inevitably gain dominance over small firms, and thus slow the rate of radical inventions in the overall economy. His contradictory claim was that monopolies favour innovations (Baldwin and Scott, 1987; Baker, 2007). In broad terms, this is true still today. Big MNCs are the major suppliers in global innovation and technology markets. The quality of supply is, however, important to assess. The most common competitive model for global commodities supplied by MNCs is oligopoly. A market leader in oligopoly is not ready to take the risk of radical or drastic innovations • Referring to the neoclassical standard doctrine, Kenneth Arrow (1962), the Nobel Prize-winner, claimed that a market leader in oligopoly is not ready to take the risk of radical or drastic innovations since the firm might jeopardize its dominant market position. Market leaders can earn profits by replacing itself (the “Arrow effect”) what small firms in oligopoly, by definition, cannot do. A market leaders inventing in new products or processes can (1) pre-empting potential rivals (Gilbert and Newbery, 1982; Gilbert and Sunshine, 1995; Gilbert and Willar, 2001; Gilbert and Weinschel, 2005); (2) slow down the diffusion of radical technological invention by new entrants (Gilbert and Riordan, 2005); and (3) maintain a permanent leadership (Denicolo, 2001). A classical case is Microsoft being the subject of antitrust investigations in the US and in the EU Microsoft. Federico (2008) has analyzed the case Microsoft. He could not find an evidence of the misuse of monopoly power although he noticed that Microsoft’s aggressive product strategies may harm competitors. U.S. managerial capitalism • Chandler (1990) compared the history of corporate capitalism in the U.S., Britain, and Germany. He noticed that the U.S. managerial capitalism was the winners for about one hundred years, from the 1880s to the 1980s. As Chandler remarked the hated US trusts were the ones that succeeded to increase output, lower costs, compete vigorously, and expand into more distant markets leading to the growing population of MNCs that are able to develop products competitive in markets and so to become multiproduct enterprises). Large vertically integrated firms replaced fragmented structures of production and distribution and started to agglomerate their competitive capabilities over industrial districts. Chandler has been the most influential writer of economic historians since Schumpeter. His writing opened the Marshall’s (1920) black-box of managerial decision-making in large firms (see Chandler, 1962, 1977, 1990). Schumpeter strongly believed in human incentive in innovation dynamics. • Some writers have continued to deal with dynamic transformation process in economies driven by the introduction of innovations (e.g. Freeman, 2008; Dosi, 1982, 1988; Anderson and Tushman, 1990). Schumpeter strongly believed in human incentive in innovation dynamics. This notion is well elaborated by Robert Lucas (1981, 1988). Following the notion of increasing return, Romer (1989) claimed that every generation has underestimated the potential for finding new recipes and ideas. Romer (1990) argued that technology is not a mysterious outside force, as economists thought in the past, but an internal one that can be cultivated to increase growth. His main slogan in terms of Schumpeter has been: “The emerging economy is based on ideas more than objects”. The greatest innovations are likely to occur from the cross-fertilization of sectors and professions. For example, artists/ scientists and businessmen work models are interrelated but different. A major difference is that artists/ scientists are more likely to think laterally and holistically, businessmen are linkers of people and concepts whilst businessmen involve a linear thinking pattern. Success of Communications Applications IM E-mail SMS time Source: Durlacher M-Commerce Hype Curve Mobile Commerce Reality Disappointment Growth Hype Source: Durlacher 2004 2003 2002 2001 2000 1999 1998 Realism M-Commerce Development Model Value creation / Business activity Interactivity One-to-one marketing / mobile advertising Transactions Mobile banking / broking Information channel SMS / WAP based E-mail Complexity / Interoperability Source: Durlacher An example of neo-Schumpeterian discovery is the famous Gordon Moore's law of the new cost curve • • In 1965, Gordon Moore, co-founder of Intel, declared the law that the number of transistors on a chip doubles every 24 months. A similar law has held for hard disk torage cost per unit of information and to some extent for many other technical devices. This law has remained true through countless cycles of high-tech development. It predicts technological progress and explains why the computer industry has been able consistently to come out with products that are smaller, more powerful and less expensive than their predecessors. Ilkka Tuomi has noticed that the semiconductor technology has evolved during four decades under very special economic conditions. The rapid development of microelectronics implies that economic and social demand has played a limited role. Contrary to popular claims, Tuomi believes that the common versions of Moore's Law have not been valid during the last decades. Moore's original statement can be found in his publication "Cramming more components onto integrated circuits”, Electronic Magazine, 19.4.1965. Tuomi, Ilkka “The Lives and Death of Moore's Law”. http://www.firstmonday.org/issues/issue7_11/tuomi/ • Creative destruction and economic discontinuities are typical characteristics of the entrepreneurial environment for the introduction of innovation and earning monopoly profits. Competition is a self-destructive mechanism; effective competition normalizes the profits. It is no doubt that much of the future technology revolution will impact on global environment, although we may not yet know the full implications. Creative destruction are going on. One of the most devastating periods was in the early 1930s, when the industrialized countries transferred from industrial to post-industrial society. • Michael Jensen(Jensen, Michael. (1992) The Modern Industrial Revolution, Exit, and Failure of Internal Control Systems, Journal of Finance.) has made an elegant contemporary interpretation of the Schumpeterian creative destruction. Comparing the growth of GNP with R&D statistics, Jensen predicted the dynamics of modern industrial revolution. Because of the chock of the oil crisis in the mid 1970s, the western countries invested in R&D. The growth of R&D expenditures has been double higher than the growth of GNPs. The revolution of information technology (IT) has been the major source of Schumpeterian creative destruction and innovations in the industrialized countries. • The greatest innovations are likely to occur from the cross-fertilization of different sectors and professions. Entrepreneurs, as innovators, are more likely to think laterally and holistically, while adaptive business managers involve a linear thinking pattern. Through this notion, Schumpeter was the first one who recognized the importance of knowledge in the economy by his reference to ‘new combinations of knowledge’ at the heart of innovation and entrepreneurship. • • • Schumpeter argued that entrepreneurs create innovations in the face of competition and, thereby, generate (irregular) economic growth. In Schumpeter’s own vision of the economic system, the theory of business cycles and the theory of growth are inseparable. Referring to concept of 'true uncertainty’ from Frank Knight’s book Risk, Uncertainty, and Profit , we might expect that there is more chaos than business cycles in the global markets. In this kinds of circumstances, the rational and linear management tools are only partly applicable. The probabilistic tools are another option if the decision-maker knows the relevant alternatives and their probabilities. Sometimes this is the case. Sometimes the true uncertainty is the prevailing contingency that is the situation where entrepreneurs are champions. Schumpeter suggests (Lintunen, Liisa (2000) Who Is the Winner Entrepreneur? An Epistomological Study of the Schumpeterian Entrepreneur (dissertation), Helsinki School of Economics, series A-180, Helsinki, 2000): – An entrepreneurial function is the act of will of the entrepreneur for the introduction of innovation in an economy, and a source of evolution in a whole society – Entrepreneurial leadership is the source of creative energy for innovation and evolution – Entrepreneurial profit is the temporary monopoly return on the personal activity of the entrepreneur • • • During his career until the 1950s, Schumpeter gave economists food for thought with the concept of creative destruction. Schumpeter was well aware of the monopolistic power of big firms. In his book Capitalism, Socialism and Democracy, Schumpeter made his prediction of the transition from the competitive capitalism to the trustified capitalism. He predicted that the success of capitalism will lead to a form of corporatism and to values that are hostile to entrepreneurship, especially among intellectuals. Schumpeter himself believed that free market capitalism is the best economic system. Since the 60s, Schumpeter’s prediction was almost fulfilled in Europe. The social climate needed to allow entrepreneurship to thrive did not exist and competitive capitalism collapsed from within as democratic majorities voted for the creation of a welfare state and placed restrictions and social costs upon entrepreneurship John Kenneth Galbraight’s book American Capitalism: The Concept of Countervailing Power completed Schumpeter's prediction of corporatism. He launched as a parallel concept to Schumpeter’s trustified capitalism. He believed that large firms have the countervailing power that describes a certain level of collusion between large firms and the government. Like Schumpeter Galbraith found that the static economic efficiency was a barrier to innovate. Schumpeter’s and Galbraight’s predictions of trustified capatalism is important in globalized economy because international governmental organizations like the WTO, the IMF, the World bank, the EU ja most of industrialized countries give strong merits to the Chicago school by Friedman, monetrism that probagate for multinationals. • • • • • • • Joshua Karliner’s book The Corporate Planet gives some figures that describe multinationals’ positions: The number of multinationals jumped from 7.000 in 1979 to 40.000 in 1995. The growth of multinationals in number has been remarkable since the UNCTAD assess the number multinationals been grown to 60.000 in 2001 These corporations and their 250.000 foreign affiliates account for most of the world’s industrial capacity, technological knowledge and international financial transactions. They hold 90% of all technology and product patents worldwide and are involved in 70% of world trade. While the world economy is growing by 2-3% per year, multinationals are, as a group, growing at a rate of 8-10%. Multinationals that are operating in all continents and markets (goods, services, financing, IPRs - Immaterial Property Rights, etc) represent trustified capitalism, not of an orthodox monopoly. Multinationals invest in countries like China, owing to impressive economic growth rates in coming years. Schumpeterian entrepreneurs cannot compete against multinationals in the commodity markets where the static economic efficiency is decisive. According to Schumpeter’s thinking, creative destruction creates economic discontinuities, and in doing so, an entrepreneurial environment for the introduction of innovations, and earning monopoly profits. Schumpeterian creative destruction is continuously going on. Multinationals are champions in the modern technology, in technology transfer over continents, in the cross-licensing of technology rights, etc. Multinationals are needed in any region. • • • Entrepreneurship cannot be excluded, like William Baumol has claimed in his book Entrepreneurship, management, and the structure of payoffs. Michael Jensen has made an interpretation of the Schumpeterian creative destruction. Comparing the growth of GNP with R&D statistics after the oil crisis in the mid 1970s, Jensen noticed the oil crisis obliged the Western countries to invest in R&D. The growth of R&D expenditures has been twice as high as the growth of GNPs. The revolution of information technology (ITC) has been the source of Schumpeterian creative destruction and innovations in the industrialized countries. A Schumpeterian global shock has also its negative implications since the inefficient firms are being divested. The driving forces of the global economy is: 1. The process of Schumpeterian dynamics, proprietary capitalism that requires policies which nurture processes of catalyzing investments in innovations, venture capital, startups, etc. The Silicon Valley region is an example of entrepreneurial, proprietary capitalism, personified by Bill Gates. One of the bottlenecks of the EU is weakly developed private venture capital markets, especially, compared to the USA. 2. The formation of globally competitive clusters of multinationals. Geographic concentration of firms has been particular to Europe, as Alfred Marshall wrote in Principles of Economics, and later to the US. Michael Porter’s book The Competitive Advantage of Nations proposes the diamond model as a doctrine for clustering that incorporates the determinants of a company’s environment, which influence the firm’s ability to create and sustain competitive advantage in the global markets. Schumpeterian entrepreneurship as the combination of proprietary and collective capitalism is functioning in regional clusters like Silicon Valley somewhere between local networks and global clusters (figure). ROI • The rise of growth fims PROPRIETARY CAPITALISM and successful COLLECTIVE CAPITALISM start-ups SMALL MEDIUM SIZED BIG FIRM SIZE • • • • • • • Of many followers of Schumpeter, Peter Drucker is unique with his book Innovation and Entrepreneurship. Drucker has identified four fascinating entrepreneurial strategies that are widely used in many countries: 1. Being fustest with the mostest 2. Hitting them where they ain't 3. Finding and occupying a specialized ecological niche 4. Changing the economic characteristics of a product, a market, or an industry Being fustest with the mostest is the strategy that a Confederate cavalry general in America's Civil War used to win battles. The entrepreneur striving for leadership is the entrepreneurial strategy par excellence. Drucker warned that this strategy is the greatest gamble, making no allowances for mistakes and permitting no second chance. But if successful, it is highly rewarding. The case Nokia is exactly the kind what Drucker described. Nokia won the battle although a market failure was also possible. The strategic leader in Nokia since the early 1990s has been Jorma Ollila, the CEO and, later, chairman of the board. He is an example of a Schumpeterian entrepreneur. Peter Gyllenhammar in Volvo in the 1970s and 1980s match well the characteristics of Schumpeter’s charismatic leader. They also fulfill the commonly used metaphor that the Schumpeterian entrepreneur is the hero of the drama. From the exogenous and endogenous growth theory: Robert Solow • According to neoclassical or exogenous growth theory, the main determinants of long-run economic growth are not influenced by economic incentives of human agents that are the core ingredient of Schumpter’s thinking. The analysis on growth factor of nations has been based on residual analysis. Robert Solow, a Nobel Prize-winner, advanced the neoclassical growth model. Solow found that technology progress has in the western countries been the most important input factor allowing long-run growth in real wages and the standard of living. In Solow’s model, the growth is caused by capital accumulation and autonomous technological change. Y = F(K, L) where K = the capital stock and L = the labor force Formula 1: Solow’ model Solow, Robert M. (2000) Growth Theory, An Exposition. Oxford University Press. The technology progress has in western countries been the most important input factor allowing long-run growth in real wages and the standard of living. • Solow postulated that the production function displays constant returns to scale, so that doubling all inputs would double output. This kind of a simplifying assumption is the major weakness, since holding one input constant (labor) and doubling capital will yield less than double the amount of output. This is the famous law of diminishing marginal returns. Solow’s model is a typical example of the ones of the exogenous growth theories. Through his residual analysis, Solow broke down changes in labor productivity into two parts: 1. 2. increase in the amount of capital per unit of labor and technological progress that includes improvements in the human factor. • In his Nobel Prize lecture, Robert Solow referred to the rivalry (or occasional complementarities) as the catalyst of innovations. Solow highly appreciated Schumpeter’s thinking. Solow admitted in his lecture that, over the long run, countries appear to have accelerating growth rates and, among countries, growth rates differ substantially. Solow, Robert M. (1987); Lecture to the memory of Alfred Nobel, December 8, 1987: Growth Theory and After. Endogenous growth theory is based on the idea that the long-run growth is determined by economic incentives • • • The new or endogenous growth theory has became popular during the two last decades, when Paul Romer recognized that technology (and the knowledge on which it is based) has to be viewed as an equivalent third factor along with capital and land in leading economies. Paul Romer has found that an economy’s increased openness raises domestic productivity, and hence must have a positive effect on the living standards of a nation. The new or endogenous growth theory has become popular during the two last decades in the USA and, later, in newly industrialized countries like China and India that invest heavily in innovations. Multinationals expect that the EU could follow the new growth theory in its policy making like other major players in the global game. Like Schumpter, Romer maintains that inventions are intentional and generate technological spillovers that lower the cost of future innovations. An educated work force plays a special role in determining the rate of long-run growth. Romer, Paul (1989) Increasing Returns and New Developments in the Theory of Growth, University of Chicago, Chicago. New growth theorists, believe like William Baumol, that the study of business without understanding of entrepreneurship is biased • The new growth theory has been advanced by neo-Schumpeterian writers, like Kenichi Ohmae, Tom Peters and Alvin Toffler. They have offered a perspective on economic growth that differs in important ways from the traditional view. • Growth theorists seem to believe that the incentives created by the markets affect profoundly on the pace and direction of economic progress. When humans do set to work in an unexplored area, important new discoveries will emerge. • The key in the growth process is the market system, supported by the hybrid institutions like universities or R&D labs and by other more informal networks like consultants and technology parks. • Traditionally, social scientists and policymakers saw economic progress as a result of progress in knowledge or technology (Kuhn's paradigm). Revolution instead of evolution is the core content of neo-Schumpeterian writers. Ohmae, Kenichi (1996) The Evolving Global Economy, A Harvard Business Review Book, Cambridge. Peters, Thomas (1990) Thriving on Chaos, Harper & Row, New York. Toffler, Alvin (1980) Third Wave, Bantam, New York. Return on Investments Increasing returm Decreasing return Increasing returm Investments Negative return Break-even-point1 Break-even-point 2 Optimal 1 Optimal 2 The POM-model by Reijo Luostarinen Home Country Market Factors Components of Internationalization Strategy Domestic Growth Opportunities Small Size Push Factors Openness Growth Strategies Internationalization The Dynamics of Internationalization Product Strategy Operational Strategy Market Strategy Internationalization Process of a Firm • David McClelland’s book The achieving society proposed that an individual's specific needs are shaped by one's life experiences. There are three personal characteristics that a particular to successful entrepreneurs: – Entrepreneurs with a high need for achievement seek to excel. They prefer work that has a moderate probability of success, ideally a 50% chance. – Entrepreneurs have also a strong human motivation, a high need for affiliation is referring to harmonious relationships with other people. This is the reason why entrepreneur performs well in customer service and client interaction situations. – The third highly entrepreneurial characteristic is a high need for personal power. These types of entrepreneurs are striving for leadership and may follow the Machiavellian behavior. Entrepreneurs are socially embedded with their partners, employees or customers. • McClelland’s findings of highly rewarding entrepreneurial characteristics have become popular. What is important to notice is that successful people in general have the same kinds of personal characteristics all over the world. So do top artists or politicians. The spesific group that is very near the characteristics of successful entrepreneurs is successful managers. Therefore, retired managers often startup their own company. • How an entrepreneur can be so good in all the key personal abilities that are needed to succeed? – An answer is given by Henry Mintzberg’ book The Nature of Managerial Work (1980) that has identified the entrepreneurial mode of strategy making as the one in which the power is highly centralized in the hands of one person. Strategy making in these firms tends to be intuitive rather than analytical. – Mark Casson’s book The Entrepreneur: An Economic Theory (1982) summarized that for an entrepreneur to obtain control over resources in a way that makes the opportunity profitable, his or her conjecture about the accuracy of resource prices must differ from those of resource owners and other potential entrepreneurs. – As Kirzner’s book Perception, Opportunity and Profit: studies in the theory of entrepreneurship (1979) has observed, the process of discovery in a market setting requires the participants to guess each other’s expectations about a wide variety of things. • • Entrepreneurs seems to know a lot of their business environment. Most of them are practicians. They are not aware of the neoclassical economics. But although entrepreneur does not know the demand and supply curves of his (or her) product or service, he has a good qut feeling of the markets. He follows the marginalism in his business. The method is learning by doing. Making continous changes in his offerings, he makes his business more profitable. This is actually what marginalism is all about. This is the core area of entrepreneurial operative management. • David Silver’s book from the year 1985) is one of the first writers of this socalled team work that is well applicable to complex business problems. The rubric of his book Entrepreneurial Megabucks. The 100 Greatest Entrepreneurs of the Last 25 Years tells to key content of innovative, strategic management. • Based on his 100 case-studies, Silver developed his model as fundamental law of entrepreneurial process. In Silver’s thinking the goal of investors, as well as entrepreneurs is the creation of wealth or high valuation (V), through the process of selecting a potentially successful entrepreneurial team (E) that can identify and conceptualize a large, multidisciplinary problem (P) and create an elegant solutions (S) which they intend to convey to the problem via a new company. V=ExPxS Where V = Wealth or high valuation of a venture E = Successful entrepreneurial team P = Large, multidisciplinary problem S = Elegant solutions Formula 1: Silver’s model of the valuation of business ventures • • • • • • • Utilizing the model, Silver analyzed ’the 100 greatest entrepreneurs of the last 25 years’. His ’entrepreneurial scorecard’ is inspiring since a company with high value (V) has many beneficiaries – entrepreneur, managers, employees and investors. In the epilogue Silver summarizes that ’being an entrepreneur is like being the builder of civilization’. In Silver’s thinking an entrepreneurial team takes holistic responsibility of the Schumpeterian process of ’creative destruction’ Why entrepreneurs are so good in the construction of new products or business methods/ models. Their most important characteristics is their ability in the recognition of entrepreneurial opportunities Entrepreneur way to look at markets is very personal, subjective process. When managers usually used analytical business tools as accounting methods, entrepreneurs rely on their own feeling that is very much experience based. Entrepreneurs are champions, winners and megabucks because of their unique way to perceive their target markets. This is what a Swedish economist Staffan Burenstam Linder noticed in his dissertation An Essay on Trade and Transformation from the year 1961. An extraordinary personality of most entrepreneurs has an inherent weakness of internal locus of control (Rotter, Julian (1966) Generalized expectancies of internal versus external control of reinforcements, Psychological Monographs). • Entrepreneurs have to believe their on visions because they cannot analyze the hard market facts. The risk of market failure is evident. • Following the model of Jung & Hull’s book Psychological Types (1991) of human mind, Hurst, Rush and White’ article (Top Management Team and Organizational Renewal, Strategic Management Journal, Vol. 10, 87-105, 1989) elaborate creative management in four levels: (1) Intuition, (2) Feeling, (3) Thinking, and (4) Sensing. Future (Potential) Present (Actual) Past (Remembered) 7. REALIZATION 1. IMAGINATION Intuition Vision Mission Reality Achievement 2. MOTIVATION Feeling 6. SATISFACTION Values Objectives Competence Standards 3. PLANNING Thinking Strategies Task 5. EVALUATION Routines Results 4. ACTION Sensing • Human behaviour is the logical result of a few basic, observable differences in mental functioning (Allinson & Hayes, The Cognitive Style Index: A measure of intuition-analysis for organisational research. Journal of Management Studies. 1996, 33(1), 119-135). These differences concern the way people use their minds to develop their skills as the decision-maker (Argyris, Chris & Schön, Donald Organizational learning. London: Addison Wesley, 1978). There are two ways of perceiving: – indirect perception by way of the subconscious intuition and – becoming aware of things through sensing. • There are two ways of judging: – Feeling, consisting of things that have personal, subjective value and – Thinking, a logical process aimed at an impersonal finding. • • We can assume that an entrepreneurial decision-maker is focused on perceiving when managerial decision-making is focused on judging. In both groups, there are many combinations of personal styles of making decisions. Jung holds that one process of sensing, intuition, feeling or thinking must be developed, if a person is to be really effective. Although people must use both perception and judgment, they cannot be used at the same moment. People use the judging and have to shut off perception for the time being. In the perceptive attitude, judgment is shut off. The Nordic perspective: Small and open countries that are the most Schumpeterian of all countries • During the past hundred year, the Nordic industrial companies have been especially skillful in their internationalization processes. Their market strategies have been innovative. • According to my own research findings, the Nordic winners can match the five critical elements of innovative, entrepreneurial strategy making: – 1. Differentiating – to be able combine various positioning of product and related pricing strategies (Chamberlin) – 2. Revolutionary – the architect of industry revolution that is often technological takes the position of market leader (Schumpeter) – 3. Holistic – the current markets are not the ones at which a company will win; the winner is able the see potential markets (Thomas) – 4. Competitive – a winner has continuous cost-cutting going on; even when market demand is in a high growth, the cost-cutting strategy is needed (Marshall) – 5. Realistic – fact and experience based (Drucker) • • • • • There are two regional success stories in the Nordic countries: 1. Western Denmark of Jylland Western Denmark is referred to be a success story of job creation in traditional industries during the period 1970-1990. In that region the agricultural sector is bigger than elsewhere in Denmark. The number of inhabitants is about 700,000 and more than 50,000 new jobs were created in private trades and industries. Furthermore, there was a considerable growth in the number of jobs in the public sector. The big industrial development in rural communities and mainly in Western Denmark is a result of vertical disintegration (networking) of industries. Local entrepreneurs have a relatively good educational background especially within craftsman professions. 2. The Oulu region in Finland During the past three decades, the Oulu region in Finland has been the success story. Entering the elite of technology clusters is not a bad achievement for Oulu that was mainly known for the forest and chemical industry until the end of the 1980s. In the Oulu region, high-tech firms employ about 12 000 people, 20 % of all jobs. The collaboration between entrepreneurs, governmental/ municipality authorities and universities is unique. The “Pro Oulu” group worked at a finer level of policy making than national states and often propagated across national boundaries within the EU and globally. Nokia is the driving force of Oulu’s ITC economy. The case of Oulu that has some common characteristics with the Silicon Valley shows that the Nordic model of Schumpeter’s entrepreneurship is, in some cases, successful. • • Nordic Small Business Research (Lahti, Arto and Pirnes, Hannu (1988) Nordic Small Business Research, ISBC 88, Helsinki) is an example of empirical study to elaborate opportunistic behaviour. This study from the year 1987 includes in an in-depth empirical analysis of 60 companies in three Nordic countries (Finland, Sweden and Denmark) and in four industries (clothing, furniture, metal and engineering and the IT-industry). The collected extensive database contains information on the entrepreneurial background and the company’s strategy and performance. The model of entrepreneurial strategy making was made so that it covers the two stereotypes and three contingencies in-between: – Craftsman behaviour is characterized by low social awareness and involvement, feeling of incompetence in dealing with a complex environment, and limited time orientation. – Opportunistic behaviour is characterized by high social awareness and involvement, confidence in his ability to deal with a complex environment, and an awareness of, and orientation to, the future. Craftsmen are historical stereotypes of entrepreneur. Incapable in dealing with a complex environment, this type of entrepreneur are not successful in the global industries. An opportunistic entrepreneur characterised by broadness in capability and openness in mind is the winner-type. These personality trails are also particular to successful scientists or artists. Based on the research of the Nordic countries, positionistic behavior with 80% opportunism and 20% craftsmanship is identified as the potential winner. In the Nordic countries the inevitable success of regional ITC clusters (like Oulu) has much to do with Ericsson and Nokia. Referring to Hamel & Prahalad’s book Competing for the future have suggested in Nordic IT companies have shifted their focus from market share to opportunity share. Craftsman behaviour Expansionistic behaviour Managerial behaviour Positionistic behaviour Opportunistic behaviour High The rate of managerial competence tic Low nis rtu po al op eri m ag ro an nf m tio r to olu ou Ev havi our be havi be Evo beh lution beh aviou from c avi r to ou r ma raftsm na g eria an l • Low • • • Nordic Small Business Research is an example of empirical study to elaborate opportunistic behaviour in the Nordic countries. The most important competitive weapon of Nordic business companies has over past century been technology. This is exactly what the Stockholm School of Economics has claimed since the 1930s. The most prominent researchers of the doctrine have been Bertel Ohlin and Gunnar Myrdal, Nobel-price winners. But it is not the abstract neoclassical economics that is the speciality of the Nordic countries. It is more question of pragmatism. Based on the research of the Nordic countries, positionistic behavior with 80 % opportunism and 20 % craftsmanship is the potential winner strategy. The practical interpretation of this market strategy is that a company have to be innovative most of time but still maintain enough common sense and operationally efficient business processes. Lahti’s model of strategy and performance is modified to integrate both the strategic and operational aspects of performance. Typical strategy models are constructed from the top-down-pespective. This means that the operative implementation of strategy selected is a specific problem. Lahti’s model include both aspects from the bottom-up perspectice. The incentives created by the markets affect profoundly on the pace and direction of economic progress. When humans do set to work in an unexplored area, important new discoveries will emerge. Therefore, the market system should be supported by the hybrid institutions, like universities or R&D labs and by other more informal networks like consultants and technology parks. This pragmatic interpretation of the modern growth theory is exactly what the Nordic countries are championing. How societies progress technologically Schumpeter and technical progress Giulio Giangaspero (PhD in Sviluppo Economico, Finanza e Cooperazione Internazionale) Introduzione TEMI PRINCIPALI • I cicli economici • La figura dell’imprenditore • La distruzione creatrice • Il progresso tecnico Perché Schumpeter è un economista attuale e affascinante • • • • Propone la massima flessibilità metodologica (poca formalizzazione, molto intuito) Ha un approccio dinamico all’analisi del sistema economico Usa strumenti diversi, provenienti sia dell’analisi economica sia sociologica L’obiettivo del suo studio è proporre una teoria del cambiamento sociale Una teoria del cambiamento Citazione da: Schumpeter, J.A. (1934). The Theory of Economic Development. TRAD. IT Le innovazioni nel sistema economico non avvengono di regola in maniera tale che prima sorgono spontaneamente nei consumatori nuovi bisogni e poi, sotto la loro pressione, l’apparato produttivo riceve un nuovo orientamento. Noi non neghiamo il verificarsi di questo nesso. Però è il produttore che di regola inizia il cambiamento economico e i consumatori, se necessario, sono da lui educati; essi sono, come pure erano, considerati come persone che vogliono cose nuove, o cose che differiscono per qualche aspetto. Pertanto, (…) è ammissibile che i bisogni dei consumatori siano una forza autonoma nella teoria del flusso circolare, ma noi dobbiamo invece assumere una differente attitudine appena ci rivolgiamo ad analizzare il ‘cambiamento’. (…) Sviluppo produttivo, cicli economici e innovazioni tecnologiche sono tre aspetti di un unico processo: è questa la concezione di Schumpeter. (Sylos Labini, P., Nuove tecnologie e disoccupazione, 1989) Cicli economici • L’andamento ondulatorio (ciclo) è la forma che lo sviluppo economico assume nell’era del capitalismo. Il progresso rende instabile il meccanismo economico e lo fa muovere secondo un andamento ciclico. Presupponendo di partire da un qualsiasi punto di equilibrio statico, cosa mette in moto l’andamento ciclico? • Schumpeter individua cause esterne (guerre, terremoti, ecc.) e cause interne al sistema economico le innovazioni • Il processo ciclico è strutturalmente irregolare: la durata dipende per lo più dall’intensità dell’innovazione. In più, esistono periodi espansivi e fenomeni recessivi. • Le innovazioni sono alla radice delle fluttuazioni cicliche non si crea un unico movimento ondulatorio, perché i periodi di gestazione e di assorbimento degli effetti da parte del sistema economico non sono uguali per tutte le innovazioni. Schumpeter individua 3movimenti ondulatori simultanei che si alternano nella dinamica capitalistica. Il ciclo Kondratieff si compie in 50-60 anni, il Juglar in 7-10 anni, il Kitchin in 2-3 anni Esempi: • 1786-1842 (I◦ Kondratieff): ciclo legato alla crescente utilizzazione a fini industriali dell’energia idrica • 1843-1897 (II◦ Kondratieff): ciclo legato all’affermazione delle ferrovie • 1898-1913: il III◦ Kondratieff, legato all’elettrificazione L’imprenditore • L’idea del contributo di Schumpeter alla teoria economica che si richiama più spesso è che “il processo di sviluppo economico è generato da una successione di innovazioni realizzate dagli imprenditori (con il potere d’acquisto loro fornito dalle banche)” (Roncaglia, A., La ricchezza delle idee, Laterza, 2001) • L’analisi dell’imprenditore è da considerarsi organica alla teoria del cambiamento produttivo • L’imprenditore non è un attore economico che agisce al di fuori del contesto in cui si trova • Non si tratta di un soggetto irrazionale: persegue il profitto L’imprenditore Citazione da: “Teoria dello sviluppo economico”, 1911 • (…) la nostra analisi dell’imprenditore non implica alcuna glorificazione del tipo (…) non abbiamo mai definito ogni imprenditore un genio o un benefattore dell’umanità, e nemmeno desideriamo esprimere qualsiasi opinione circa i meriti comparativi dell’organizzazione sociale nella quale questi esplica il suo ruolo (…) Distruzione creatrice Citazione da: “Capitalismo, socialismo, democrazia”, 1942 Capitalism [...] is by nature a form or method of economic change and not only never is but never can be stationary. [...] The opening up of new markets, foreign or domestic, and the organizational delevelopment from the craft shop and factory to such concerns as U.S. Steel illustrate the same process of industrial mutation [...] that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism. It is what capitalism consists in and what every capitalist concern has got to live in. Definizioni di progresso tecnico e la teoria schumpeteriana IL PROGRESSO TECNICO Il progresso tecnico: richiami Il prodotto complessivo di un paese non dipende solo dalla quantità dei fattori usati ma anche dal modo in cui si combinano tra loro: •Questo è ciò che si definisce lo “stato della tecnologia”, e attraverso questa definizione ci si ricollega all’impostazione classica La tecnologia è una variabile “immateriale” (anche se la frontiera attuale della ricerca è la misurazione della tecnologia) Definizioni di Progresso tecnico • Def. ampia: gli effetti sull’economia dei cambiamenti nella tecnologia, cioè tutti i fattori che contribuiscono alla crescita della produttività • Def. specialistica: carattere del miglioramento tecnologico (es. capital-saving, labour-saving, neutrale) • Def. avanzata: il cambiamento tecnologico per se, cioè i miglioramenti nella conoscenza legata ai modi di produzione Miglioramenti nel modo della produzione Il progresso tecnico risulta da una combinazione di: • Ricerca • Invenzione • Sviluppo • Innovazione Ma è anche fondamentale il processo di adozione e diffusione della tecnologia (in questo ambito è importante la disciplina della sociologia dello sviluppo) Bibliografia Testi di Schumpeter: Schumpeter, J.A. (1934). The Theory of Economic Development. Cambridge, Massachusetts: Harvard University Press. Schumpeter, J.A. (1939). Business Cycles. A Theoretical, Historical and Statistical Analysis of the CapitalistProcess. New York: Mc Graw Hill. Schumpeter, J.A., Capitalismo, socialismo, democrazia, ETAS, Milano , 2002 (1942). Altri testi Thirlwall, A.P., Growth and development, Palgrave Macmillan, N.Y., 2003 Roncaglia, A., La ricchezza delle idee, Laterza, Bari, 2001 Sylos Labini, P. (1989). Nuove tecnologie e disoccupazione. Bari: Laterza. Teorie della crescita a confronto, CIDEM, Edizioni Nuova Cultura, Roma, Giugno 2009 Contatti: giulio.giangaspero@uniroma1.it