Giovanni Dosi, Richard R. Nelson,
Chapter 3 – Technical Change and Industrial Dynamics as Evolutionary Processes, Editor(s): Bronwyn H. Hall, Nathan Rosenberg, Handbook of the Economics of Innovation, North-Holland,
Volume 1, 2010, Pages 51-127, ISSN 2210-8807, ISBN 9780444519955, https://doi.org/10.1016/S0169-7218(10)01003-8.
(https://www.sciencedirect.com/science/article/pii/S0169721810010038)

1. Evolutionary Perspective on Technology:

• The paper places technological advancement within an evolutionary framework, linking it to broader concepts of industrial dynamics and economic growth.
• This perspective emphasizes the interconnected nature of technological and organizational innovation, suggesting a dynamic and continuous process of development rather than static states.
• The evolutionary view challenges traditional models by focusing on the cumulative and often unpredictable nature of technological progress.

1. Historical Views on Technology Evolution:

• Early examples from Bernard de Mandeville and Adam Smith are used to demonstrate the historical understanding of technology’s evolutionary nature.
• Mandeville’s discussion on the evolution of warship design and Smith’s insights on productivity improvements exemplify early recognition of technological evolution.
• These historical perspectives underscore the longstanding awareness of the progressive nature of technology across different fields.

1. Evolutionary Themes in Change:

• The paper challenges the notion of strong rationality, proposing that technological advancement is often a result of cumulative, incremental contributions shaped by limited foresight.
• It emphasizes the role of disequilibrium dynamics in what is termed “restless capitalism,” involving trial and error and unexpected outcomes in the search for new technologies.
• Despite the unpredictable nature of technological change, the authors seek to identify discernible patterns in innovation, technology-industry relationships, and the emergence of orderly industrial changes.

1. Impact on Economic Theories:

• The evolutionary nature of technological change is presented as having significant implications for economic theories, particularly in understanding the dynamics of technology-intensive industries.
• It influences perspectives on firm behavior, competition nature, and the determinants of industrial structure within these industries.
• This approach offers a more nuanced understanding of how firms and industries evolve in response to technological changes.

1. Technology and Economic Growth:

• The paper argues that perceiving technological change as an evolutionary process is crucial to understanding the dynamics of economic growth.
• Technological and organizational innovations are presented as central drivers of growth and transformation in modern economies.
• This view contrasts with more traditional economic growth models, highlighting the importance of continuous innovation and organizational adaptation.

Technology as Information

1. Characteristics of Technological Knowledge:

• Technological knowledge is characterized as nonrivalrous, meaning its use by one does not reduce its availability to others, and indivisible, where partial information often lacks value.
• The creation of technological knowledge is costly, but once established, it can be utilized at lower costs, exhibiting a unique cost structure.
• Unlike physical goods, technological knowledge often appreciates with use, emphasizing its increasing returns property and diverging from traditional economic goods.

1. Economic Implications:

• Contemporary economic theory is evolving to incorporate the unique characteristics of information as a fundamental input in the economic system.
• Kenneth Arrow’s work on the non-convexity of production possibilities with information introduces the concept of extreme forms of increasing returns.
• This shift in economic thinking acknowledges the critical role of information in shaping production processes and economic outcomes.

1. SYS Synthesis:

• The SYS synthesis acknowledges the distinct features of technological knowledge and information, drawing on insights from prominent scholars in the field.
• It recognizes both the common and unique attributes of technological knowledge in comparison to general information theory.
• This approach contributes to a deeper understanding of how technological knowledge functions within the broader economic system.

1. Challenges in Replication and Imitation:

• Despite its scalable nature, technological knowledge poses challenges in replication or imitation due to its complexity and tacit elements.
• The tacitness of technological knowledge often necessitates significant effort and resources for effective replication and application in new contexts.
• This complexity highlights the specialized nature of technological knowledge, differentiating it from other forms of information.

1. Production Theory Implications:

• The indivisibility of ideas and technologies challenges traditional production theory, particularly the axiom of divisibility.
• Technologies often involve indivisible elements like machines and plants, influencing their integration and utilization in economic activities.
• The paper explores how the tacit aspect of technological knowledge impacts innovation, the market for technologies, and the division of labor across organizations.

1. Sources and Nature of Technological Knowledge:

• Technological activities draw on a mix of practical know-how and theoretical knowledge, with varying degrees of emphasis in different contexts.
• The sources of technological knowledge include external institutions like universities, industrial actors, and endogenous accumulation within organizations.
• The paper discusses the concepts of endogenous versus exogenous technical progress, highlighting the internal generation of advances within applied, task-focused organizations.

Technologies as Recipes, Routines, and Artifacts

1. Technologies as Recipes:

• Technology is conceptualized as a recipe combining product design and production procedures, including inputs, equipment, and action sequences.
• These recipes specify technically feasible procedures, akin to grammatical rules, based on the underlying knowledge base.
• While some aspects of technology are codified, a significant portion remains tacit, transmitted through practice and experience, underscoring the depth of knowledge involved in technology and its transmission beyond formal channels.
• 2. Technologies as Routines: • Routines represent the operational nature of organizations, encompassing collective actions in response to environmental cues. • They embody organizational problem-solving capabilities and governance structures, with specific divisions of labor and coordination modes. • These routines form the basis of organizational competences and capabilities, underpinning mastery of specific knowledge bases and higher-level tasks, and are central to how organizations function and adapt to changes in their environments. 3. Technologies as Artifacts: • This approach centers on the final outputs of technological processes, whether they are physical artifacts or services. • Technologies often involve designs that are configurations based on a knowledge base, with outputs studied in terms of design properties and components. • The evolution and history of technologies can be traced through changes in product and equipment performance characteristics, providing a tangible means to study and understand technological progress and its impacts.

Procedural View of Technology1. Focus on Design and Procedures: • The procedural view prioritizes the design of devices and the methods used in transformations, focusing on how raw materials are converted into finished products. • It sees technological advances primarily as changes in procedures and designs, with input/output relations being secondary outcomes. • This perspective offers a more dynamic understanding of technology, emphasizing modifications and refinements over time and highlighting the ongoing evolution and adaptation in technological processes. 2. Implications for Production Theory: • Production functions are conceptualized as ex post descriptions of production quantities, derived from the nature of the recipe and product characteristics. • This approach challenges traditional views of production functions as fixed and static, instead presenting them as fluid and evolving based on changes in technology and organizational processes. • The dynamic interplay between changing recipes and input characteristics underscores the complexity and non-linearity in production processes, challenging traditional economic models that view production as a simple, linear process. 3. Mappings Between Procedures and Input/Output Relations: • The paper discusses the challenge of mapping problem-solving metrics to input/output metrics, questioning whether different recipes for the same product could result in vastly different input/output coefficients. • It suggests that there might be no regular pattern ensuring that similar sequences of procedures correspond to similar input/output ratios, and vice versa. • This highlights the complexity and variability in technological processes, indicating that similar outcomes can be achieved through different methods and that there is not always a direct, predictable relationship between inputs, processes, and outputs. 4. Implications for Firm Heterogeneity: • The procedural view accounts for the significant variance in performances across firms within the same industrial sector, attributing it to differences in understanding and mastering procedures. • It suggests that each organization may know only a few procedures, and even similar recipes might be mastered with varying degrees of effectiveness, leading to heterogeneity across firms. • This view challenges the notion of uniformity in industry practices, highlighting the diversity and complexity within sectors and the impact of organizational knowledge and capabilities on firm performance.