Interaction of Drastic and Incremental Innovations: Economic Development Through Schumpeterian Waves

Xiangkang Yin and Ehud Zuscovitch
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Ehud Zuscovitch: Department of Economics and Finance, La Trobe University

No 1999.02, Working Papers from School of Economics, La Trobe University

Abstract: Technological progress as a major source of economic development stems from the interaction of two types of innovations, drastic and incremental. While the former sets the fundamental pace of economic progress by redefining production possibilities as Schumpeter strongly emphasized, the latter takes the basic framework as given but pushes the production possibilities frontier outwards marginally in production practice. This paper studies the dynamic interaction and effects of these endogenously-determined innovations. Upstream firms in the model "produce" drastic innovation, which turns out brand new technology and obsolescences the existing technology used by downstream firms that specialize in final goods production. After the downstream firms adopt the new technology, they can improve it further by their incremental innovations.

Keywords: Economic Development; Technology; Innovations EDIRC Provider-Institution: RePEc:edi:smlatau (search for similar items in EconPapers)
Pages: 31 pages
Date: 1999
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Working Paper: Interaction of Drastic and Incremental Innovations: Economic Development through Schumpterian Waves (2000)
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