Technological innovation has defined human evolution from the beginning of the Stone Age to the current informative age. Its contributions to the society's development were noticed but it was only recently at the dawn of the industrial revolution that its impact was fully analyzed by historians and economists alike. This essay will first explore what innovation is and how technology relates to it. Then it will discuss how the approach to technological innovation has been developed from the beginning of the industrial revolution to the current period. It will then conclude by discussing the main factors influencing technological change.
Innovation as a whole has numerous definitions depending on which discipline it is looked at from. In the dictionary, it is defined as a new idea, method, or device (Merriam-Webster 2020). This definition can also be confused with the definition of invention which states that it is the act of discovering a new idea, process, or device (Merriam-Webster 2020). The difference between invention and innovation can be attributed to the success of the new concept as one can discover a new concept but not make any impact on the social culture or the economy. An example of this difference would be the radio newspaper of 1939 that sent newspaper articles via radio waves that failed to take off and the fax machine of 1980 that used a similar process but was an economic success (Jaume 2012). One of the main reasons why the radio newspaper failed to take off was the technology that it used was not as advanced as that of the fax machine.
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Technology is the practical application of intelligence (Ferré 1988). This definition helps to clarify the difference between invention and innovation as it emphasizes the practicality of inventions which some are not. The importance of technology cannot be understated with new technologies that are shaping the way we live such as Artificial Intelligence which is making the delivery of vital services more efficient to blockchain technology which is making transactions on the internet more secure (Rayome 2019). Though technology is not simply physical artefacts but is also the knowledge of the technology. This knowledge can come in three forms, first is in the artefacts themselves, secondly as explicit knowledge that is recorded information, and lastly as tacit knowledge that is information passed informally. The importance of this knowledge is how it is passed on from one generation to the next. In explicit knowledge, this is simple to follow as there are clear procedures to this knowledge that can be easily followed, replicated, and stored. As for the artifacts and tacit knowledge, this can be difficult to extrapolate backward as vital steps can be missed. This was the case when the US government in 2007 tried to increase its stockpile of hydrogen bombs. To make hydrogen bombs they needed to make a vital material called ‘Fogbank’, whose process had been lost to the staff and engineers of the 1980s (Baumann 2009). Therefore, from the examples and the definitions given above it can be said that technological innovation is the continual improvement and development of new ideas, methods, and devices with specific emphasis on their technical aspects with the ultimate goal of economic success. This goal is one of the reasons that brought about the industrial revolution.
The Industrial Revolution was a period where capitalism was born. It was during this time that there was a shift in the way technological innovations were developed and applied to society, with specific emphasis on the means of production. Before the Industrial Revolution products were produced in small isolated batches that were non-systematic. In the late 18th century the means of production shifted to large-scale mass production in industries ranging from agriculture to iron manufacture. This shift was brought about by new technologies developed and marketed by inventor-entrepreneurs, new methods of organizing production through division of labor, and new power sources such as steam and electricity. Many historians and economists have given their perspectives on the different drives that brought this change about but it is Schumpeter analysis (Schumpeter 1911, 1950) of the innovator as an entrepreneur that gives a better explanation of how innovation was developed in that era. In his analysis, Schumpeter describes the entrepreneur as an innovator who creates new industries through a destruction process that causes relevant structural changes to an economy (Galindo & Méndez-Picazo 2013). In the Industrial Revolution, an inventor/innovator usually approached an entrepreneur to bring his concept to market but sometimes it was the same person. For example, Josiah Wedgewood was an innovator-entrepreneur who developed his innovations in pottery and the market (Dodgson 2011). As industries grew bigger and technologies became more intense and complex so did the development of innovation with the rise of corporate research and development(R&D).
Corporate R&D began in the chemical industry in 1861 when a new patent to develop soda ash called the Solvay process was developed. This process was more efficient than the Leblanc System. The nations that quickly adopted, Germany and North America, quickly gained economic success than those who stagnated in their adoption, Britain (Floud and Johnson 2003). This was further developed and put into greater practice by Thomas Edison when he founded the Edison General Electric Company in 1890. Edison was able to approach innovation development systematically by bringing management discipline to the invention to harness the talents of individuals. This resulted in the company winning more patents than any other company in America over the next 50 years since its conception (Hamel 2006). Development of innovation in R&D continued until strong trends to decentralize and outsource it arose in the 1980s and 1990s. This led to a new industrial ecology of ‘open innovation’ (Chesbrough 2003), thus bringing us to consider the factors that influence technological change.
Of the many factors that influence technological change, technological knowledge is an important factor in the innovation process. In the past technological knowledge was seen to be based on scientific knowledge, and as a result led to the linear development of technology driven by science. This model was contrasted by other economists who said that innovation was not science-driven but rather pulled by the market for further development. This resulted in a new model for the innovation process that incorporated technology and market influence, that is the sophisticated interactive chain-link mode of the innovation process. The development of an all-encompassing model has had its difficulties as many models did not include aspects of the socioeconomic and cultural environment. They also only consider R&D developments in their models as well ignore how the technology will be implemented by the user, also they often consider innovation as having an end, rather than innovation being the continual process of improvement.
Another factor is that of the firms who develop innovation through R&D. From the days of Edison, we can see that management in the development of innovation is an important factor. Various economic views have developed along with the development of innovation from classical views by Adam Smith to neo-classical views that describe innovation as being exogenous to economic development. Neo-classical views use the micro-economic model of the theory of production to illustrate how a technological innovation might be chosen or developed. The model considers that innovation is chosen on the basis that it reduces cost and at the same time increases productivity output. Neo-classical views were limited in that they considered production as a simple input-output process with no other influencing factors. It concluded that the basis of choosing a technological innovation was solely dependent on cost and labor.
This theory was contrasted by Schumpeter who highlighted that innovation was key to economic growth. He acknowledged that it was endogenous to economic growth through the industrialization of innovation in R&D. He also emphasized the role of temporary monopoly as an incentive for the development of innovation. This can be seen throughout the history of big firms like Microsoft which had a temporary monopoly on the personal computer and Apple which had a temporary monopoly on the smartphone. His work addressed the neo-classical model by stressing the dynamic nature of innovation. This dynamic nature was examined in the modern theories of the firm. The theories of the firm examined how the management of the firm affected the development of innovation in three particular aspects. The first is how ownership and control of the firm impacted the firm’s ability to develop innovation. If the firm’s managers were more incentivized to profit maximization or to growth maximization profit maximization proved to develop more innovations to get a competitive edge in the market. The second factor was how the firms approached cost as this affected the structure of the firm. It was seen that a firm that was hierarchical developed fewer innovations than a multidivisional firm, for a multidivisional firm had more control over its development.
In conclusion, it is evident that innovation is vital to the economic growth of any organization be it a firm or a nation. Its development is multi-dimensional and involves all sectors of an economy. Its analysis is as complicated as analyzing any technical discipline in that each view has its strengths and weaknesses. And above all that technological innovation is an endless process that will only get better with time.
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