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Economy – Innovation Economics and the Dynamics of Interactions 1.1. Introduction

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Capitalism cannot and will never be stationary, Schumpeter once said. In a process of “creative destruction”, the technologies of the present become obsolete, while innovations emerge and feed new economic cycles. Economic history (Braudel 1979) clearly shows new combinations of production factors: products, production processes, sources of raw materials and semi-finished products, organization of work and markets. In short, innovations have fueled economic growth. Since the 18th century, a number of economists, such as A. Smith, J.B. Say, D. Ricardo, T.R. Malthus, K. Marx, etc., have provided the conceptual bases on which the economic theories of innovation have been developed.

Innovation economics was born in the wake of the industrial economy, in the aftermath of World War II. The neoclassical approach first considered technical progress as an exogenous phenomenon, a residue of the production function in models of economic growth (Solow 1956, 1957), and the economists were mainly interested in its effects on the economy, especially on employment. But the recognition of its role in economic growth and evolution, in the wake of the work of J.A. Schumpeter, led them to study in greater detail the mechanisms of its genesis, at the micro, meso and macro levels.

The evolutionary theories initiated by R. Nelson and S. Winter (1982) focus on the genesis of innovation within organizations. They see it as a systemic phenomenon, resulting from the interaction between actors within organizations (giving rise, through learning, to organizational routines, a source of change and inertia), as well as resulting from fruitful interactions between organizations and institutions (analyses in terms of innovation systems at different scales: local, regional, national, sectoral). A country, like a company, is situated, in its development, on a technological trajectory that largely conditions its capacity to assimilate new technologies.

For their part, endogenous growth theories (Romer 1994) study technical progress as the result of private and public investment in the sphere of the economy, particularly in knowledge, infrastructure and human capital. Private investments are made by individuals motivated by profit. Economic growth is then determined by the behavior of economic agents and macroeconomic factors. The field of public policy then becomes paramount, and theoretical work calls for the replacement of big scientific and technical programs that marked the post-war period by more indirect modes of intervention. They are based, on the one hand, on the framework conditions for innovation (by strengthening the components and interactions within innovation systems), and, on the other hand, on incentives to invest and innovate, particularly for firms. This results in positive externalities, which can be seen as the basis for justifying government intervention.

This contribution looks back at some of the evolutions of the major issues of innovation economics. In the first part of the chapter, we attempt to define and develop the meaning of the word innovation, with a particular interest in the work of J.A. Schumpeter. Then, in the second part, we look at the difficult issue of measuring innovation, in particular because of its multifaceted nature. The identification of the key actors of innovation (entrepreneurs, large companies, as well as universities, so-called third places) is the subject of the third part. It reveals their diversity and the need for their interaction to ensure both the production and the diffusion of innovation. The fourth part of this chapter is devoted to the question of these systemic relationships and to the evolution of policies dedicated to strengthening them.

Innovation Economics, Engineering and Management Handbook 1

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