Analysis of Technological Innovation from Business Economics and Management

An in-depth review examines the main approachesused by business economics and management in the study of technologicalinnovation by firms. These five approaches include industrial organization,transaction costs economy, positive agency theory, resource-based view, andevolution theory. Within the industrial organization approach, emphasis is placed on theeffect of external factors to the firm. The theory of a transaction costseconomy focuses on the exchange of intangible assets (e.g., technology). Thepositive agency theory comes from two factors: differences of interest amongindividuals, and existence of uncertainty and information asymmetries. Theprimary concern of the resource-based view is the internal analysis ofinnovation, particularly intangible assets. Technological change and innovationare found to be the main features of the evolutionary theory. Each framework emphasizes a particular aspect of the innovation process, andare therefore somewhat complementary. Two broader, and therefore perhapsmore useful,models emerge from a review of these approaches: (1)industrial organization and (2) evolution. The evolutionary theory is the chiefapproach currentlyused for innovation analysis, and is deemed to be anappropriate theoretical framework for future empirical research, when informedby specific aspects of other views. (NEE)