Dissipative Structures, Control and Innovative Behavior in Monopolies

Although many economists have tended to agree with Schumpeter that most research and innovative activities will tend to be conducted by large, monopolistic firms, empirical studies do not provide clear evidence to support this conclusion. Part of the problem in resolving this conflict, it is argued, rests with the lack of a methodologically sound conceptual framework for examining the processes of innovation. This paper employs concepts from the comparatively new scientific fields of “chaosâ€, non-linear systems, and “dissipative structuresâ€â€”as well as from cybernetics and information theory—to develop an outline of a general model to explore the issue. It concludes that to the extent that monopolies tend to move “close to equilibriumâ€, their internal entropy will increase, and their R&D efforts will atrophy. On the other hand, when these firms are driven by external market pressures “far from equilibriumâ€, R&D and innovative activities become revitalized.