SOURCES OF TECHNICAL CHANGE: INDUCED INNOVATION, EVOLUTIONARY THEORY AND PATH DEPENDENCE

The 1960s through the 1980s were very productive of new theory and empirical insight into the sources of technical change. In this paper I argue that each of the three approaches that have been advanced--induced technical change, evolutionary theory and path dependence--is approaching a dead end. The induced technical change process is driven by changes in the economic environment in which the firm (or public research agency) finds itself. But its internal mechanism, the learning and search process, remain inside a black box. The evolutionary model builds on the behavioral theory of the firm in an attempt to provide a more realistic description of the internal workings of the black box. The strength of the path dependence interpretation lies in the importance it places on the sequence of specific micro-level historical events. But it holds only for network technologies characterized by increasing returns to scale--and only until the increasing returns have been exhausted. The three approaches should be regarded as components of a more general theory of the sources of technical change. In the later section of the paper steps that might be taken toward the development of a more general theory of the sources of technical change are suggested.