The emergence of new knowledge, market evolution and the dynamics of micro-innovation systems

In this paper, we develop a problem-driven approach to innovation systems to account for the emergence of new knowledge and the long-term evolution of markets. We show that (1) science, technology and markets co-evolve along coherent trajectories of long-term change, which can be efficiently mapped by longitudinal network analysis of bibliometric data that are consistent with market-level data, (2) the inception of these trajectories corresponds to phases of close interaction within small entrepreneurial networks of multi-skilled practitioners that grow through the division of innovative labour and associated incremental change in specific and problem-centred micro-innovation systems, (3) as trajectories grow and develop, changes in knowledge alter structure and composition of final product markets and the likelihood of opportunities for new entrants increases with the distance between the knowledge bases of firms. As the knowledge that is necessary to solve new technical problems grows and as these are transformed by their very solutions, new ties are created and old ties decay in an open-ended co-evolutionary process of change in knowledge and industry organisation.