Path to Sustainable Development – a Kaleckian-Schumpeterian Synthesis
When I first investigated innovation, it came out of my work on investment. I quickly found out that the cyclical and volatile nature of capital investment is due to the level of innovation embedded in investment. Without innovation, capital investment ends up only as replacement of capital stock. This has two crucial demand side effects. First, investment demand is limited by the amount of funding required merely to replace depreciated stock. Second, consumer demand is limited to adding more of the product (how many cars and toasters are you prepared to spend money on?), and replacement of the product (what is the extent of planned obsolescence that consumers are prepared to accept?). This investigation ended up as my first book: Investment Cycles in Capitalist Economies: A Kaleckian Behavioural Contribution. After completing that book, I began to realize that research into innovation – whether from the disciplines of economics, management or entrepreneurship – did not view innovation from the investment perspective. For innovation to become successfully commercialized, it requires significant investment in two areas. One is well understood – that is investment in the creation of the innovation (called ‘invention’) through formal R&D and informal non-R&D (new uses of existing knowledge and ad-hoc ‘on-the-job’ changes). The other is not well understood – that is the implementation of the innovation through capital investment by private enterprise and infrastructure investment by the public sector (sometimes in partnership with private enterprise). The two together form the backbone of productivity improvements that lift sustainable living standards. The...