Cycles, Crises and Innovation

Cycles, Crises and Innovation

Path to Sustainable Development – a Kaleckian-Schumpeterian Synthesis

Jerry Courvisanos

Cycles, crises and innovation are the major economic forces that shape capitalist economies. Using a critical realist political economy approach, the analysis in this fine work is based on the works of Michał Kalecki and Joseph Schumpeter – both of whom identify these three dynamic forces as plotting the path of economic development. Jerry Courvisanos’ thought-provoking book examines how the rise of capital through investment enshrines innovation in profit and power which in turn determines the course of cycles and crises. The author concludes by arguing for strategic intervention by transformative eco-innovation as a public policy path to ecologically sustainable development.

Chapter 4: Investment in Building Innovation Capacity

Jerry Courvisanos

Subjects: economics and finance, economic psychology, economics of innovation, history of economic thought, innovation and technology, economics of innovation


The most decisive input for innovation is knowledge. While information is the flow of data, knowledge is a stock of information that is organised into a conceptual schema. Innovation is the ability to blend and weave different types of knowledge into something new, different and unprecedented, which has economic value. (Feldman 2010, pp.124–5) From innovation stimulus to innovation capacity Investment in building innovation capacity encapsulates all spending, both private and public, that is invested in an economy. In a capitalist economy, innovation capacity is nurtured through the ability of enterprises to identify trends and new technologies, as well as acquiring and exploiting this knowledge and information (Tidd et al., 2005).1 This innovation capacity concept was first labelled ‘absorptive capacity’ by Cohen and Levinthal (1989), recognizing the need for workers in the enterprise to absorb information and knowledge from external collaborations in research and development (R&D). Michie and Sheehan (1999) extend this absorptive capacity concept to the organizational setting in which employees operate and their ability to absorb innovation stimuli within the enterprise. As Feldman notes in the opening quotation, the stock of accumulated knowledge in all organizations is the decisive input into the capacity of the economy to conduct innovation. This was defined in the previous chapter as ‘knowledge capital’. Investment in the knowledge capital stock that elicits innovation comprises of the two enterprise-based innovation variables from the Kaleckian InnovationInvestment Framework in Figure 3.1: ‘RD’ and ‘L’. From this Kaleckian perspective, investment in both need to be...

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