Path to Sustainable Development – a Kaleckian-Schumpeterian Synthesis
Chapter 5: Investment in Implementing Innovation
The innovation process supplies the ‘impulse,’ the innovation process explains why current profits should loom so large in the calculations of ‘routine entrepreneurs,’ but the ‘adaptation mechanism’ is Mr. Kalecki’s. (Rothbarth, 1942, p.227) From innovation capacity to innovation performance The previous chapter examined in detail the link between innovation stimulus and innovation capacity as specified in Figure 4.1, the dilemmas that arise in the process of investing in innovation, and the implications for cycles and crises. This is the innovation ‘impulse’ referred to in the opening quotation above. The present chapter focuses on the bridge between innovation capacity and innovation performance in Figure 4.1. Two interconnected mechanisms operate across this bridge to deliver innovation performance. One is the Schumpeterian ‘combination mechanism’ of selecting and combining factors of production, or in the language of innovation management, ‘mobilizing resources’ (Jolly, 1997). Using Marx’s reproduction schema, the second is Kalecki’s ‘adaptation mechanism’ that adapts innovation capacity to bring forward innovation into the marketplace. This requires investment in implementing innovation through physical capital stock, with the other resources that are selected – land and labour – and combined once the desired investment in capital stock is determined and financed. Courvisanos (1996) specifies the Kaleckian adaptation mechanism in which the investment (in capital stock) process is cyclical, and central to cyclical patterns of economic activity (or business cycles). Uncertainty about expectations of future profitable returns determines the level of susceptibility, and it is this susceptibility level that governs the extent of instability of investment cycles....
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