The New Economics of Technology Policy
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The New Economics of Technology Policy

Edited by Dominique Foray

This book focuses on technological policies, in other words all public interventions intended to influence the intensity, composition and direction of technological innovations within a given entity (region, country or group of countries). The editor has gathered together many of the leading scholars in the field to comprehensively explore numerous avenues and pathways of research. The book sheds light on the theory and practice of technological policies by employing modern analytical tools and economic techniques.
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Chapter 3: Technology Policy: The Roles of Industrial Analysis and Innovation Studies

W. Edward Steinmueller


1 W. Edward Steinmueller INTRODUCTION 3.1 The rationales put forward for technology policy shape the potential for policy-making. Traditionally, a limited number of rationales have been available. The most familiar are those of ● ● ● market failure (Nelson, 1959; Arrow, 1962); infant industry development (Shafaeddin, 2000); coordination failure, for example in the case of compatibility standards (David and Greenstein, 1990; Tassey, 2000) In addition, and of particular relevance to developing economies, the development of demand and its effects in inducing innovation have been offered as a rationale within both development (Binswanger and Ruttan, 1978; Ruttan, 2001) and evolutionary economics (Metcalfe, 1995). A rationale that is less popular among economists, but frequently suggested by policy-makers, is imperfect capital markets (see Hall, Chapter 15 in this volume). For example, the hypothesis is that financial institutions may be too risk-averse to invest in new technology-based firms and hence there is a need for bolstering ‘risk capital’.2 Finally, relatively neglected, but still salient, rationales include the role of procurement (Flamm, 1987), and mission-oriented research (Mowery, 1995 and Chapter 12 in this volume), including defence and other social needs such as health, safety and environmental protection. The relative weight of these rationales has waxed and waned over time but the policy discourse has, until relatively recently, almost universally relied on one or more of these rationales. The goals of employing technology policy have been similarly constrained. In the developing countries, these have fluctuated between growth and employment on the one hand, 17 18 The new economics of...

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