Although many economists have tended to agree with Schumpeter that most research and innovative activities will tend to be conducted by large, monopolistic firms, empirical studies do not provide clear evidence to support this conclusion. Part of the problem in resolving this conflict, it is argued, rests with the lack of a methodologically sound conceptual framework for examining the processes of innovation. This paper employs concepts from the comparatively new scientific fields of “chaos”, non-linear systems, and “dissipative structures”—as well as from cybernetics and information theory—to develop an outline of a general model to explore the issue. It concludes that to the extent that monopolies tend to move “close to equilibrium”, their internal entropy will increase, and their R&D efforts will atrophy. On the other hand, when these firms are driven by external market pressures “far from equilibrium”, R&D and innovative activities become revitalized.
Get full access to this article
View all access options for this article.
References
1.
AbramsonN. (1963). Information Theory and Coding, New York: McGraw-Hill.
2.
AshbyW.R. (1963). An Introduction to Cybernetics, London: Methuen & Co.
3.
AshbyW.R. (1962). “Principles of Self-Organizing Systems,” in Principles of Self-Organization, edited by Von FoersterH.ZopfGeorge W., New York: Pergamon Press.
4.
Charles River Associates (1980). Innovation, Competition and Government Policy In The Semi-Conductor Industry, Lexington, Mass.
5.
DasguptaP. (1982). “The Theory of Technological Competition,” Discussion Paper, International Centre for Economics and Related Disciplines, London School of Economics.
6.
DasguptaR.StiglitzJ. (1980). “Industrial Structure and the Nature of Innovative Activity,”The Economic Journal, 90, 266–293.
7.
DasguptaR.StiglitzJ. (1977). “Market Structure and Research and Development,”London School of Economics (mimeo).
8.
DasguptaR.StiglitzJ. (1980). “Uncertainty, Industrial Structure and the Speed of R&D,”Bell Journal of Economics, 11, 1–28.
9.
DayR.GrovesT., eds. (1975). Adaptive economic models: Proceedings of a symposium conducted by the Mathematics Research Center. New York: Academic Press.
10.
DayR.SinghI. (1977). Economic Development as an adaptive process: The green revolution in Indian Punjab. Cambridge and New York: Cambridge University Press.
11.
EliassonG. (1977). “Competition and Market Processes in a Simulation Model of the Swedish Economy,”Amer. Econ. Rev., 67(1), 277–81.
JennerR.A. (1966). “An Information Version of Perfect Competition,”The Economic Journal, 76, 786–805.
20.
KamienM.I.SchwartzN.L. (1982). Market Structure and Innovation, Cambridge: Cambridge University Press.
21.
LevhariD. (1966). “Further Implications of Learning by Doing,’Review of Economic Studies”, 33, 31–33.
22.
LevinR.C., “Technical Change, Barriers to Entry and Market Structure,”Economica, 45, 347–362.
23.
LouryG.C. (1979). “Market Structure and Innovation,”Quarterly Journal of Economics, 93, 395–410.
24.
MansfieldE. (1967). Econometric Studies of Industrial Research and Technological Innovation, New York.
25.
MarschakJ. (1968). “Economics of Inquiring, Communicating, Deciding,”The American Economic Review, 58, 1–18.
26.
NelsonR.R. (1981). “Research on Productivity Growth and Productivity Differences,”The Journal of Economic Literature, 19, 1029–64.
27.
NelsonR.R.SchuetteH.L. (1976). “Technical Change in an Evolutionary Model,”Quarterly Journal of Economics, 90, 90–118.
28.
NelsonR.R.WinterS. (1977). “Forces Generating and Limiting Concentration Under Schumpeterian Competition,”Bell Journal of Economics, 9, 524–548.
29.
NelsonR.R.WinterS. (1982). “The Schumpeterian Tradeoff Revisited,”The American Economic Review, 72, 114–32.
30.
NelsonR.R.WinterS.G. (1982). An Evolutionary Theory of Economic Change. Cambridge, Mass., and London: Harvard University Press.
31.
PrigogineIlyaIsabelleStengers, (1984). Order Out of Chaos: Man’s New Dialogue With Nature, New York, N.Y.: Bantam Books.
32.
ProopsJ.L.R (1987). “Entropy, Information and Confusion in the Social Sciences,”The Journal of Interdisciplinary Economics, 1, 225–242.
33.
ProopsJ.L.R (1983). “Organization and dissipation in economic systems,”Journal of Social and Biological Structures, 6, 353–353.
34.
ReinganumJ.F. (1984). “Practical Implications of Game Theoretic Models of R&D,”The American Economic Review, Papers and Proceedings, 61–66.
35.
SchumpeterJ. (1947). Capitalism, Socialism and Democracy, 2nd Ed., London.
36.
ShannonC.E.WeaverW. (1949). The Mathematical Theory of Communication, Urbana: The University of Illinois Press.
37.
SheshinskiE. (1967). “Optimal Accumulation With Learning By Doing.” In Essays on the Theory of Optimal Growth, edited by ShellKarl. Cambridge, Mass.: MIT Press.
38.
SinghJ. (1965). Great Ideas in Information Theory, Language and Cybernetics, New York: Dover Publications.
39.
TandonP. (1985). “Innovation, Market Structure, and Welfare,”The American Economic Review, June1984, 74, 394–403.
40.
TheilH. (1967). Economics and Information Theory, Chicago.
