Selection environments and innovation regimes: Micro-macro innovation dynamics in late development
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This paper explores macro-, and meso-economic forces shaping search and explorative behaviour at the firm level. In particular, we focus on top-down selection mechanisms (both direct and indirect) that modify the rate and direction of technological change, as well as the nature of technological learning at the micro-economic level. Studies on economic development in developing countries focus increasingly on the concepts of technological learning and technology systems. It is well accepted that fundamental causes of differences in long term economic performance expresses technological asymmetries at the firm and sectoral level (Dosi, Pavitt and Soete, 1990; Fagerberg, 1994). Given that technological learning is embedded in production chains, knowledge networks, and institutions, patterns of accumulation of technological capabilities depend in turn on related systems of innovation (Lundvall, 1992; Nelson, 1993). Opportunities for catching-up and narrowing technological asymmetries depend as well on the particular innovation regime, the rules govern search and innovative behaviour that in a particular industry and in a particular time (Nelson and Winter, 1982; Malerba and Orsenigo, 1995). However, macro-to-micro causality has been largely excluded in these fundamental explanations of economic performance (see Cimoli and Katz, 2002). Macroeconomic environments determining levels and growth rates of key variables can influence directly the rates of technology absorption and local innovation through traditional channels like relative prices of capital, capital turnover rates, market size and growth rates, etc. Next to these quantitative impacts, we argue, macroeconomic settings can also affect the nature of technical change, by influencing market- and firm-level selection mechanisms that govern an economy's capacity of generating variety. Following Nelson and Winter (1982) model of search and selection, we develop an analytic framework that links explicitly micro-level behaviour and learning, with macroeconomic selection mechanisms. In turn, we show how macro-to-micro causation can bias technological behaviour into certain directions, reinforcing cumulative causation and path-dependent features of technological learning. Next, we examine the conditions under which adverse selection environments can generate development traps of slow economic growth, and slow variety generation. In circumstances where active competition and market transference mechanisms operate in a relatively fluid manner across borders, economic resilience is crucial for preventing economic systems to rely purely on static advantages that may result socially and environmentally deleterious in the long term. Finally, we argue how the learning restrictions set by astringent selection environments can and have been overcome under certain innovation regimes.