------------ EH.NET BOOK REVIEW --------------
Published by EH.NET (February 2007)

Cristiano Antonelli, Dominique Foray, Bronwyn H. Hall and W. Edward 
Steinmueller, editors, _New Frontiers in the Economics of Innovation 
and New Technology: Essays in Honour of Paul A. David_. Cheltenham, 
UK: Edward Elgar, 2006. vii + 485 pp. $160 (cloth), ISBN: 
1-84376-631-0.

Reviewed for EH.NET by James Bessen, Boston University School of Law.


This festschrift of fifteen papers (plus an introduction and a 
postscript) reflects the breadth of Paul David's work, both in the 
range of subjects and in the methods used. The postscript, written by 
Dominique Foray, compares David's work to a theatrical performance 
that includes roles for Galileo and Edison, as well as Pomo Indians 
and !Kung bushmen, nymphs, reapers and robots, sex, blood and more. 
The collection in the book, no less broad (although probably less 
theatrical), has something for everyone.

The papers are grouped into three sections, reflecting important 
themes in David's work: path dependence, the economics of knowledge 
and the diffusion of innovation. The significance of David's 
contributions in each of these areas is developed in the introductory 
essay by the editors and this provides a general, but brief, 
introduction to his large body of work.

The first chapter, by Andrea P. Bassanini and Giovanni Dosi explores 
why technology markets tend to be monopolies. This paper presents a 
theoretical model to challenge Brian Arthur's (1989) widely-cited 
model of competing technologies. Arthur's model has been used to 
argue that technological monopolies result from unbounded increasing 
returns. The paper shows that Arthur's result is not general, but 
follows instead from specific assumptions of linearity and limited 
heterogeneity among agents. The authors do find, however, that 
increasing returns combined with a high rate of technological change 
frequently generate stable near-monopolies in a more general model.

Cristiano Antonelli, in the second chapter, develops a high level 
overview of different kinds of technological path dependence and 
relates this to issues of dynamic economic efficiency.

Franco Malerba and Luigi Orsenigo study the evolution of the 
pharmaceutical industry, looking at the interrelations between 
technology, regulation and market structure. They begin with a very 
nice summary of the development of pharmaceutical search technology 
over the past fifty years, noting cross-country differences in 
regulation and differences in the roles of imitative firms and market 
leaders. They follow this with a simulation model for the "random 
screening" era that reproduces some of these relationships.

John Cantwell uses patent data in an innovative way to explore path 
dependency of large firms regarding their choices of technological 
specialization. These firms maintained patterns of specialization -- 
that is, high levels of patenting relative to their industry peers in 
certain specialties -- for periods of sixty years or longer. 
Interestingly, Cantwell also finds some general trends in 
technological diversification: the large firms in chemical and 
electrical industries initially increased their diversification, 
followed, over the last several decades, by a trend toward greater 
technological concentration.

Two papers, one by G. M. Peter Swann and one by Robin Cowan, look at 
issues of path dependency in tastes for art. Swann uses correlations 
in auction prices for the paintings of different artists to map these 
relationships. Cowan models the cyclical nature of changes in these 
relationships.

Beginning the section on the economics of knowledge, W. Edward 
Steinmueller picks up on Paul David's theme of organization and 
learning. He looks at historical examples, including the transitions 
from craft organization to the American system of manufactures to 
Fordism to GM's "flexible mass production" to inform a discussion of 
current-day issues of learning and organization in the use of 
information technology to enhance product variety.

Dominique Foray and Lilian Hilaire Perez cover some less familiar 
history, comparing Paul David's "open science" with the "open 
technology" of the Lyon silk industry, which bore some similarities 
to examples of shared innovation discussed by Allen, von Hippel and 
others. Lyon established a sophisticated system of rewards for 
inventors with incentives to share their knowledge. This led to an 
extended period inventiveness. In contrast, the British silk 
industry, where a larger share of inventions was patented, was 
relatively backward. Foray and Hilaire Perez make a very useful 
comparison between the features of the Lyon system and those of open 
science.

Jacques Mairesse and Laure Turner directly explore the nature of 
scientific collaboration by using data on co-publication to measure 
the intensity of collaboration. Using this measure, they investigate 
how the intensity of collaboration varies with geographical location 
and technological specialization.

Patrick Cohendet and Ash Amin look at knowledge and the nature of the 
firm, stressing interactions between "epistemic communities" and 
"communities of practice" within the firm.

Ashish Arora, Andrea Fosfuri and Alfonso Gambardella ask how 
institutions affect the creation and development of markets for 
technology. In numerous papers and a book (2001), these authors have 
explored aspects of technology markets. Here, with an eye toward 
policy, they look specifically at the roles of standards, 
well-defined property rights and institutions that encourage 
risk-taking. The article provides a nice overview of a large range of 
policy-related issues from an institutional perspective. At times the 
authors seem a bit too enthusiastic. For example: "It is difficult to 
think that a market ... could ever function properly without property 
rights ..." I suspect that economic historians might think of 
examples of trade pre-dating property rights or examples of illicit 
trade outside the realm of property rights. Nevertheless, the article 
provides a useful overview.

Arora, Fosfuri and Gambardella argue that global technology markets 
allow small countries to specialize in technology fields in an 
international division of innovative labor. Stefano Brusoni and Aldo 
Geuna explore patterns of national specialization and also the 
integration of different types of technical knowledge. They develop 
indices of specialization similar to those used by Cantwell in the 
paper discussed above, but based on data of peer-reviewed papers in 
chemistry and pharmacology instead of patent data. They also measure 
the integration of knowledge across areas of basic research, applied 
research and applied technology and engineering. They find that large 
European nations do not integrate basic research into pharmaceutical 
technology as well as the U.S. does; they propose that this explains 
why EU R&D managers in pharmaceuticals rely on U.S. research. They 
also claim, perhaps controversially, that their measures might serve 
as a policy guides -- governments might facilitate national 
specialization by supporting integrated knowledge development.

The book's section on the diffusion of innovation begins with a 
chapter by Bronwyn Hall and Manuel Trajtenberg that reports on 
attempts to identify General Purpose Technologies using patent 
statistics. Paul David (1990) persuasively argues that the diffusion 
of electric motors one hundred years ago bears important similarities 
to the diffusion of computer technology today. Both have been called 
General Purpose Technologies (GPT), but some researchers have felt 
that too many technologies can be called GPTs for the term to be a 
useful analytical tool. The authors of this paper explore the use of 
a variety of statistics based on patent citations to see if they can 
derive a measure of "generality" and identify GPTs. Their results are 
mixed. Using a combination of statistics, they identify twenty highly 
ranked patents; most are related to using computers, especially for 
interacting and working at a distance. These technologies seem to fit 
the intuitive description of GPTs. On the other hand, the authors 
note several possible biases that may have influenced this result.

The next chapter, by Luis M. B. Cabral presents a theoretical model 
of technology diffusion that includes adopter heterogeneity (like 
David's 1969 model) and also network effects.

In the final chapter, Paul Stoneman and Otto Toivanen also build a 
model of technology diffusion, this one based on a real options 
approach. They then apply this model to data on international 
diffusion of robot technology, using a sophisticated econometric 
model. They use the estimated model to conduct policy 
thought-experiments, for example, testing the effects of 
macro-economic stability on a nation's diffusion rate for robot 
technology.

The research in this book exhibits a wide variety of methods, topics 
and styles. Few readers will find all of the contributions worthwhile 
or interesting. But few who have an interest in technological 
innovation will fail to find something of value.

References:

Arora, Ashish, Andrea Fosfuri and Alfonso Gambardella (2001), 
_Markets for Technology: The Economics of Innovation and Corporate 
Strategy_, Cambridge, MA: MIT Press.

Arthur, W. Brian (1989), "Competing Technologies, Increasing Returns, 
and Lock-in by Historical Events," _Economics Journal_ 99: 116-31.

David, Paul A. (1969), "A Contribution to the Theory of Diffusion," 
Research Center in Economic Growth, Memorandum No. 71, Stanford 
University.

David, Paul A. (1990), "The Dynamo and the Computer: An Historical 
Perspective on the Modern Productivity Paradox," _American Economic 
Review_ 80: 355-61.


James Bessen, Lecturer in Law, Boston University School of Law and 
Director, Research on Innovation has, following Paul David, written 
about learning-by-doing in "Technology and Learning by Factory 
Workers: The Stretch-Out at Lowell, 1842," _Journal of Economic 
History_ (2003). He is a former innovator and entrepreneur who wrote 
one of the first desktop publishing programs. Now he writes about 
technological innovation and patents. Current works include (with 
Eric Maskin) "Sequential Innovation, Patents, and Imitation," RAND 
(2007); (with Robert M. Hunt) "An Empirical Look at Software 
Patents," _Journal of Economics and Management Strategy_ (2007) and a 
book (with Michael J. Meurer), _Do Patents Work? The Empirical 
Evidence That Today's Patents Fail as Property and Discourage 
Innovation, and How They Might Be Fixed_ (forthcoming 2008).

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