Technical Progress at an Endogenous Rate

Abstract

Technical progress, defined in Chapter 7 simply as the advancement of knowledge about methods of production, is often thought of as proceeding in a number of distinct stages. The first is invention or discovery, which may be defined as the occurrence of new ideas or as ‘the devising of new ways of attaining given ends’ (Kennedy and Thirlwall, 1972, p. 51). Generally, a new idea will not be suitable for application in production without some effort and expenditure on its refinement and development. When the idea has become applicable, the next stage is its adoption; and it is this which constitutes innovation, defined as ‘the commercial application of inventions for the first time’ (Kennedy and Thirlwall, 1972, p. 56). (The innovation may or may not need to be embodied in some new kind of productive factor.) All this can occur within one firm; we should usually expect there to follow diffusion of the new knowledge through the economy as a whole, and imitation of the original innovation.