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Invention, Innovation and Diffusion

  • Paul R. Ferguson
  • Glenys J. Ferguson
Chapter

Abstract

In the twentieth century, competition between firms has been largely on the basis of product improvements and cost advantages generated by developments in methods of production and organisation. However, textbooks often ignore the process of change, concentrating instead on the beneficial effects of price competition. This is a major omission, for as Schumpeter argues:

But in capitalist reality as distinguished from its textbook picture, it is not that kind of [price] competition which counts but the competition from the new commodity, the new technology, the new source of supply, the new type of organisation … competition which commands a decisive cost or quality advantage and which strikes not at the margins of the profits and the outputs of existing firms but at their foundations and their very lives (1942, p. 84).

The lack of attention paid to new products and processes in most economic texts reflects the difficulty of incorporating the topic within the neoclassical approach. Adopting the assumptions of perfect information and using a form of analysis that is static is inappropriate to the discussion of change.

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Copyright information

© Paul R. Ferguson and Glenys J. Ferguson 1994

Authors and Affiliations

  • Paul R. Ferguson
  • Glenys J. Ferguson

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