Innovation as an Evolutionary Process

Abstract The chapter ‘zooms in’ on the analysis of sources, procedures, and microeconomic effects of innovation. It starts from the basics—that is, what is technology—in terms of problem-solving knowledge, procedures, recipes, routines, and ensuing artefacts. Next, it explores the structure and dynamics of such knowledge in terms of technological paradigms and the implications in terms of trajectories of technological change. There are a few features which the generality of paradigms have in common and others that differentiate them in terms of richness of opportunities of innovation and their sources, tacitness of the underlying knowledge bases, cumulativeness in the processes of innovative advances, and appropriability of the economic benefits from the innovation itself. Different paradigms map into different sectoral regimes of innovation and industrial dynamics, from which one can build illuminating taxonomies. The economic impact of innovations depends on their diffusion. Thus, it is crucial to understand whether they diffuse at all and the determinants of the rates and patterns of diffusion themselves.