This session at Schumpeter Conference in Rio explores the varieties of knowledge in the economy and articulates promising avenues for future research. Carliss Baldwin, Richard Langlois and Richard Nelson will make presentations followed by discussions and questions from audience members. The session is organized and facilitated by Johann Peter Murmann.
Abstract—Carliss Baldwin
Designs are the instructions based on knowledge that turn resources into things that people use and value. All goods and services have designs, and a new design lies behind every innovation. I argue that designs—sometimes called recipes (Nelson and Winter) or prescriptive knowledge (Mokyr)—are a special kind of knowledge deserving of focused attention by scholars of innovation. In the first place, designs have observable structures (architecture). Their structure can be mapped in terms of hierarchies of modules with coordinating interfaces. Design structure influences (but is also influenced by) the organization of firms and the economy, including the location and design of transactions. In the second place, the unit of change or innovation in a complex system is the module. Modules are “units of a larger system whose elements are powerfully connected among themselves and relatively weakly connected to elements in other units.” Thus it is relatively easy to substitute one module design for another without changing other parts of the system. As a result, modules carry option value, which in turn provides incentives for to invest resources in innovative effort. Investigating the modular structure of designs, the option value of modules, and how different institutions support or impede the evolution of complex designs is an exciting, open avenue of inquiry in the study of technological change and innovation.
Abstract—Richard Langlois
I will discuss knowledge and designs from the perspective of economic history and economic growth. One of the ongoing puzzles — and controversies — in the theory of economic growth is exactly what “knowledge” is and how it contributes to growth. I will argue that one important, and often neglected, mechanism involves the embodiment of knowledge in economic structures — in organizational and technological designs — in a way that generates increasing returns through knowledge reuse. In a fundamental respect, economic growth is about the evolution of design. “Spillovers” from explicit or propositional knowledge can augment this process, but such spillovers need not be the primary driver of growth.
Abstract—Richard Nelson
My discussion will be concerned with the co-evolution of practical know-how in a field, and the understanding that relates to that know-how and orients efforts to advance it. In some cases relative impressive bodies of know-how have been achieved almost exclusively through the vehicle of trial and error cumulative learning with little in the way of understanding behind that know-how. But there would appear to be limits to the advance that can be achieved this way. Over the last two hundred years at least virtually all bodies of know-how that have been advanced greatly have had associated with them relatively strong and progressive bodies of science or science-like understanding. I will argue that the positive correlation involves two way, not one way, causation.
