former Evolutionary Economics Group

The concept of a dominant design has taken on a quasi-paradigmatic status in analyses of the link between technological and industrial dynamics. A review of the empirical literature reveals a variety of interpretations about some aspects of the phenomenon such as its underlying causal mechanisms and its level of analysis. To stimulate further progress in empirical research on dominant designs, we advocate a standardization of terminology by conceptualizing products as complex artifacts that evolve in the form of a nested hierarchy of technology cycles. Such a nested complex system perspective provides both unambiguous definitions of dominant designs (stable core components that can be stable interfaces) and inclusion of multiple levels of analysis (system, subsystems, components). We introduce the concept of an operational principle and offer a systematic definition of core and peripheral subsystems based on the concept of pleiotropy. We also discuss how the proposed terminological standardization can stimulate cumulative research on dominant designs.

Evolution is thought to occur in many disciplinary domains. Because of the intellectual attraction of the neo-Darwinian theory of evolution, evolutionary processes in other domains are often conceptualized in terms of that theory. However, as explained, such a heuristic strategy is neither necessary nor is it always helpful. An attempt is therefore made to identify generic features of evolution which transcend all domain-specific characteristics. Two concrete features are discussed together with their epistemological, conceptual, and methodological implications. Finally the ontological question is highlighted how non-biological evolutionary theories can be accommodated by the Darwinian world view of the moderns sciences.

In pursuing profit opportunities, entrepreneurs often use multi-person firms. Since employment contracts leave some discretion to the employees, organizational coherence requires that they are coordinated on the entrepreneurial business conception as their own frame of action. Accordingly, the entrepreneurial reorganization of production and trade implies two different coordinating tasks: the exploitation of market opportunities and the seeing through of the business conception in the firms= daily organizational grind. The former has been center stage in the Austrian school of economics. For the neglected latter task a cognitive theory is suggested which highlights an Austrian, or entrepreneurial, approach to the firm.

The paper argues that a substantial proportion of the social economic benefits from publicly funded basic research is associated with scientists' migration into the commercial sector of the innovation system. Rejecting a reduction of the research process to the propositional knowledge it produces, a set of hypotheses on the value of different types of knowledge is derived. The hypotheses are tested with empirical data obtained from scientists formerly employed by the Max Planck Society, one of the main organisations for basic research in the German innovation system. Findings indicate that rather than applying latest theoretical insights, scientists mainly transfer elements of knowledge that underlie complex problem-solving strategies in basic research. The paper concludes by discussing the implications of the results on science and technology policy.

Entry by spinoffs from incumbent firms is investigated for the laser industry. A model in which spinoffs exploit knowledge from their parents is constructed to explain the types of firms that spawn spinoffs, the market conditions conducive to spinoffs, and the relationship of spinoffs to their parents. The model is tested using detailed data on all laser entrants from the start of the industry through 1994. Our findings support the basic premise of the model that spinoffs inherit knowledge from their parents that shapes their nature at birth. Implications of our findings for organizational behavior, business strategy, entry and industry evolution, and technological change are discussed.

Witt (1997) proposes a model of technological adoption in markets characterized by network xternalities in which superior technological standards have smaller critical mass, so that they can easily displace inferior alternatives. This paper builds on his model to show that the critical mass of a given technology depends upon its e.ciency and its compatibility with the existing standard, and hence that more efficient technologies need not have smaller critical masses. Some consequences for the economics of converters and "gateway technologies" are also discussed.

This paper studies the dynamics that cause the emergence of local industrial clusters on a general level. Predictions about these dynamics are deduced from theoretical modelling. The predictions are tested with the help of empirical data from Germany. 3-digit manufacturing industries are classified according to their dynamics. It is examined whether certain industrial characteristics are able to predict the type of dynamics that is occurring. It is shown that a high number of process innovations and a high share of regional cooperation with suppliers and public research institutes characterise those industries in which local clusters emerge.

Two different approaches have been proposed to explain the rise and decline of industries. Schumpeter (1942/1947) argued that creative destruction was a necessary part of innovation. Rybczynski (1955) demonstrated in a two-factor model that an increase in one factor leads to a decrease in output in the sector intensive in the other factor. Here we combine these approaches to show that under endogenous technological change, sectors threatened with decline may be given new life, while others lose their export markets as their products became noncompetitive. Testing this hypothesis with 1970-1992 export data from 14 OECD countries, we find evidence that induced innovation undertaken in response to local factor shortages may reshape international comparative advantage.

Between 1890 and 1938, the public share of total spending rose to unprecedented peacetime levels in many Western countries. This development has been explained by either (i) a shift in the demand for public goods or (ii) a restructuring of the state to transfer income. However, neither explanation has been shown to be compatible with individual incentives. Here, we model the rise of public spending as a contingency-learning phenomenon within Schelling's Multi-Person Dilemma. Tests of the resulting propositions with national time series reveal no unit root but a break in trend, a result shown to favor explanation (ii) over(i).

Most economic production models are restricted to relationships between input and output quantities. In the presence of technological change, these models do not capture all relevant information on production processes. As the present paper aims at demonstrating, even a stylized representation of the internal structure of production processes helps to better understand the dynamics of technological change. To this purpose, production processes are interpreted as sequences of operations (techniques) during which the object of production is successively modified. Specifically, the paper investigates how interdependencies between the stages of a technique affect technological change by giving rise to incompatibilities or complementarities. In addition, it is discussed whether the existing literature on modular product designs and decomposable complex systems is helpful to understand the dynamics of production processes. It is argued that decomposable techniques need not be modular and that decomposability itself evolves over time, as it depends on the state of knowledge.