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Showny Boy
more than 4 weeks ago

How Freeman 1994 and Griliches 1957 based on technological substitution explain about induced innovation hypothesis and where in more explanation?

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more than 4 weeks ago
Freeman (1994) and Griliches (1957) both provide insights into the concept of technological substitution and its implications for the induced innovation hypothesis.

Technological substitution refers to the process by which new technologies replace older ones, leading to changes in production processes and the overall structure of the economy. This process is driven by factors such as changes in relative prices, technological advancements, and shifts in consumer preferences.

The induced innovation hypothesis posits that changes in relative prices and other economic incentives can induce firms to innovate and develop new technologies. In other words, firms are more likely to invest in research and development when they see potential profits in doing so.

Freeman (1994) expands on this idea by highlighting the role of technological trajectories in shaping the direction of innovation. He argues that firms are more likely to invest in technologies that are compatible with existing knowledge and capabilities, leading to a path-dependent process of technological change.

Griliches (1957) also contributes to our understanding of induced innovation by emphasizing the importance of market competition and the diffusion of new technologies. He suggests that firms are more likely to innovate in response to competitive pressures and the need to keep up with rivals.

Overall, both Freeman (1994) and Griliches (1957) provide valuable insights into the relationship between technological substitution, induced innovation, and the dynamics of technological change in the economy. Their work helps to explain how firms respond to changing economic incentives and market conditions, leading to the development of new technologies and the evolution of industries.
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