The relationship between technological change and environmental policy has received increasing attention from scholars and policy makers alike over the past ten years. This is partly because the environmental impacts of social activity are significantly affected by technological change, and partly because environmental policy interventions themselves create new constraints and incentives that affect the process of technological developments. Our central purpose in this article is to provide environmental economists with a useful guide to research on technological change and the analytical tools that can be used to explore further the interaction between technology and the environment. In Part 1 of the article, we provide an overview of analytical frameworks for investigating the economics of technological change, highlighting key issues for the researcher. In Part 2, we turn our attention to theoretical analysis of the effects of environmental policy on technological change, and in Part 3, we focus on issues related to the empirical analysis of technology innovation and diffusion. Finally, we conclude in Part 4 with some additional suggestions for research

portion of this paper may be reproduced without permission of the authors. Discussion papers are research materials circulated by their authors for purposes of information and discussion. They have not necessarily undergone formal peer review or editorial treatment.. Technological Change and the Environment

Technological change is perhaps the most powerful engine of growth in markets today. To harness this source of growth, firms need answers to key questions about the dynamics of technological change: (1) How do new technologies evolve? (2) How do rival technologies compete? and (3) How do firms deal with technological evolution? Currently, the literature suggests that a new technology seems to evolve along an S-shaped path, which starts below that of an old technology, intersects it once, and ends above the old technology. This belief is based on scattered empirical evidence and some circular definitions. Using new definitions and data on 14 technologies from four markets, the authors examine the shape and competitive dynamics of technological evolution. The results contradict the prediction of a single S-curve. Instead, technological evolution seems to follow a step function, with sharp improvements in performance following long periods of no improvement. Moreover, paths of rival technologies may cross more than once or not at all. Understanding technological innovation is vital for marketers for several reasons. Technological change is perhaps the most powerful engine of growth. It fuels the growth of new brands (e.g., Gillette’s Mach 3), creates new growth markets (e.g., digital video recorders),

Because knowledge plays an important role in the creation of wealth, economic actors often wish to skew the flow of knowledge in their favor. Managers seek to spread knowledge widely within their organization but prevent its diffusion to rivals. Regional planners promote knowledge diffusion within a local economy but not beyond it. We ask, when will knowledge developed in one area of dense social connections – such as a firm, a geographic locale, or a technological community – tend to diffuse to the edge of that area but not beyond it? Marrying social network theory with a view of knowledge transfer as a search process, we argue that the degree of knowledge inequality across social boundaries depends crucially on the nature

A vast and often confusing economics literature relates competition to investment in innovation. Following Joseph Schumpeter, one view is that monopoly and large scale promote investment in research and development by allowing a firm to capture a larger fraction of its benefits and by providing a more stable platform for a firm to invest in R&D. Others argue that competition promotes innovation by increasing the cost to a firm that fails to innovate. This lecture surveys the literature at a level that is appropriate for an advanced undergraduate or graduate class and attempts to identify primary determinants of investment in R&D. Key issues are the extent of competition in product markets and in R&D, the degree of protection from imitators, and the dynamics of R&D competition. Competition in the product market using existing technologies increases the incentive to invest in R&D for inventions that are protected from imitators (e.g., by strong patent rights). Competition in R&D can speed the arrival of innovations. Without exclusive rights to an innovation, competition in the product market can reduce incentives to invest in R&D by reducing each innovator’s payoff. There are many complications. Under some circumstances, a firm with market power has an incentive and ability to preempt rivals, and the dynamics of innovation competition can make it unprofitable for others to catch up to a firm that is ahead in an innovation race.

Abstract: This paper reviews the extant empirical studies of financial innovation. Adopting broad criteria, the authors found just two dozen studies, over half of which (fourteen) had been conducted since 2000. Since some financial innovations are examined by more than one study, only fourteen distinct phenomena have been covered. Especially striking is the fact that only two studies are directed at the hypotheses advanced in many broad descriptive articles concerning the environmental conditions (e.g., regulation, taxes, unstable macroeconomic conditions, and ripe technologies) spurring financial innovation. The authors offer some tentative conjectures as to why empirical studies of financial innovation are comparatively rare. Among their suggested culprits is an absence of accessible data. The authors urge financial regulators to undertake more surveys of financial innovation and to make the survey data more available to researchers. JEL classification: G00, O31 Key words: financial innovation, banking, securities, patents

This article characterizes the Modernization of EC competition law as an economization, whereas most pieces concentrate on its procedural and structural aspects. Moreover, it attempts to relate the Modernization to WTO discussions: it argues that the influence that the Modernization will have on WTO discussions will enable the adoption of an international competition law, and it posits that, since the Modernization moves EC competition enforcement closer to that of the U.S., it should mitigate American hostility toward WTO-level competition regulation.

This report analyzes the sources and uses of advanced technology in the service sector, identifies barriers to more widespread use, and identifies policy options to ameliorate these barriers. In addition to the overview information, it contains case studies on the following key service sector industries: retail banking, home entertainment, and health care. Effective technology policy recognizes the complementary roles played by the private sector, government organizations, and universities in creating a robust technological infrastructure that supports the development, diffusion, and implementation of technology. These organizations have widely varied objectives and incentives; still they must interact and collaborate to support the optimum level and pace of technology development and implementation. Because technology development entails high levels of risk compared to other types of investment, economic policy generally supports some type of incentive structure. The most commonly proposed form is a broadly applicable policy, such as a tax incentive. More specific technology barriers often exist as well. These too are amenable to policy action. To formulate such actions requires a deeper understanding of the specific market environments in which the technologies are developed and applied. The service sector is the largest and most rapidly growing segment of the U.S. economy. It accounts for roughly three-fourths of value added in GDP, and it has been growing at about 10 times the rate of the non-service sector. From 1984 to 1994, the U.S. economy grew 33.12 percent in constant 1987 dollars; service industries as a whole grew by 46.21 percent, while the non-service industries grew by just 4.63 percent. The service sector purchases large quantities of information technol...

The introduction of technological innovations is induced by changes in product and factor markets to which firms cannot adjust by means of changes in a given technical space, because of limited information, localized knowledge and irreversibility of tangible and intangible production factors. Firms can counteract the decline in their performance and the increase in actual costs by changing their technologies, with the introduction of process and product innovations Proximity in the Lancastrian product space matters when relevant knowledge is acquired and localized by learning by doing current products, learning by using the techniques in place and learning by interacting with current customers and rivals. The rate of technological change and the mix between product and process innovations are endogenous and localized by the key role of irreversibility and by the competence accumulated by means of learning processes.

We are witnesses to both an intense debate over copyrights and patents and a general agreement that some special kind of legal protection is needed to secure for inventors and creators the fruits of their labor. For all the emotion, it seems both those in favor of