Inside the black box Technology and economics Inside the black box Technology and economics NATHAN ROSENBERG Professor of Economics, Stanford University CAMBRIDGE UNIVERSITY PRESS PUBLISHED BY THE PRESS SYNDICATE OF THE UNIVERSITY OF CAMBRIDGE The Pitt Building, Trumpington Street, Cambridge, United Kingdom CAMBRIDGE UNIVERSITY PRESS The Edinburgh Building, Cambridge CB2 2RU, UK www.cup.cam.ac.uk 40 West 20th Street, New York, NY 10011-4211, USA www.cup.org 10 Stamford Road, Oakleigh, Melbourne 3166, Australia Ruiz de Alarcon 13, 28014 Madrid, Spain © Cambridge University Press 1982 This book is in copyright Subject to statutory exception and to the provisions of relevant collective licensing agreements, no reproduction of any part may take place without the written permission of Cambridge University Press First published 1982 Reprinted 1983, 1984, 1986, 1988, 1990, 1993, 1995, 1999 Typeset in Sabon A catalog record for this book is available from the British Library Library of Congress Cataloging in Publication Rosenberg, Nathan, 1927- Inside the black box Includes index Technological innovationd Technology — Social aspects Economic development I Title HC79.T4R673 1982 338\06 ISBN 521 27367 paperback Transferred to digital printing 2004 82-4563 Contents Preface page vii Part I Views of technical progress The historiography of technical progress Marx as a student of technology 34 Part II Some significant characteristics of technologies Technological interdependence in the American economy The effects of energy supply characteristics on technology and economic growth On technological expectations Learning by using How exogenous is science? Part HI Market determinants of technological 10 55 81 104 120 141 innovation Technical change in the commercial aircraft industry, 1925—1975 David C Mowery and Nathan Rosenberg The economic implications of the VLSI revolution Nathan Rosenberg and W Edward Steinmueller The influence of market demand upon innovation: a critical review of some recent empirical studies David C Mowery and Nathan Rosenberg 163 178 193 Part IV Technology transfer and leadership: the international context 11 The international transfer of technology: implications for the industrialized countries 245 vi 12 Contents U.S technological leadership and foreign competition: De te fabula narratur? Index 280 293 Preface The central purpose of this book may be simply stated Economists have long treated technological phenomena as events transpiring inside a black box They have of course recognized that these events have significant economic consequences, and they have in fact devoted considerable effort and ingenuity to tracing, and even measuring, some of these consequences Nevertheless, the economics profession has adhered rather strictly to a self-imposed ordinance not to inquire too seriously into what transpires inside that box The purpose of this book is to break open and to examine the contents of the black box into which technological change has been consigned by economists I believe that by so doing a number of important economic problems can be powerfully illuminated This is because the specific characteristics of certain technologies have ramifications for economic phenomena that cannot be understood without a close examination of these characteristics Thus, I attempt to show in the following pages how specific features of individual technologies have shaped a number of developments of great concern to economists: the rate of productivity improvement, the nature of the learning process underlying technological change itself, the speed of technology transfer, and the effectiveness of government policies that are intended to influence technologies in particular ways The separate chapters of this book reflect a primary concern with some of the distinctive aspects of industrial technologies in the twentieth century: the increasing reliance upon science, but also the considerable subtlety and complexity of the dialectic between science and technology; the rapid growth in the development costs associated with new technologies, and the closely associated phenomena of lengthy lead times and the high degree of technological uncertainty associated with precisely predicting the eventual performance characteristics of newly emerging technologies; the changing structure of interindustry relationships, such as that between the makers of capital goods and their eventual users; and the changing characteristics of a technology over the viii Preface course of its own life cycle Each of the chapters in Part II represents an attempt to identify some significant characteristics of specific advanced industrial technologies - or of the process by which such technologies have emerged and have been introduced into the economy The chapters in Parts HI and IV continue this examination against the backdrop of a concern with issues of public policy and with the implications of technology transfer in the international context The book opens with a broad survey, in Part I, of the historical literature on technical change It attempts to provide a guide to a wide range of writings, including those by some social historians and social theorists as well as economic historians and economists, that illuminate technological change as a historical phenomenon It should not be necessary to belabor two points: (i) that past history is an indispensable source of information to anyone interested in characterizing technologies, and (2) that both the determinants and the consequences of technological innovation raise issues that go far beyond the generally recognized domain of the economist and the economic historian The first chapter discusses aspects of the conceptualization of technological change and then goes on to consider what the literature has had to say on (1) the rate of technological change, (2) the forces influencing its direction, (3) the speed with which new technologies have diffused, and (4) the impact of technological change on the growth in productivity A separate chapter is devoted to Marx Marx's intellectual impact has been so pervasive as to rank him as a major social force in history as well as an armchair interpreter of history And yet, curiously enough, I argue that Marx's analysis of technological change opened doors to the study of the technological realm through which hardly anyone has subsequently passed Part II is, in important respects, the core of the book Each of its chapters advances an argument about some significant characteristics of industrial technologies, characteristics that are typically suppressed in discussions of technological change conducted at high levels of aggregation or lacking in historical specificity Chapter explores a variety of less visible forms in which technological improvements enter the economy Each of these forms, it is argued, is important in determining the connections between technological innovations and the growth of productivity flowing from innovation Chapter explicitly considers some significant characteristics of different energy forms It became a common practice in the 1970s, following the Arab oil embargo, to treat energy as some undifferentiated mass expressible in Btus which it was in society's interests to minimize This chapter examines some of the complexities of the long-term interactions between technological change and Preface ix energy resources It emphasizes, in particular, the frequently imperfect substitutability among energy sources in industrial contexts and the consequent suboptimality of criteria for energy utilization that fail to take specific characteristics of different energy forms into account Chapter 5, "On Technological Expectations," addresses an issue that is simultaneously relevant to a wide range of industries - indeed, to all industries that are experiencing, or are expected to experience, substantial rates of technical improvement I argue that rational decision making with respect to the adoption of an innovation requires careful consideration of prospective rates of technological innovation Such a consideration will often lead to counterintuitive decisions, including slow adoption rates that, from other perspectives, may appear to be irrational Expectations about the future behavior of technological systems and their components are shown to be a major and neglected factor in the diffusion of new technologies The last two chapters of Part II are primarily concerned with issues of greatest relevance to high-technology industries - industries in which new product development involves large development costs, long lead times, and considerable technological uncertainty (especially concerning product performance characteristics) and that rely in significant ways upon knowledge that is close to the frontiers of present-day scientific research Chapter 6, "Learning by Using," identifies an important source of learning that grows out of actual experience in using products characterized by a high degree of system complexity In contrast to learning by doing, which deals with skill improvements that grow out of the productive process, learning by using involves an experience that begins where learning by doing ends The importance of learning by using is explored in some detail with respect to aircraft, but reasons are advanced suggesting that it may be a much more pervasive phenomenon in high-technology industries The final chapter in Part II, "How Exogenous Is Science?" looks explicitly at the nature of science—technology interactions in hightechnology industries It examines some of the specific ways in which these industries have been drawing upon the expanding pool of scientific knowledge and techniques The chapter also considers, however, a range of much broader questions concerning the institutionalization of science and the manner in which the agenda of science is formulated in advanced industrial societies Thus, a major theme of the chapter is that, far from being exogenous forces to the economic arena, the content and direction of the scientific enterprise are heavily shaped by technological considerations that are, in turn, deeply embedded in the structure of industrial societies 290 Technology transfer and leadership turbines are both hampered by the lack of a good theory of turbulence In the case of aircraft, wind tunnel tests still involve substantial margins of error in predicting actual flight performance Indeed, the high development costs described in this paper are due precisely to the inability to draw more heavily upon a predictive science in determining the performance of new designs or materials If science provided a better predictive basis for producing optimal designs, development costs (which constitute about two-thirds of total R&D expenditures in the United States) would be far lower On the other hand, as was argued in Chapter 7, scientific progress itself has become increasingly dependent upon technology In advanced industrial societies, an important spur to scientific progress is given by the attempt to account for anomalous or unexpected observations or difficulties that arise in the productive process In addition, technological progress in the design and construction of scientific instruments has enormously expanded the observational capabilities of science Our understanding of the remarkably complex molecular structure of polymers, for example, would be far less in the absence of an array of twentieth-century scientific instruments-x-ray diffraction equipment, the ultracentrifuge, the electron microscope, the viscometer, and so on To an increasing degree, the growing proximity between science and technology is proving to be a powerful stimulus to science, which in turn feeds back into the productive process This growing proximity between the scientific and technological realms identifies some important concerns that will require greater attention in the future Decision makers in both the public and private sectors will need to determine how to improve organizational conditions and incentive structures at the science-technology interface The ability to improve the functioning at that interface will undoubtedly be an important determinant of future leadership in high-technology industries This is so not only for the reasons already indicated but because changes also appear to be occurring in science as well as technology For example, there is evidence that forms of scientific knowledge most likely to be useful to high-technology industries must be pursued in an increasingly interdisciplinary fashion The transistor was the work of physicists, chemists, and metallurgists The scientific breakthrough leading to the discovery of DNA was the work of chemists, biologists, biochemists, and crystallographers Historically, new disciplines such as biochemistry emerged when practitioners of separate disciplines —biology and chemistry —discovered an interesting range of problems at the boundaries of their respective disciplines Unfortunately, such interdisciplinary research runs counter to the organizational arrangements, pri- U.S leadership and foreign competition 291 orities, and incentive structures of the scientific professions, although admittedly that is more true in the academic than the industrial world Nevertheless, there may be a high social payoff to enlarging the opportunities for at least some larger subgroups of the scientific community to define their activities with a stronger problem orientation rather than a discipline orientation, and in ways that will make it easier to undertake joint interdisciplinary research when it appears to be promising The most successful research institutions in private industry have already demonstrated that it is possible to conduct both fundamental and interdisciplinary research in a commercial, mission-oriented context In addition, the United States has, in the past, shown great institutional creativity by inventing public-sector mechanisms for research in specific fields The land grant colleges and agricultural experiment stations have played immensely important roles in exploiting the regionally diverse agricultural resources of the country; the National Institutes of Health have played a vital part in advancing the frontiers of medical research; and the National Advisory Committee on Aeronautics, the predecessor of the National Aeronautics and Space Administration, played a critical role in generating empirical data for the design of new aircraft that made an essential contribution to American worldwide leadership in the commercial aircraft industry Devising additional ways of encouraging a closer and more creative interaction between science and technology seems to be both feasible and in close conformity with our pragmatic traditions Index Aaronson, S., 14911 Abernathy, W J., 235, 239 Abramovitz, M., 24, 29, 280 Adams, W., 114 adoption, see innovation, adoption of; technological change, adoption of aerodynamics, 175 supersonic, 148 "age hardening" of metals, 145 agriculture, 17, 22, 26, 27 American, i i n , 291 British, 261 genetic manipulation in, - innovation in, 10, 61 mechanization of, 17, 25, - productivity, 17, 57, 74 resources, 57 specialization in, 26, 57 worldwide division of labor, 58 air conditioning, importance of, 101 aircraft industry, n o , 128—9, 143, 145, 147-8, 166, 170-6 commercial, 163-77, 186, - , 291 commercial, interaction with military, 165, 171, 174 learning in, 123-35 military, 163, 166, 168, 174, 176 airmail, 160, 172 Air Mail Act of 1934, J 73 Aitchison, L., 85 Alchian, A., 12m Aldcroft, D., 25 7n Alexander, W., i45n Allen, R C, 92n alloys, development of, 75, 145, 165, 289 see also steel, alloys aluminum, 57, 72, 75, 83, 97, 98, 145 recycling, 98-9 American Standard Code for Information Interchange (ASCII), 183 Ames, E., 7111, iO7n, antenna, 149 293 "anticipatory retardation," io7n applied research, see research, applied Arnon, N., 22m Arrow, K., 121 assembly-line production, 100 Australia, 46, 249, 26T, 268 automation, 179, 191 automobile industry, 60, 112, 116, 257 "axiom of indispensability," 28 Babbage, C , 5on, io7n Bacon, F., 245 Baker, N R., 219-20, 225, 226, 228, 239 Baker, W O., 15 311 Barger, H., 67n Barzel, Y., io8n basic research, see research, basic Battelle Research Institute Study, 204, 211-15, 228, 234 Beer, J J., 25711 Belfield, R., 99n Belgium, 25, m , 255, 271 Bell Laboratories, 138, i39n, 147, 149, i5on, 151, 153, 155 Bernal, J D., 14, 29, 51 Berthelot, P., 146 Bessemer process, 4, 49, 89, 90, 91, 145 biomedical electronics industry, 213, 214, 221, 223 Birr, K., n n , i46n blast furnace, 23, 47, 83, 84, 85, 86, 87n, 91, 92, 93, 95, 97, 246, 270 hot blast, 88 Bloch, M., 11, 19, 30 Bode, H W., i n Boeing, n o , 126, 165, 166, 168, 172, 285, 286, 288 Booz, Allen and Hamilton Applied Research, Inc., 17 m , 176 Brady, D., 62n, i n n Brattain, W H., Braun, E., 15511 Index 294 brewing industry, 21, 85 Bright, A A., 6on, 6in, i i n , i i n Brink, J A., 96n Brooks, F Jr., i39n Brooks, H., i5on, i$6n Brown, W., 172-3 Burns, A F., 105 business cycles, Cairncross, A C , 26 m Cameron, R., 247n Canada, 255, 261 canals, 28 capital accumulation, 8, 44, 81 circulation of, 46 equipment, useful life of, 67 fixed, 50 formation, 23, 280 capital goods, 26, 46, 67, 71, 72, 168 industries, 21, 74 performance of, 123 production of, 45 in world trade, 267 capital goods sector, 43, 50 role in technological change, 35 technological change in, 47 capitalism, 8, , 44, 46, 51, 230 according to Marx, 35—6 British, mid-nineteenth century, 45 historic rise of, 9, 12, 36, 38 as a historical force, instability in, 5, 43 productivity in, 40 capitalist growth process, 5, 6, 38 capital—output ratio, 271 Cardwell, D.S.L., i42n Carnot, S., 142 Carr, C , 98n Carroll, S L., 176, 177 Carter, A P., m , 72, 101 Carter, C F., 216-19, 224, 225, 226, 229, 239 Caves, R., 275n, 277n Census of Manufactures, 102—3, 196 cereal production, 25 Chandler, A D., 88n charcoal, 23, 84, 85, 90 see also wood chemical industry, 72, 73, 74, 75, 76, 95n, 272 102, 165, 221, 222, chemistry, 42, 45 research in, 156 Chicago Board of Trade, 8, 36 223, 257, China, 12, 245 Christianity, 9—10 Clark, V., 86n class struggle, 35, 38 clay industry, 103 coal, 8.1, 84, 86, 95, 97, 102, 116, 254, 289 anthracite, 23, 88-9 bituminous, 21, 89 mining of, 44, 66 physical structure of, 89 sulfur content, 86, 248 transport costs, 58, 246 see also coke Cohen, B., i42n, i44n coke, 23, 84, 85-6, 88, 89, T02 see also coal coke ovens, 87n, 95 Cole, W A., 25on, 252, 253, 256 Coleman, C M., i5n commercial feasibility, 198, 2T8 communications, long-distance, 94 see also radio; satellite communication; short-wave transmission communications industry, 4, 37, 138, 148-51, 185 see also telecommunications industry communications revolution, 46 competition, 5, 15, 50, 163, 170, 176, 199, 207, 218 international, 275, 280—91 complementarities, 56—62, 79, 200, 205 computer industry, 70, 139—40, 158, 186, 196, 288 software, 190, 191, 288 Concorde, i74n, T79, 285 concrete, prestressed, 66n, 72 Constant, E W., 170, 175, 177 Constantin, J A., m , 9711 construction industry, 18, 64n, 66 consumer demands, 214, 222n consumer durables, trade in, 268, 269, 270 consumer goods, i n , 196, 268 contracts, n , 163, 169 copper, 95n Corning Glass Works, 94 corporate objectives, 217 Cort, H., 86 costs capital, 136, 138 effectiveness, 184 of machine models, 50 reduction of, 4, 7, 8, 14, 15, 27, 28, 29, 57,68,73,94,188 Index structure, of alternative technology, 29 tooling, 171, 176 see also development costs; "disruption costs"; electricity; energy; fuel; labor; production; research; transportation cotton, production of, 26 see also textile industry Crowther, J G., i42n "customer need" model of innovation, 205-6 Darwin, C, 6, 34 David, P., 16, 22, 27, 29, 30, non, 12m, i93n, 2oon, 239 Davis, E W., 93 Davis, L., 20, 30, 263, 264 Davisson, C J., 152 Deane, P., 25on, 252, 253, 256 defense industry, 179, 208, 209 see also aircraft industry, military; military and space industry; military technology demand, 18, 194 anticipated, 199, 233 changes in, 265, 268 "potential," 218 demand curve, 26, 199, 207, 230, 234 "demand-pull" model of innovation, 194-238 demand-side forces, 25, 206, 227, 231 Denison, E., 24-5, 30, 193, 279 Denslow, D., io9n Department of Defense, 207-9, 237 Department of Industry, 238 Depression, Great, 166, 264 design process, sequential, 139 des Noettes, Lefebvre, 10 de Tocqueville, A., 109 development, short term, 217 development costs, 136, 143, 165, 168, 169, 171, 176, 284, 285, 286, 290 diffusion, 105, 115, 140, 218, i*& timing of, 21 see also innovation, diffusion of; technological change, diffusion of Dinn, N F., ison Dirlam, J., 114 "discovery-push" model of innovation, 204, 205, 206, 207 distributed lag model, 75n "disruption costs," 107 Dolotta, A., i4on Douglas, n o , 166, 286 Du Boff, R., 78n, ioon 2-95 DuPont's rayon plants, 8, 67 Duralumin, 145 Easterlin, R A., 248 economic system, structural interdependence, 72 economies of scale, 25, 58, 63, 165, 166, 182, 183, 184, 272, 278 link with technological progress, 108 Eddy, P., i69n, 177 Edison, T A., 59 education, 13, 23, 24, 81, 247 electrical equipment, manufacture of, 112 electricity, 59, 65, 66, 75, 77, 78, 79, 81, 82, 93-102, 144, 187, 257 costs of, 57, 60, 77, 97 generation of, 65, 74, 76, 95 history.of, 93—4 hydropower, 99 meter, 6on see also motors, electric electric light, 59-60, 6in, 94, 11311 electric power industry, learning in, 136-8 electrolytic process, 95, 98 electronics industry, 76, 145, 164, 189, 190, 209, 210, 236-7, 278, 287 see also integrated circuit industry; VLSI industry electron microscope, 211 emissions control technology, 176, 282 energy, 81-103 atomic, 157 consumption, 97n costs of, 176, 282 efficiency, 83 forms of, 84, 94, 236 policy, 82, 83, 101 requirements, 81, 93 solar, 180 sources, 4, 66, 77-8, 285 technologies of, 176 use patterns, 83 Engels, F., 8, 9, 31, 3711 Engerman, S., 25, 30 Enos, J., 8, 30, 68 entrepreneur, behavior of, 105, 113, 118 environment, natural, in production, 48n environmental degradation, 279 Europe, 9111 dependence on overseas products, 58 medieval, 12 postmedieval, 13 receptiveness to new technologies, 245 technological growth in, 281 see also individual countries z96 Index Evans, W G., 202-7 expectations of future improvement, 104, 105, 109, 114, 115, 116, 118, 119 experimental method, 13 factor-saving bias of invention, 14, 27 of technology, 15 factory centralized production, 254 layout and design, 78 Falk Innovation Project (FIP), 221 4, 228, 232n Farin, P., 98n Federal Aviation Authority (FAA), 132 Fellner, W., 15, 107, 2oon, 239 fertility, decline in, 80 fertilizers, 57, 74-5 feudalism, 10, 12, 36, 37 Finkelstein, S N., 123 Finland, 255 firm multinational, 261, 276, 277, 278, 279, 287 specialist, 71 theory of, 104 Fishlow, A., 7, 30, 57n, 69, ii7n Fogel, R., 25, 28, 29, 30, 57n food-processing industries, 270 fractional distillation techniques, 146 France, 13, 25, 98, 249, 255 R & D spending, 274 Freeman, C, 73n, 21m free trade policy, 253 friction, reduction of, 6j fuel, 46, 84, 102 consumption, 87n costs of, 83, 84, 88 efficiency, 61, 63, 65, 84, 86, 87, 289 fossil, 81, 116, 179-80 geographic distribution of, 85 mineral, 23 physical characteristics of, quality, 86n requirements, 6$n, 84, 87 see also charcoal; coal; coke; gasoline; oil industry; wood furnaces, 85, 86, 87n, 89, 91, 92, 94n, 96, 97, 98 see also blast furnace gasoline, 98 "gatekeepers," 189-90 General Dynamics, 207 geographic exploration, infifteenthcentury, 36 Germany, 9, 25, 9m, 175, 249, 254, 255, 257, 263, 271 R 6c D spending, 274 Gerschenkron, A., 25 in Gibbons, M., 202, 211, 215-16, 238, 239 Giedion, S., 79n Gilchrist-Thomas "basic" process, 90, 270 Gilfillan, S., 7, 13, 30, 63 Gille, B., 19, 30 Gillispie, C, 14, 30 Gilpin, R., 226-7, 22-8, 235, 239 glassmaking industry, 85, 94, 103 Goldberg, V P., 169, 177 Golding, A M., 236n, 239 Graham, C, 21, 30 Great Britain, see United Kingdom Greenberg, D S., 2O7n, 239 Griliches, Z., 21, 25, 30, 75n, 141 guilds, 37, 38 Gummett, P J., 211, 238, 239 gun-making machinery, American, 20 Habakkuk, H J., 15, 16, 30, 105, ii4n, i93n, 2oon, 239 Haber, W., 67n Hall, A R., 12-13, 19, 30, 245n Hall, C M., 97, 98n Hansen, A., 36n hard-driving method, 89 Harley, C, 21, 31 Harrod, R., i93n Hawke, C, 29, 31 Hayami, Y., 17, 32 health and safety, 279, 283 Henderson, L J., 14, 20, 31 Henderson, W O., 247 Heroult, P.L.P., 97 Hewish, M., 135 Hicks, J R., 14, 15, 31, 193, 2oon, 239 high-technology industries, 137-40, 148, 153, 280, 284, 286, 290 Hilgerdt, F., 255, 263, 265 Hilton, R., 11, 32 HINDSIGHT, 203, 207-11, 212, 215, 216, 225, 226, 228, 234 Hirsch, W., 12m Hirschman, A., 263n Hirshleifer, J., 199, 239 historical materialism, 35 Hoddeson, L H., i38n Hogan, W T., 92n, 95ft Hollander, S., 8, 31, 67,68 Index Holley, I B., 166, 177 Hoover administration, 172 horsepower, 10 Horsley, A., 22 m household appliances, mechanization of, 79 housing suppliers (paint and glass), 196 Hughes, W., 66n, io8n, i37n Hunsicker, H Y., 145n Hunter, L., 7, 31, 64 hybrid grains, 21, 25, 213, 214 Hyde, C, 8sn, 86n, 87n, 88n "idea generation," 219, 220, 225 import substitution, 262, 264, 265, 269 improvement, see innovation improvement engineering, 273 incentives, 8, 164, 170, 248 index number problem, 23 India, 12, 47, 268 individuals, role of, 6, 34, 48, 49, 55 indivisibilities, 45 industrial boundaries, 71, 76 industrialization, 14, 81, 247, 264 industrial organization, 79 Industrial Revolution, 13, 23, 73, 81, 84, 246, 251-2, 255 industrial technology, 253, 254, 261 development of, 11, 247 science-based, 277 industry relationship with science, 14 structural reorganization of, structure, 165 technological needs of, 154 infant mortality, decline in, 81 information, flow of, 169, 215, 216, 234 information theory, 150 innovation(s) according to Marx, "active," 218-19, 224, 225 adoption of, 21, 104, 114, 189, 198, 204, 225, 258, 278 capital-saving, 46 causes of, 5, 15, 219 clustering of, 5, 59 commercial, 121, 205, 207, 217, 219, 221 commercial success of, 218, 222, 223— 6, 229, 232-3, 234 comparative advantage in, 221 complementary, 117 cumulative effects of, 22 defensive response pattern in, 199 demand for, 171-3 297 demand-induced, 222 diffusion of, 20, 21, 114, 189, 197, 204, 205, 212, 225, 238 direction of, 193, 217, 219 distinct from invention and technological change, economic importance of, 27, 28 failure of, 221, 224, 233 idea formulation stage of, 197 imitation of, 25n, 278, 286 impact of, 71, 77, 185-6 impact of federal policy on supply and demand of, 174 improvements in, 108, 111 individual, 29, 60, 62, io5n, 201, 209, 232, 235 induced model of, 17 information inputs to, 201 institutional aspects of, 237-8 labor-saving, 15, 47, 101, 281 lag in, 199 linear models of, 203, 205, 207, 209, 216, 226 low visibility, 66 major, 120, 204 management of, 221 market demand and, 193—238 minor, 120 motivational factors in, 213, 223, 225, 226, 231 mutually reinforcing nature of, 246 organizational, 87n "passive," 218-19, 224, 225 performance of different nations, 232 phases of, 201, 206 predictive theory of, 195, 197, 199, 205 rate of, 170, 176, 181, 193, 219 recognition of need for, 214 resource-saving, 281 Schumpeter's definition of, 5-6 social payoff, 58, fj stimuli for, 198, 232, 233 structural aspects of, 235 substitute, 29 technical opportunity for, 198, 203, 231 technical success of, 178 timing of, 201, 205, 212 transmission of knowledge, 203 two-stage taxonomy, 197 uncertainty in, 211, 234 see also process innovations; product innovation; technological change "innovation by invasion," 77 innovation possibility frontier, 233 298 Index input-output analysis, 27, 71-2, 73, 87, 21 ? insecticides, 213 instrumentation, 91, 158 innovation in, 224 integrated-circuit (IC) industry, 180-5, 187, 188, 287 interdisciplinary transfer, i5on, 290 interfirm relations, 235 interindustry relations, 26, 46, 70, 71, 72, , , 165, 188 intrafirm cooperation, 204 intraindustry analysis, 223 invention, 6, 7, - , 56, 228 according to Marx, adaptation to submarkets, 21 heroic theory of, 55 history of, 19 performance characteristics, 21 social impact of, 186 see also innovation; technological change investment foreign, 257, 260, 261, 275, 277n size of, 22, 181 iron, 83, 84, 86, 89 pig, 23, 88, 89, 254 scrap, , 95 see also steel iron industry, 84 American, 25, 88, 89 British, 86, 92, 255 fuel, 86-93 iron ore deposits of, , 92, 95 pelletization of, 92, 93 quality, 93 taconite, 90, 93n Isenson, R S., 2O7n, 240 Ishikawa, T., n o n Italy, 9, 25, 255 Jansky, K., 149 Japan, 13, 17, 249, 252, 255, 267, 270, 271, - , 2.81, 288 R & D spending, 274-5 Jerome, H., 10in Jervis, V.T.P., 2 m jet aircraft, 175 jet engine, 61, 74, 126, 130, 148, 165, 170, 175, 284 Jevons, F R., 2 - Jewkes, J., i4n Johnston, R., 215, 239 Jones and Laughlin Steel Corporation, 96 Joskow, P L., Joule, J P., 142 Kakela, P., 92n Kelly, C , 62n Kelly, M J., 138, 147 Kelly Air Mail Act, 166, 172 Kendrick, J., 65n, 164, 177 Kennedy, C , i93n, 239 Kindelberger, C , 259n, 260, 262n Klein, B., i37n Klein, J., 25, 31, i i n Knight, K., 70 knowledge cumulative growth of, 153 disembodied, 123, 124 embodied, 123 see also scientific knowledge; technical knowledge Korea, industrialization of, 272 Korean War, 171 Kranzberg, M., i46n, i56n Kuznets, S., 4, 5, 31, 4111, io5n, 141, 258 labor costs of, 15, 22, 121, 138, 261, 281 quality changes in inputs, 24 reallocation of, 250 skilled, 20, 125, 269 social conditions, 40 supply of, 15, 16, 17 labor power, 38n, 42, 46 lag, in technological change, 19, 195, 205, 215 land, supply of, 17 Landes, D., 11, 13, 20, 31, 73, 74, 79n Landsberg, H., 65n, 78n Langrish, J., 202—7, 225n, 226, 228, 240 laser technology, 154, 227 Latin America, 268 lead times, in innovation, 222 learning, 13, 120 learning by doing, 16, n o n , 122 learning by using, 120—40, 165 learning curves, 165, 166 learning hypothesis, 16 legal institutions, 11 Lewis, W A., 251-2, 257, lighting technology, i i n , see also electric light linear models, see innovation, linear models of Little, A D., 65n, 66n, 75n, 77n Lockheed, 166, 168, 176, Index locomotive, 47, 48 see also railroads Lunar Society of Birmingham, 14 Lyman, J., i8on Mabon, P., i38n, MacDonald, S., machinery, 50, cost of, 50 design of, 6, 44 development of, 47 electrically powered, 99 life expectancy of, 50, 136 maintenance of, 64, 65, 66, 130—5 optimal life of, 105, 109 performance of, 44 production of, 36, 44, 46, 73 trade in, 267 machine services, 22 machine shop, 64 machine tool industry, 62, 6$n, 73, 76, in magnetic ferrites, 211, 213 maintenance, see machinery, maintenance of; railroads, maintenance of Maizels, A., 265-6, 267^ 268 Mak, J., 68n Malthus, T R., 82, 227 management, effectiveness of, 289 Mansfield, E., 21, 31, io4n, 109, 141, i89n manufacturing factors, in innovation, 198 manufacturing system, 37-8, 41, 42, 44, 200, 253 marine engines, 7, 63 market(s), 5, 36, 37, 179, 184, 212 American, 255 influences on idea generation, 198 local, 269 need, 206, 226 overseas, 279 size, 230 market demand definition of, 196 influence on innovation, 193-238 "market determinateness," i96n, 223, 224 market-generated incentives, 236 "market-pull" forces, i75n, 176 market research, 206 Marquis, D G., 195, 196-202, 206, 212, 213, 225, 226, 228, 229, 235, 240 Marx, K., 6, 8, 9, 14, 31, 34-51, 62n, iO7n, 283 Marxism, 14 299 "Marxist tradition," faithfulness to Marx, 51 Massachusetts Institute of Technology, 155 mass production, 78, 100 materials handling, 64 materials industry, 165 materials research, 151-2 Mathias, P., 13, 31 matrix isolation, 211 mauvine, synthesis of, 156 McCloskey, D., 258n McDonnell Douglas, 176, 284 McNary-Watres Act, 172, 173, 174, 175 mechanics, 42, 43, 48 metal fatigue, i48n metal industry, 74, 102 metallurgy, 19, 44, 61, 63, 64, 65, 72, 82, 83-93 95> 99, M5-6, 165, 209 ferrous, fuel requirements of, 83-93 quality control in, 91 "metaproduction function," 17 Mick, C K., 18in microprocessor, 184 microscope, history of, 158 microwave transmission, 149, 154 Middle Ages, 10, 11, 12, 41-2 military and space industry, 227 see also aircraft industry, military military technology, 10, 155, 284 see also aircraft industry, military Miller, R C, 79n, 11 on, i26n, 13 on, i35n, i37n Miller, S., 95n mining industry, 19, 58 Modern Industry, 40, 42, 43, 44 modes of production, 9, 38, 41, 44, 45, 79 Morton, J A., i47n, 15m, i52n, 155 motors electric, 62, 99, 100, 115 in factory, 45 Mowery, D., i7sn, 177 Musson, A E., 13, 31 _ Myers, S., 195, 196-202, 206, 212, 213, 225, 226, 228, 229, 235, 240 National Advisory Committee on Aeronautics (NACA), 170, 291 National Aeronautics and Space Administration (NASA), 131, 170, 291 technology utilization program, 174 National Institutes of Health, medical research in, 291 3°° Index National Science Foundation, 41, 194, 211, 212 natural sciences, 42, 43 navigation, 37 need, distinction from demand, 206, 218 "need identification," 204 "need pull" model of innovation, 205, 206, 207 "need recognition," 229 Needham, J., 12, 31, 51 needs, 195, 204 economic, human, 186-8, 229 "production," 229 of users, 190, 206, 222n, 223, 224, 233 Nef, J., 86n Neilson's hot blast, 23, 87 Nelson, R R., i75n, 177, 234, 240 New Economic History, 19, 25 New Zealand, 249, 261, 268 Niagara Falls, hydropower, 99 North, D., 20, 30, 31 Noyce, R N., 183 nuclear physics, 155 nuclear reactors, 285 nuclear technologies, 116, 179, 227 observational capabilities, 158 observational method, 13 ocean shipping, 20, 46, 58 Oersted, H C, 97 oil industry, 185 Olmstead, A., 22, 31 Olson, S., 67n O'Neill, H., i 6n open-hearth process, 91, 96 optical fibers, 154 optics, 154-5 oral contraceptives, 211, 213, 214 organizational flexibility, 289 Organization for Economic Cooperation and Development (OECD), 280 Osborne, A., 18in oxygen production, 96 Page, B., i69n, 177 paper industry, 102 Parker, W., 18, 25, 31, ii7n Passer, H C, 59n, 6on, 112 Pasteur, L., 142, 158 patents, 19, 49, 56, 190, 228, 232, 282 Pavitt, K., i96n, 232, 240 Peach, W N., 9111, 97n Pearson, G L., Peck, M J., 74n, 111, ii2n, 2O9n, 240 Pennsylvania Railroad's laboratory, 157 Penzias, A A., 149-50 performance criteria of, 163, 178, 179 improvement in, 50, 74, 284 predictability of, 164 petroleum industry, 18, 68, 102, 146, 165, 272 see also oil industry petroleum lubricants, 63 Phillips, A., i29n plastics, 72, 74 policy, 194, 205, 235-8 government, 76, 111, 163—4, 170—6, 226, 235, 237, 283 social, 236 pollution, 96, 101, 112, 279, 282 polyethylene, properties of, 153 population, distribution of, 23 Post Office, 166, 172 Potter, P., i69n, 177 power, production of, 6, 47, 57, 58n, 60, 61, 78, 100, 117, 179 power plants, maintenance of, 130 Pratten, C F., 272n Princeton University, 155 problem solving, 16, 197, 215, 216 stage of innovation, 197, 200 process innovations, 4, 5, 14, 107, 185, 222, 224, 237, 287 producer concentration, 163, 167 producer goods industry, 76, 196 "product cycle" view of international trade, 54 product differentiation, 163 product innovation, 4, 5, 14, 24, 84, 113, 222, 269, 287 production according to Marx, 9, 35, 38, 39, 41, ^ 45> 47 costs of, 26, 83, 165, 231, 284-5 cumulative improvements, 121 efficiency of, 287 factor intensity of, 272 factors of, 22, 200 intermediate, 72n large scale, 45, 181-3 unit of, expansion of, 38 see also modes of production "production-related" influences in idea generation, 198, 200 production techniques, 21, 49, 65, 67 productivity, 3, in capitalism, 40 Index increase in, 22, 25, 26, 27, 42, 55, 62, 69, 7°, 73» 78, 84, 89, 140, 170, 238, 279, 282-3 measurement of, 191 performance, 164 see also agriculture, productivity profit, 21, 22, 36, 46, 116 expectations of, 230 profit-making opportunities, 9, 38 project management, 208 propeller, 63 puddling process, 86 quality-of-life variables, 279 quantitative analysis, 19, 72 Queen's Award for technological innovation, 202 radio, 144, 148 radio astronomy, 149 Rae, J B., 168, 177 railroads, 21, 26, 37, 46, i48n American, 7, 18, 28, 29, 57, 58, 67, 69, 89, 90, i i n , 157, 196 British, 29 maintenance of, 67n materials for rails, 69 performance improvements in, 60, 70 Ranis, G., 272n Rapping, L., m Rasmussen, W., 62n raw materials, 5, 44, 249, 250—2 Rayleigh, J.W.S., 157 rayon, 8, 68 reaper, 22, 25, 27 recognition phase of innovation, 197 Reformation, 12 refrigeration, 26, 58 regulation, CAB, 168, 172, 173, 174, 175, 176 Reibsamen, G., 98n reliability, standards of, 137-8, 151, 152, 154, 199 religion, Renaissance, 12 research applied, 149, 171, 2.07, 210, 211, 212, 2.15, *37 basic, 121, 149, 150, 156, 170, 171, 175, 194, 207, 208, 209, 210, 211, 212, 215, 216, 217, - , 273 costs of, 142, 155, 159 direction of, 148 empirical, 210 institutions of, 159, 238 301 military sponsored, 170-1 mission-oriented, 211, 212, 215 nonmission-oriented, 212, 214, 215 outcomes of, 156, 159, 270 in private industry, 195, 291 publicly supported, 175, 176 relation between scientific and technical, 209 in universities, 210 Research and Development (R & D), 120, 191, 198, 199, 206, 207, 213, 214, 215, 217, 218, 219, 224, 232, 233, 236, 284 allocation of resources to, 217, 228 expenditures, 76, 171, 274, 290 risks, 182, 289 commercial, 285 sharing of, 168 Robertson, A B., 22m Robinson, E., 13, 31 Rohrbach, A., i25n Rosenberg, N., 6, 14, 16, 18, 20, 21, 32, 43n, 5111, 6in, 7m, 73, i n n , ii5n, ii7n, i22n, i75n, 177, 233, 240, 249 Rosovsky, H., 273 Rostow, W W., 13, 32 Rothbarth, E., 2oon, 240 Rothwell, R., 22m, 223, 224, 225n, 232, 240 Rozanski, G A., i37n Russia, 13, 249, 255 Rutherford, E., 157 Ruttan, V., 7, 17, 32 Sahota, G., 75n Sallee, C P., 134 Salter, W.E.G., 15, 26, 32, n8n, i93n, 240 Samuelson, P., 15, i93n, 240 satellite communication, 149, 151, 154 Saul, S B., 16, 32 Sawers, D., n o n , i i n , i26n, i35n, i37n Sawyer, P., 11, 32 Saxonhouse, G., 20, 32 Sayers, R S., 113, 114, i i n , scale economies, see economies of scale scale frontiers, i37n Scherer, F M., i n , i i n , 2O9n, 232n, 240 Schlote, W., 253n Schmookler, J., 17, 18, 32, 141, 227, 228, 232, 240 Schockley, W., 155 3O2 Index Schofield, R., 14, 32 Schulze, D., 10911 Schumpeter, J A., 5, 7, 32, 105, 106, 227 business cycle theory of, concept of innovation, 109, 286 Schurr, S H., 6$n, 78n science, 11, 12, 18, 195, 216, 277 application to production, 41, 42 definition of, 13 exogenous nature of, 141-60 history of, 14, 41, 158 link with business community, 13 relation with technology, 13, 14, 43, 147, 152, 156, 158, 159, 203, 289-91 see also research science of technology, 43 Scientific Activity Predictor from Patterns with Heuristic Origins (SAPPHO), 221-4, 228, 232n scientific experiments, validity of, 148 scientific instrument industry, 221, 222 scientific knowledge, 17, 40, 122, 143, 144, 157, 198 scientific progress, 45 determinants of, 158 influence on technical progress, 14 see also innovation scientific revolution, 11 scientific societies, 14 Scoville, W., 19, 32 semiconductors, 147, 155, 236-7 service quality, 170, 173 service sector, growth in, 283 Sharpe, W F., 11 in Sherwin, S W., 2O7n, 240 ship designs, 20, 63 shipping industry, 20, 46, 58, 113, ii4n, short-wave transmission, 144 Shreve, R N., 96n Siegman, J., 219, 239 Simon, H., 233-4, 4° Smith, C S., i46n, i56n Smith, V L., io8n social change, 8, 36 social structure, relation to production, 9, 35,40,43-51, 186 solid-state physics, 147, 152, 155, 237 Solow, R., 24, 32, io8n South Africa, 261 space program, 284 see also NASA specialization in production, 71, 73, 79, 129, 253, 269, 276 regional, 57 workers, 41 Speller, P T., 2 m steamboat, 46 history in America, 7, 26, 64, 68n steam boilers, 7, 63 steam engine, 14, 46, 47, 61, 62, 77, 78, 85, 113, 115, 142, 187 steam power, 136 steamships, 58, 251 steam turbine, 77, 187 steel, 4, 21, 44, 61, 63, 65, 84, 89, 145 alloys, 61, 65, 95 carbon, 95 high-speed, 146 oxygen-process, 114 post-Bessemer, 145, 157 see also Bessemer process steel industry, 87n, 92, 93, 97, 157, 271 American, 90, 91, 96 British, 255 steel mill, integrated, 87n Stigler, G., n n Stillerman, R., i i n stone industry, 103 Strassmann, W P., 6, 33, 272 Street, A., i45n Stumpf, H C , i45n subcontracting, 160, 168, 285 suboptimization, 82, 83 Suez Canal, 46, 114 supersonic transport (SST), supply, constraints on, 258 supply-induced growth, 26 supply-side forces, 18, 25, 26, 171, 205, 231 Svennilson, I., 259n Sweden, 255 synthetic dye industry, 257 synthetic fibers, 75, 267 systems perspective, 59-60, 61 Taiwan, industrialization of, 272 Taylor, F., 146 technical alternatives, 178, 179 technical feasibility, 197 technical knowledge, 16, 143, 198 technical performance, 153 technical progress, 3-29 see also innovation; technological change technique, choices of, 16, 17 technological capacity, 271, 275 technological catchup, 283 Index technological change, 3-29, 38, 56, 87, 104, 112., 230, 283 adoption of, 8, 19, 26, 27, 113, n8n, 140, 280 consequences of, 141 continuous nature of, cost-reducing impact of, 5, 258 cumulative effects of, 8, 62, 63, 66, 179, 231 determinants of, 141 diffusion of, 3, 19, 21, 22, 51, 105, 115, 189, 191, 276, 287, 288 direction of, 3, 14, 17, 18 discontinuous nature of, 5, 6, 105, 108 economic incentives to, 18, 144 effect on economy, 3, 22, 23, 24, 26, 55> 56, 143 endogenous, 17 giving rise to fundamental research, 154,158 giving rise to scientific explanation, 141-6 interdependence between major and minor, 68 long term, 48 major, profitability of, 117 rate of, 3, 8-14, 51, 105, 107, 117, 118, 276, 279 relation to demand-side forces, 18 relation to productivity, 67 social determinants of, 29 social impact of, 34, 178 see also innovation technological determinism, 158 of Marx, 35, 39, 40 of White, 38 technological dynamism, 8, 11, 14, 35, 37, 118, 236, 269 technological expectations, 104-19 technological interdependence, 55-80 technological leadership, 289 technological "learning," \6 technological uncertainty, 164 technologies "best practice," 118 coexistence of old and new, complementary, 56, 59, 262 interaction between, 57, 59 technology, definition, 143, 203 technology, transfer of, 260, 261, 287 history, 270 impact on country of origin, 249, 260 international, 245—80, 287 role of consultants in, 190 303 "technology discovery" model, 205 Technology in Retrospect and Critical Events in Science (TRACES), 203, 211—15, 228, 234 "technology push" model of innovation, I75n, 198, 211, 221, 229, 230, 231 telecommunications industry, 148, 149, 150, 151, i53n, 154, 286, 288 see also communications industry telescope, history of, 158 Temin, P., 16, 23, 33, 88n, 89n, 2oon, 240 Teubal, M., i96n, 22m, 223, 224, 232n, 241 textile industry, 73-4, 75, iO9n, 265, 267, 269-70 American, 25, non, 267 British, 74, 254, 255-6 Indian, 268 Japanese, 20, 267, 271 thermodynamics, 142 thresher, 25 threshold function, 22 Tilton, J F., 236n, 241 tomato harvesters, mechanical, 62 Torricelli, E., 142 Townsend, J., 22m Townsend, P L., 235, 239 Trachtenberg, M., 22m transistor, 61, 76, 138, 147, 151, 152, 155, 156, 237 transportation industry, 4, 26, 28, 44, 47, 98, 251-2 costs of, 57, 58, 93, 288 see also aircraft industry; railroads; shipping industry turbojet, 147-8 two-sector model, 43 Tyson, R E., Uekusa, M., unified theory, application of, 210 United Kingdom, 25, 226 aeronautics, 175 class structure, 11 coal industry, 20, 86, 88n economy, 250, 252, 258-63 emergence of Modern Industry, 40 history of science, 13-14 Industrial Revolution, 81, 246 introduction of hot blast, 87 nineteenth century, 15, 16 ore reserves of, m R & D spending, 274 shipping industry, 113 304 Index United Kingdom (cont.) transfer of industrial technology from, zo, 246, 247, 249-70 twentieth century, 258-9 United States, 13, 17, 25, 226 aeronautics, 170 economy, technological interdependence in, 55-80 imports, 263 introduction of hot blast, 87-8 gross national product of, 26 growth of manufacturing in, 254-5 nineteenth century, 15, 16, 25 raw material availability, 281 R &c D spending, 274, 275 technological superiority of, 280 transfer of technology from, 257 uranium, 99n, 116 urbanization, 81 Ure, A., 5on Usher, A P., 6, 7, 13, 33, 48, 49, 51, 6in, 63n utility companies, 77n, 116 Utterback, J M., 225-6, 229, 241 vacuum tube, unreliability of, 152 Vernon, R., 272, 276n, 278, 279n vertical integration, 163, 168, 170 Very Large Scale Integration (VLSI), 178-92 standardization in industry, 182-3 see also integrated circuit industry Vico, G., 35 video tape recorder, 211, 213 von Hippel, E., 123, 222n, 232n, 241 von Karman, T., i48n Walker, W., 196, 240 Walton, G., 21, 33, 68n waste materials, 45 water power, 19, 85 Watt,}., 64, 115, 142 separate condenser of, 49 wave nature of matter, 152 weapons, i n , 207, 208, 209, 216, 284 Weber, M., Welsbach gas mantle, i i n Westinghouse, G., 60 White, Leslie, 38n White, Lynn, 9, TO, I I , 33 Whyte, R R., i26n, i44n Wilkins, M., 249n Williams, B R., 216-19, 224, 225, 226, 2.2.9, 2.39 Williamson, J., 105 Williamson, O W., 169, 177 Wilm, A., 145 Wilson, R C., 149-50 Winter, S G., i75n, 177 Wittfogel, K., 9, 33 women's liberation movement, 79-80 wood, 23, 72, 84 work day, length of, 24, 50, m workplace, organization of, 100, 146 World War II, 166, 170 Wright, T W., i n Wright Brothers, 157 Wruble, B., 86n xerography, 213 Youngson, A J., 26, 33, 58, m Zevin, R., 26, 33 .. .Inside the black box Technology and economics Inside the black box Technology and economics NATHAN ROSENBERG Professor of Economics, Stanford University CAMBRIDGE... consequences, and they have in fact devoted considerable effort and ingenuity to tracing, and even measuring, some of these consequences Nevertheless, the economics profession has adhered rather strictly... limiting the power and privileges of the sovereign and nobility, and so on The second distinctive aspect of European development, according to Landes, was the high value placed upon the rational