Approaches the firm from the perspective of its critical role in contributing to overall economic growth, addressing the broad question of technological advance and how it comes about. The ‘technological residual’ in economists’ growth models has traditionally been treated as exogenous and has only recently come to be incorporated as endogenous, as a function of firms’ investment in research and development; the authors elaborate on this theme by focusing on the neglected role of science in technological advance and on the inherent uncertainty associated with such advance, and back their case with examples. The important contribution of private firms that invest in creating new or improved technology and appropriate the benefits thereof is given its due, but it is also noted that applied science (typically performed at universities) and research and development carried out by firms feed off each other; this interdependence stems from externalities, but also from less obvious linkages, such as private laboratories providing a labour market for university‐trained researchers, and applied university research rapidly responding to the need for scientific explanations of technological advances made by private firms. The fundamental uncertainty often associated with technological breakthroughs further complicates this picture, although the authors argue that there is commonly true surprise involved in the discovery of new technology, and in addition, make the point that in fact ‘old’ science often lies behind these breakthroughs. Finally, it is noted that incorporating the interdependence of public and private R&D, and the uncertainty of technological advance, into mainstream formal growth models may be difficult, however realistic it is.
Keywords: companies; economic growth; economic models; firms; growth models; interdependence; private research and development; public research and development; research and development; science; technological advance; technology
Chapter. 6898 words.
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