The key conclusions of this chapter can be summarized in several related propositions.

1. It is clear that the mobilization of scientific and engineering talent and resources to solve a problem is virtually never accidental; it is usually a response to a perceived opportunity (arising from a perceived need or challenge) of some sort.

2. Need or potential demand are not always enough. Needs may not be sufficiently clearly articulated to generate a private-sector 'market' for solutions. Or the scope of the problem may be too great for the resources of the private sector. When - and only when - the need is well articulated and can be met by producing more of what is already being produced, or by improving the existing technology along well-established lines, the 'free market' will normally respond.

3. Under modern conditions, the resource mobilization process is formally characterized as R&D. It almost always begins with an allocation of funds for a particular goal or mission. The goal or mission is normally very specific indeed. If the goal is to achieve a modest improvement in a product or process, the basic principles are well known and the only problem is to apply them systematically at the right scale. The outcome is subject to very little uncertainty. Reducing the weight of an automobile body, or determining the optimal method of welding aluminum, designing a faster microprocessor or a larger civil aircraft, scaling up an industrial process - even sending a man to the moon - are also examples of the 'normal' process in operation.

4. But when a need becomes acute because the free market cannot respond for some reason, there is a crisis. A crisis arises from a disequilibrium that cannot be resolved by 'normal' means. In a crisis there is a possibility of radical 'outside the box' (Schumpeterian) innovation. Examples of normal means at the macro-level include investments (or disinvestments) in existing means of production, political compromises or engineering adjustments of existing systems - in short, by doing more (or less) of what is already being done.

5. At the micro-level, demand and supply often refer to functionality and the analog of resource exhaustion is the approach to a physical or physical-economic limit. Every technology is subject to physical limits, resulting from properties of physical materials or laws of nature (that is, of thermodynamics). As performance limits are approached, the cost of further improvement rises without limit.

6. Radical 'Schumpeterian' innovations involve some departure from known principles, or at least, from conventional wisdom, and correspondingly much less certainty of cost, elapsed time or ultimate success. This is sometimes called 'thinking outside the box'. Where the departure from the established technological trajectory is significant, costs can become too burdensome and failure is a real possibility. Examples from the recent past include the AT&T picture-phone, the Wankel engine, Philips Stirling cycle engine and the video disk. Numerous single technology 'startups' have failed and disappeared. Needless to say, the risks of developing totally new materials, new types of machines or instruments, new industrial processes or new business models are greater still. The ongoing search for a viable broadband internet business model, or an alternative to the use of hydrocarbon fuels for internal combustion engines for automobiles are two current examples.

7. Differential impacts of a new technology can result in significant disequilibria - a fancy word for supply-demand imbalances. For instance, when a new technology creates a demand for some product that displaces another older one, there is an automatic imbalance. To take a somewhat trivial example, demand for motor vehicles left buggy-whip manufacturers and horse breeders with excess capacity and declining markets. Electric lighting left candle and kerosine lamp manufacturers with excess capacity, while demand for electric light bulbs exploded. Disequilibria may arise from sudden military needs (in war), sharp increases in demand confronting limited supply, or sharp decreases in supply due to blockades, sanctions, regulation or resource exhaustion. The greater the disequilibrium the stronger the economic (and social) incentives to resolve it. However, the incentives operate mostly at the micro-level. Major innovations occur in response to particular problems, even though they may (rarely) have significant applications in other areas.

8. Technological breakthroughs presuppose barriers. Barriers may be absolute physical limits, but much more often they result from exogenous factors or interactions between economics, institutions and physical characteristics of a technological configuration or 'trajectory' (as explained in the text). Barriers can also arise from a variety of causes, ranging from wars to geo-political developments, to problems arising from the adoption of a pervasive technology, such as motor vehicles, including resource scarcity or environmental harms such as climate warming. Radical innovations may overcome these barriers by opening new 'morphological neighborhoods' to exploration (see Zwicky 1951). Breakthroughs in functionality can sometimes be predicted in advance, once a barrier has been clearly identified, although timing and details cannot. The probability of a breakthrough within a given time period is essentially proportional to the intensity of the search for it. If the need is great, the problem will probably be solved sooner rather than later.

9. Once a major barrier has been breached, gradual improvements, based on investment in R&D, are relatively smooth and predictable in the short run. Indeed, they tend to follow a standard pattern that is common to many processes, including diffusion, namely the elongated S-shaped curve (discussed in Chapter 1). The parameters of the curve cannot be predicted a priori, but sometimes the curve can be projected once it is established, from its history and from a forecast of the ultimate limits of the particular technological trajectory.

10. Breakthroughs may have unexpected impacts (spillovers) in fields (sectors) other than the one where the barrier originally existed. The greater the range and scope of the spillovers, the greater the growth-promoting impact (and the harder it is to predict). The most important breakthroughs have impacts far beyond the original objective, resulting in new opportunities in other sectors. The role of technology is, in effect, to create a perpetual disequilibrium. We have mentioned a number of examples. For instance, cheap electricity made a number of new materials available for the first time (for example, synthetic abrasives, chlorine, aluminum, stainless steel, tungsten), which, in turn, opened the door to other important innovations, such as high-speed grinders and mass production of automobile engines. Aluminum was an essential prerequisite to the development of the aircraft industry.

In more recent times, computers and digital communications may be having comparable cross-border impacts. These spillovers are often difficult to predict, however, and they have uneven impacts across the spectrum. Thus, not only is new technology created as an essential part of the positive feedback cycle, it is non-uniform in its impacts.

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