Inderscience Publishers

Flexible returns and the diffusion of innovation policy

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The process of innovation production exhibits characteristics that may determine their subsequent market diffusion dynamics. Among these, there are several (positive and negative) feedback mechanisms; returns to production scale, to product adoption and to scope (i.e. fostering the joint production of innovative techniques) may prove to be important issues to look at to understand the process of technology substitution. The long-term learning effects, related to cumulative experience in capital production and R&D activities, appear as an important self-reinforcing mechanism as well. The diffusion of new technologies analysis therefore requires that several types of natural monopoly and economic regulation be distinguished according to the prevailing returns patterns. In particular, the occurrence of flexible returns brings into evidence new dynamics of technology diffusion and new dimensions for technological policy actions. An active and balanced technology policy appears advisable to achieve a reasonable degree of technological diversity, that is, to keep options open with respect to the success of a wide range of technologies.

Keywords: technology diffusion dynamics, flexible returns, technological policy

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