Path Dependence, Endogenous Innovation, and Growth*

Abstract

The article presents a model of endogenous innovation and growth, in which technological change is path dependent. The historical pattern of technological development plays a central role in determining the pace of future technological change. Path dependence is explained using a distinction between fundamental and secondary knowledge. The economy moves endogenously between periods of drastic and nondrastic innovation. Technological lock‐in is shown to be a special case of path dependence. The model provides a rationale for cycles in technological leadership. This rationale exists in equilibria with positive levels of fundamental research and in a world with no imitation.

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