The Economics of the Frugal Direction of Technological Change: New Paradigm Frame, Induced Direction Models and Demand Side Approaches

Abstract

Knowing that a large number of publications deal with Frugal Innovation (FI) we contribute to the literature by offering a large (and maybe better) understanding of this new type of inclusive innovation through the lens of the Economic Analysis of Innovation. We consider FI as depicting a new type and direction of technological change. Its specific trends are analysed using three different basic models of the Economics of Technological Change. We show that: 1) FI matches a new technological paradigm characterised by a decreasing technological complexity, 2) a new microeconomic frontier of innovation possibility stemming from the theory of the induced bias of technological change provides a relevant explanation of the firm?s decision faced with the choice between investing in FI and other types of innovation, 3) after presenting various approaches dealing with the linkages between innovation and demand the novelty of the direction of FI towards the demand appears distinctly. JEL Codes: ML2, O31, O31, O33

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