Case 2: The economics of innovation
Learning goals
1. What is the definition and description of innovation?
2. Why is innovation a research topic in health economics?
3. What are different economic theories on innovation (classical, Schumpeterian, Arrovian,
evolutionary and new institutional economic)?
a. What are the differences and similarities between the theories?
b. Which factors stimulate innovation?
Keywords of the case
Product innovation, process innovation, innovation, invention, creativity, R&D, entrepreneur,
technological change, (economic) growth, Schumpeter’s approach to innovation, Arrow’s approach
to innovation, classical Approach to innovation, evolutionary approach to innovation and new
institutional economic theory.
Literature
-Pouvourville, G. de (2001), Innovation as a major research issue in health economics, HEPAC, 2, 139-
141 (Springer Verlag)
- Swann, G.M. P. (2009), The Economics of Innovation. An introduction. Edward Elgar: Cheltenham
UK; Northhampton, MA, USA:
- Antonelli, C. (2009), The economics of innovation: from the classical legacies to the economics of
complexity, Economics of Innovation and New Technology, 18: 7, 611- 646.
- ‘Defining and characterizing innovation in general’, chapter 2 from: Ferrandiz, JM, A Mordoh, J.
Sussex (2012). The many faces of innovation. London: Office of Health Economics, pp. 12-16.
- Dorward, A., J. Kydd, J. Morrison, C. Poulton, L. Smith (2000). New Institutional Economics: insights
on innovation dissemination and uptake, pp. 97-103, In: Sustaining change: proceedings of a
workshop on the factors affecting uptake and adoption of innovation. Hainsworth. S.D. and S.J. Eden-
Green (eds.), Imperial College at Wye, Kent, UK.
, 1. What is the definition and description of innovation, according to economists?
Innovation is generally defined as a process concerning ‘the search for, and the discovery,
experimentation, development, imitation, and adoption of new products, new processes and new
organizational set-ups’ (Swann, 2009).
Invention versus innovation (Swann, 2009)
- Invention: generation of new ideas through research or other forms of creativity
- Innovation: the commercial application of invention
Types of innovation
- Product innovation (HTA)
o Capital saving
o Input saving
o Economies of scale/ scope (Swann, chapter 4)
§ Scale: increased output, saving costs as you produce more (make a laptop,
manufacturer)
§ Scope: produce two different products, more easily due to the manufacture
they can create easier the other/ second product.
- Process innovation
- Organizational innovation (IEA)
Uncertain and successive improvements when innovating
- Innovating is an uncertain activity since you never know how the innovation is evaluated by
the customers/society and what the exact impact is.
- The fact that new technologies come into the market in a primitive/embryonal form which
can be improved and widely adopted only after its first introduction highlights.
Learning goals
1. What is the definition and description of innovation?
2. Why is innovation a research topic in health economics?
3. What are different economic theories on innovation (classical, Schumpeterian, Arrovian,
evolutionary and new institutional economic)?
a. What are the differences and similarities between the theories?
b. Which factors stimulate innovation?
Keywords of the case
Product innovation, process innovation, innovation, invention, creativity, R&D, entrepreneur,
technological change, (economic) growth, Schumpeter’s approach to innovation, Arrow’s approach
to innovation, classical Approach to innovation, evolutionary approach to innovation and new
institutional economic theory.
Literature
-Pouvourville, G. de (2001), Innovation as a major research issue in health economics, HEPAC, 2, 139-
141 (Springer Verlag)
- Swann, G.M. P. (2009), The Economics of Innovation. An introduction. Edward Elgar: Cheltenham
UK; Northhampton, MA, USA:
- Antonelli, C. (2009), The economics of innovation: from the classical legacies to the economics of
complexity, Economics of Innovation and New Technology, 18: 7, 611- 646.
- ‘Defining and characterizing innovation in general’, chapter 2 from: Ferrandiz, JM, A Mordoh, J.
Sussex (2012). The many faces of innovation. London: Office of Health Economics, pp. 12-16.
- Dorward, A., J. Kydd, J. Morrison, C. Poulton, L. Smith (2000). New Institutional Economics: insights
on innovation dissemination and uptake, pp. 97-103, In: Sustaining change: proceedings of a
workshop on the factors affecting uptake and adoption of innovation. Hainsworth. S.D. and S.J. Eden-
Green (eds.), Imperial College at Wye, Kent, UK.
, 1. What is the definition and description of innovation, according to economists?
Innovation is generally defined as a process concerning ‘the search for, and the discovery,
experimentation, development, imitation, and adoption of new products, new processes and new
organizational set-ups’ (Swann, 2009).
Invention versus innovation (Swann, 2009)
- Invention: generation of new ideas through research or other forms of creativity
- Innovation: the commercial application of invention
Types of innovation
- Product innovation (HTA)
o Capital saving
o Input saving
o Economies of scale/ scope (Swann, chapter 4)
§ Scale: increased output, saving costs as you produce more (make a laptop,
manufacturer)
§ Scope: produce two different products, more easily due to the manufacture
they can create easier the other/ second product.
- Process innovation
- Organizational innovation (IEA)
Uncertain and successive improvements when innovating
- Innovating is an uncertain activity since you never know how the innovation is evaluated by
the customers/society and what the exact impact is.
- The fact that new technologies come into the market in a primitive/embryonal form which
can be improved and widely adopted only after its first introduction highlights.
