NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Growing by Leaps and Inches: Creative Destruction, Real Cost Reduction, and Inching Up

Michael R. Darby, Lynne G. Zucker

NBER Working Paper No. 8947
Issued in May 2002
NBER Program(s):   PR

Most firms achieve perfective progress, incrementally improving commodities or productivity. But technological progress is concentrated in a few firms achieving metamorphic progress: forming or transforming industries with technological breakthroughs (e.g., biotechnology, lasers, semiconductors, nanotechnology). Unless congruent with incumbents' science and technology base, metamorphic progress promotes entry. Scientific breakthroughs embodied in discovering scientists, protected by natural excludability, and transferred by learning-by-doing-with at the bench generally drive metamorphic progress. Embodied knowledge is rivalrous and leads to entry and industry dominance by star-scientist-linked firms. Incorporating this scientific-entrepreneurial process is essential to improving - if not transforming - endogenous growth models.

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Document Object Identifier (DOI): 10.3386/w8947

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