Abstract

This paper presents the theoretical foundations of the induced innovation model.
We try to show its inadequacy to explain the rise of a new technological paradigm. The
validity of the model is restricted by its central hypothesis as to the economic rationality
of productive agents that are induced to introduce innovations to save the more expensive
production factor. Supply-side constraints on innovations are neglected, but they are very
important to explain the technical and scientific characteristics that define a new technological
pattern; so, the factor-saving bias is the only thing the model can say about a new
technological paradigm to be generated.

JEL Classification: Q16; Q18; O33