‘More is different’, exaptation and uncertainty: three foundational concepts for a complexity theory of innovation

Abstract

Increasingly, economists concur that innovation processes are far from equilibrium phenomena. Indeed, these processes are characterized by complex qualitative changes in the relations between producers, sellers and users, from which new products and new markets emerge. In order to understand such processes, many economists have begun to draw on ideas and methods from ‘the sciences of complex systems’ literature. In this paper, I examine in detail three concepts from this literature, and I show how, taken together, these concepts provide a foundation for a complexity theory of innovation. I briefly characterize these concepts as follows:

• (1) The ‘more is different’ principle. The need to reach new potential consumers in the face of increased production capacity induces qualitative changes in artifact functionality, agent interaction patterns, and the relations between production and consumption.

• (2) Exaptation. New patterns of interaction among agents around the use of new kinds of artifacts lead to the emergence of new functionality, which in turn induces new kinds of relationships among production, technology, and consumption.

• (3) Ontological uncertainty. New artifacts, new patterns of interaction around their production and use, and new attributions of functionality generate perpetual novelty in innovation contexts, which makes prediction impossible: not only because agents are unable to decide which among some set of well-defined consequences will happen as a result of actions they contemplate taking, but also because some of the very subjects, objects, and criteria of value with which these consequences of their possible actions would have to be expressed simply do not exist at the historical moment in which agents must act.

The paper argues that a theory of innovation capable of providing deep insight into the way in which innovation processes unfold in historical time must begin by embedding these three concepts in its foundation.

Keywords:

• innovation
• complexity
• quantitative and qualitative changes
• exaptation
• ontological uncertainty

JEL Classification :

• O30
• O33
• D80
• D20
• B25

Acknowledgements

The author would like to thank David Lane for many discussions and suggestions and Andrea Ginzburg, Margherita Russo, Anna Simonazzi and two anonymous referees for their helpful comments on an earlier draft of the paper. The usual disclaimers apply.

Notes

Other formulations of the characteristics and properties of the economy as a complex system are presented in Rosser (1999), Durlauf (2005) and Foster (2005).

Examples include: Frenken (2006a, 2006b); Frenken and Nuvolari (2004); Caminati (2006); Cowan, Jordan, and Zimmermann (2006, 2007); Antonelli (1997); Silverberg and Verspagen (2005).

See for example contributions in the forthcoming Handbook on the economic complexity of technological change, Cheltenham, Edward Elgar.

The creative response has three features: (a) it cannot be predicted by applying the rules of inference to pre-existing facts; (b) it shapes the entire course of future events and their long-term results; (c) it depends on the quality of the actors in the field and on the distribution of these qualities among the different productive sectors, on the individual decisions and actions and on the patterns of behavior (Schumpeter 1947, 150).

See Schumpeter (1939, 95–6). As is well known, Schumpeterian competition is based on innovative activity (Schumpeter 1911, chap. 2; 1942, chap. 7). Hence in the ‘Schumpeterian hypothesis’ competition and innovation are endogenous forces of economic change. Antonelli (forthcoming) puts forward the hypothesis – which he considers as complementary to the ‘Schumpeterian hypothesis’ – that profitability above or below the average overcomes the firms’ reluctance to innovate. According to Antonelli, therefore, innovation is a phenomenon characteristic of oligopolistic rivalry, but only out of equilibrium, when profits are either above or below normal. Low levels of profits induce firms to seek new routines to enhance tacit knowledge, to exploit new technological knowledge and to adopt in a creative way new processes and new products. On the contrary, high levels of profits provide firms with incentives and opportunities to innovate.

Many years ago, Rosenberg (1975, 67) remarked that the idea of innovation in terms of shifts in the production function led Schumpeter to make distinctions among invention, innovation and diffusion, and to disregard the processes whereby an invention attains its full application and commercial exploitation.

See, for example, Hughes (1983) and the essays in Bijker, Hughes, and Pinch (1987). For a recent review of the origin and development of the social construction of technology approach, see Bijker (2010).

In the model, the firms cannot shift from one class to another, but several firms are assigned to the same class and the consumers can purchase goods from all the firms, not only from those assigned to a particular class. It is further assumed that all the firms have the same technology, cost function and mark-up: competition with regard to only product innovation.

This is the orientation of ‘evolutionary realism’, the ontology put forward by Dopfer and Potts (2004, 204–8; 2008, 3–4).

See references in Bonifati (2008, 230).

In Marx's words: ‘A railway on which no one travels, which is therefore not used up, not consumed, is potentially but not actually a railway. Without production there is no consumption, but without consumption there is no production either, since in that case production would be useless. Consumption produces production in two ways. 1. Because a product becomes a real product only through consumption. … 2. Because consumption creates the need for new production … This is matched on the side of production … [b]y the fact that production supplies the material, the object of consumption. … But production provides not only the object of consumption, it also gives consumption a distinct form, a character, a finish’ (Marx 1857).

The aim of attaining the potential demand requires a whole series of links, of mutual nexuses with the potential customers. In this context, competition itself as Hirschman has noted, harking back to Simmel (1955, 61–3), appears as ‘an institution that fosters empathy and the building of strong social ties, not of course among the competitors but between them and an important and often overlooked third party – the customer’ (Hirschman 1982, 1472).

Gould and Vrba cite various instances of exaptation. Among these is one, revealed by Darwin himself, relating to the cranial sutures of mammals. These are of use for birth, but were not selected for this purpose; for they are also present in the cranium of birds and reptiles. Thus a characteristic that emerged for some other reason – whether connected or not with the process of natural selection – was co-opted for a different use. The employment of the cranial sutures of mammals for birth purposes is the effect of this cooptation, not the function of it, and represents an exaptation for birth (Gould and Vrba 1982, 5–6).

See Rosenberg (1996), though he does not refer to the concept of exaptation, and Dew, Sarasvathy, and Venkataraman (2004).

In Lane et al. (2009, 38–9), exaptation phenomena are considered in relation to the patterns of interaction around the artifacts in use and to the generation of new functionalities by some participants in (or observers of) these patterns of interactions. In the next section, I shall underline the role of ontological uncertainty and the construction of new markets as constituent elements of the social processes of exaptation.

The new artifacts generated in exaptation processes may include complementary necessary technologies, e.g. optical fibres were necessary for the laser to become significant for telecommunications. On the emergence of complementary innovations in connection with generative relationships, see Russo (2000).

My definition also makes evident that exaptations have nothing to do neither with the notion of externality nor with the idea that innovations are essentially new combinations of existing factors of production (Dew, Sarasvathy, and Venkataraman 2004, 73–4).

Lane and Maxfield (2005, 37). On the concept of scaffolding structures see also Clark (1998, chap. 9).

I offered an example of this type of contribution in a book, currently available only in Italian (Bonifati 2008), in which the theoretical framework here proposed is discussed in a closer dialogue with a case study of special interest for our purposes: the passage from the production of manuscript books to that of printed books, from the mid-fourteenth to the mid-fifteenth century in Italy. This case study provides the opportunity to examine the first example in modern times in which a new technology, together with several other conditions, caused a change in the scale of potential production, compelled qualitative changes in the relationships between producers, sellers, and users, and, in conditions of ontological uncertainty, triggered exaptation processes that ushered in new kinds of books and new markets. I shall offer in a companion article an outline of the main results of this case study.