Reviewed by
Cristiano Antonelli
University of Torino
This book deserved a review for various reasons. First, while economics of innovation mostly focuses on manufacturing industry, today employment and revenue, especially in the most advanced economic systems, revolve around service sector. Unfortunately, we have little knowledge on how technological knowledge is generated and technological innovation is introduced and spreads in this industry. This book by Thomas Grebel aims to fill this gap by exploring the dynamics of innovation in this key-sector, especially in health care. Furthermore, not only it provides a preliminary, yet comprehensive account of how health care industry works. It also stresses the pivotal role that institutional architecture plays in this sector, which is strongly conditioned by the public hand and the bounded rationality of consumers. In this respect, Grebel shows that an economics of innovation approach is a necessary step to develop a theory of innovation in this sector.Here, following Dopfer (2005), the distinction between ontological and methodological foundations of economics is important. The ontology of a non-market-system is confronted with the basic methodology of economics, which is based upon profit maximization and market selection. The distinction between generic and operant levels is crucial to elaborate an alternative frame to standard accounts. While cognitive processes characterize the generic level, economic action is embedded in a strong institutional setting and qualifies the operant levels. Ongoing cognitive processes generate new knowledge. This eventually becomes available and provides opportunities for creative economic actors, at the operant level. At this level, the outcomes of new knowledge generated at the generic level are various as the results of the intentional action and interaction between agents are not univocally determined by the knowledge content.
Thomas Grebel is influenced by the Witt's view (2008), according to which the Darwinistic evolutionary approach where innovation is introduced randomly and without intentionality, is strongly contrasted. Here, economic agents act intentionally. They assess the new knowledge, recombine it with existing technologies, adapt it to existing routines, skills, competences and infrastructure and possibly introduce technological innovation. Various specialized public bodies, e.g., hospitals, physicians of the public health system, regulatory authorities and standard setting agencies, have rich interactions which are pivotal to introduce and adopt new health technologies. Therefore, technological change is the result of complex interaction between learning agents at the generic level, between the generic and the operant levels and finally between agents embedded in diverse and changing institutional settings inside the operant level. Intentional behaviour and agent interaction are qualified by the structural context into which they take place and engender both technological and structural changes with important path-dependent effects.
Finally, this analytical frame is applied to and enriched by two empirical and simulation based exercises. Chapter 6 presents a simulation model of knowledge generation which highlights that the search for novelty is important in a context where the cumulativity of knowledge and the complementarity between interacting actors within networks take place. Chapter 7 empirically explores the determinants of the diffusion of health innovation with a model that considers both supply and demand side factors.
The representation of the innovation process in the health sector provided by Thomas Grebel is convincing and can contribute to our understanding of an important, and yet somewhat forgotten part of the economy. This can also explain the generation of new technological knowledge and the introduction of new technologies. This can be surprising as technological progress in the provision of health care has provided, throughout the 20th century, probably the most impressive evidence about the central role of innovation in the economy. Not finding proof of this in economics and more specifically in economics of innovation, was a gap that Grebel has filled.
This said, the Grebel's frame provides only a partial picture: the role of market processes and profit seeking agents should be appreciated better. More specifically, the role of firms in introducing technological innovation was poorly understood. Indeed, both large and small corporations in major industrial upstream sectors such as pharmaceuticals and medical instruments, through different interaction mechanisms, play a key-role in the health innovation process. Therefore, Grebel's approach should be complemented by a stronger focus on why do agents innovate. Now, it is not clear why do agents carry on the burden and the risk of changing both the technology and the structure within the system. Of course, the book provides an important clue in such a direction, but this is not fully elaborated, yet.
Furthermore, the role of physicians as competent reputation-seeking intermediaries could be framed better (Spulber 1996). Physicians and agents of different public bodies, such as scholars who are supported by the academic system and contribute to scientific progress in the pursuit of reputation, could introduce novelties while seeking to increase their reputation among patients, their professional status and make a career within the public bodies. Such an approach might be easily stretched so as to include firms and other profit seeking activities, such as the burgeoning biotechnology sector based on venture capital undertakings based upon closed network interactions with hospitals and medical schools.
Due to this weakness, the book sometimes seems to reflect more a specific case, such as Germany, apparently characterized by a heavy bureaucratic apparatus, rather than the broader institutional evidence of the international economy, where a variety of institutional settings can be found. In other parts, it seems to apply more and better to medical practices rather than to well-identified product innovations generated by upstream industries. In general, however, Grebel's book provides a strong platform able to accommodate future efforts to include the role of profit-seeking (private) agents in the innovation process in this service industry.
In conclusion, the sophisticated analytical framework suggested in this book not only provides an original - yet partial - account of dynamics of technological change in the health economy. As a complementary and non minor result, it makes an innovative contribution for understanding evolutionary systems composed by a variety of interacting and creative agents which cannot maximize but are clearly able to change their routines and even their goals. The analytical platform elaborated by Grebel can be developed so as to articulate the analysis of innovative decision-making more precisely.
As a matter of fact, this book makes an important contribution to elaborate a broader notion of evolutionary economics. An enlarged approach that goes beyond the limits of Darwinistic analogies, where variety is generated randomly. In doing so, it makes it possible to understand how agent routines change and innovation is introduced, instead of taking these aspects for granted, such as in the Nelson and Winter tradition. As soon as we incorporate these changes, innovation can be viewed as an emergent property of a complex system. This is the final and non-trivial reason to appreciate this book.
ReferencesSPULBER, DF (1996) Market Microstructure and Intermediation. Journal of Economic Perspectives, 10, 135-52
WITT, U (2008) What Is Specific About Evolutionary Economics. Journal of Evolutionary Economics, 18, 547-75
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