Branching innovation, recombinant innovation, and endogenous technological transitions

Abstract

We propose a model of technological transitions based on two different types of innovations. Branching innovations refer to technological improvements along a particular path, while recombinant innovations represent fusions of multiple paths. Recombinant innovations create "short-cuts" which reduce switching costs allowing agents to escape a technological lock-in. As a result, recombinant innovations speed up technological progress allowing transitions that are impossible with only branching innovations. Our model replicates some stylised facts of technological change, such as technological lock-in, experimental failure, punctuated change and irreversibility. Furthermore, an extensive simulation experiment suggests that there is an optimal rate of innovation, which is strongly correlated with the number of recombination innovations. This underlines the pivotal role of technological variety as a seed for recombinant innovation leading to technological transitions.