The Ontology of Innovation: Human Agency in the Pursuit of Novelty
Courvisanos, Jerry, History of Economics Review
Abstract: This paper develops an analysis of innovation based on Allen Oakley's (2002) primary themes of ontological priority, agency-structure and critical realism. I develop a history of thought and contemporaneous endogenous view of innovation in an environment of uncertainty, potential novelty and policy priority. Drawing on the literature of Austrian, institutional, Schumpeterian, Penrosean and other schools, I explore a continuum of agency-structure relationships that enhance innovation. These relationships cover environments that are based on agency and contingency, through to those that balance contingency with containment (structure), and situations that are heavily contained. The literature on innovation is investigated vis-a-vis the degree to which different environments encourage creative, original marketable opportunities for the common good. Innovation policy-making is then investigated through the traverse process of irreversibility, and within a retroductionist planning process. Overall, I seek to advance the cause of realism through innovations generated in different environments.
1 The Research Problem
Ontology is often overlooked in the study and explication of innovation. Does this matter? It matters because 'innovation' has become an important word in the twenty-first century, reflecting all that is modern, progressive and exciting in a complex world. This is reflected in every phase of daily existence in modern capitalist economies. Firms are urged to be innovative to gain or sustain a 'competitive edge'; consultants advertise their strategic advice as the essence of innovation; the survival of local schools depends on the capacity-building that comes from innovation; schools are exalted to have innovation in their curriculum; and universities promote themselves as leaders in innovation. Politicians respond to the need to support all of the above through policies to enhance national innovation.
Ontology is '... the study (or a theory) of being or existence, a concern with the nature and structure of the "stuff" of reality' (Lawson 2003, p. 12). Any study or research has a metaphysical precondition to modelling and empirical validation, whether implicitly or explicitly stated, and this is its ontology. Thus ontology is the foundation of all inquiry. Ontology illuminates the range of empirical phenomena that potentially can be investigated. When it comes to innovation, ontology is poorly conceived or implicitly assumed in an extremely simplistic approach. The reason is that the human actions underlying innovation have rarely been explicated in any clear, consistent manner.
Innovation as a process is complex and poorly understood because it is deeply rooted in the uncertainty of the future world, from which emerge new products, processes, movements, organisations and sources of raw material. (1) All that is known is that innovation brings change and something 'new' emerges, which cannot be modelled (or only very sketchily modelled). As a result, it is often portrayed as exogenous, and thus anything that cannot be accounted for by quantifiable measures is called 'the residual' and comes about via innovation. Empirical studies from as far back as Edward Denison (1962) clearly show that this 'innovation' residual is very significant, accounting for far more than 50 per cent of economic growth. Economic historians have confirmed the crucial role of innovation in their empirical narratives. (2)
The research problem that emerges is how to identify and exposit a realist and sustainable theory of human action in the innovation process. Orthodox economics conceptualises a general ontology of the economic agent that is based on human action, to which innovation is only one specific application. The results of this approach have been inadequate. The next section identifies these inadequacies within the history of economic thought and argues for an ontology that places innovation and the pursuit of novelty at the centre of human agency. …