Chapter11W - mcc75691_ch11w_001-020.indd Page 1 9/19/08...

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“Just do it!” In 1968 two entrepreneurs from Oregon developed a lightweight sport shoe and formed a new company called Nike, incorporating a “swoosh” logo (designed by a graduate student for $35). Today, Nike sells $16 billion worth of goods annually. “Leap Ahead.” In 1967 neither Intel nor its product existed. Today it is the world’s largest producer of microprocessors for personal computers, with about $35 billion of annual sales. “Save money, live better.” Expanding from a single store in 1962 to about 7000 stores worldwide today, Wal-Mart’s annual revenue ($349 billion) exceeds that of General Motors or IBM. Nike, Intel, and Wal-Mart owe much of their success to technological advance, broadly defined as new and better goods and services or new and better ways of producing or distributing them. Nike and Technology, R&D, and Efficiency IN THIS CHAPTER YOU WILL LEARN: 1 The differences between invention, innovation, and technological diffusion. 2 How entrepreneurs and other innovators further technological advance. 3 How a fi rm determines its optimal amount of research and development (R&D). 4 Why fi rms can benefi t from their innovation even though rivals have an incentive to imitate it. 5 About the role of market structure in promoting technological advance. 6 How technological advance enhances productive effi ciency and allocative effi ciency. Bonus Web Chapter WEB www.mcconnell18e.com 11 11W-1
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±Invention,±Innovation,± and Diffusion For economists, technological advance occurs over a theo- retical time period called the very long run, which can be as short as a few months or as long as many years. Recall that in our four market models (pure competition, monopolis- tic competition, oligopoly, and pure monopoly), the short run is a period in which technology and plant and equip- ment are fixed. In the long run, technology is constant but firms can change their plant sizes and are free to enter or exit industries. In contrast, the very long run is a period in which technology can change and in which firms can develop and offer entirely new products. In Chapter 1 we saw that technological advance shifts an economy’s production possibilities curve outward, enabling the economy to obtain more goods and services. Technological advance is a three-step process of invention, innovation, and diffusion. ±Invention± The basis of technological advance is invention : the discov- ery of a product or process through the use of imagination, ingenious thinking, and experimentation and the first proof that it will work. Invention is a process, and the result of the process is also called an invention. The prototypes (basic working models) of the telephone, the automobile, and the microchip are inventions. Invention usually is based on sci- entific knowledge and is the product of individuals, working either on their own or as members of corporate R&D staffs.
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Chapter11W - mcc75691_ch11w_001-020.indd Page 1 9/19/08...

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