Technological congruence and the economic complexity of technological change

Technological congruence is an emergent system property defined by the match between the relative size of output elasticity and the relative abundance and cost of inputs in local factor markets. With given total costs, output is larger the larger is the output elasticity of the cheapest input. Technological congruence is a powerful tool that helps in grasping the economic complexity of technological change with respect to determinants of the direction of technological change and its effects in terms of growth accounting and specialization, both at the firm and the system level. Its appreciation stems directly from advances in the economics of innovation in understanding the endogenous determinants of the introduction and diffusion of directed technological changes. Technological congruence is most relevant to influence the actual levels of total factor productivity of new technologies and, consequently, to shape the competitive advance of firms and countries.