Impacts of Functionality Development on Dynamism between Learning and Diffusion of Technology

Under a long lasting economic stagnation, since significant increase in R&D investment has become difficult, practical solution could be found in systems approach maximizing the effects of innovation as a system by making full utilization of potential resources of innovation. At the same time, under the increasing significance of information technology (IT) in an information society which emerged in the 1990s, functionality development has become crucial for stimulating a self-propagating nature of IT driven innovation. Stimulated by these understandings and prompted by a concept of institutional innovation, this chapter attempts to analyze the interacting dynamism of innovation in a comprehensive and organic system. Theoretical analysis and empirical demonstration are attempted focusing on dynamism between learning and diffusion of technology taking Japan's PV development, which follows the similar trajectory of IT's functionality development, over the last quarter century. The effects of functionality decrease on learning coefficient and consequent impacts on technology diffusion and its dynamic carrying capacity are analyzed. Fear of a vicious cycle between functionality decrease, deterioration of learning, stagnation of technology diffusion and its carrying capacity in long run is demonstrated. Thereby, the significance of institutional dynamism leading to a dynamic interaction between learning, diffusion and spillover of technology is identified. Reprinted from Technovation 24, No. 8, C. Watanabe and B. Asgari, Impacts of Functionality Development on the Dynamism Between Learning and Diffusion of Technology, pages: 651–664, copyright (2004), with permission from Elsevier.