Induced innovation and path dependence: A reassessment with respect to agricultural development and the environment

The study reviews two models of technical change-induced innovation and path-dependent models of technical change. The study argues that the two models are complementary rather than alternative explanations of the forces that influence the direction of technical change. Although path-dependent properties can give rise to surprising consistency and duration in the direction of technological change, historical development of a technology seldom proceeds indefinitely along an initially selected process array. As technical progress slows down, a shift in relative factor prices can induce an intensified search for technologies along a new direction that is more consistent with contemporary factor prices. This explains why technological inertia can be overcome to induce a path of technological development and infrastructure investments consistent with the rising value of environmental resources.