Institutional diversity and innovative recombination

Abstract

In Explaining Technology, Koppl et al. (2023) argue that “recombination is the essential driver of technological evolution” (p. 3). Modelling combinatorial innovation as a self-propelling, “autocatalytic” process raises the question of what explanatory role, if any, is left for institutional analysis. Although the authors grant institutions only an auxiliary explanatory role, they hint at the functional importance of market institutions, trade networks, patent law, and entrepreneurship. Our paper argues that institutions matter because they crucially affect aggregate levels and rates of recombination and innovation, as well as shaping patterns of recombination and innovation that occur. This paper builds upon Koppl et al.’s acknowledgement of these institutional effects by integrating combinatorial evolution within recent developments in commons theory and institutional economics. Specifically, we argue the burgeoning literature on Governing Knowledge Commons offers a fruitful framework and body of empirical case studies that illuminates the diverse institutions individuals use to facilitate and steer combinatorial innovation. Whilst healthy institutional diversity may incentivize more recombination than any single monocentric institutional arrangement, the non-teleological aspect of recombination means that innovative processes can exude either productive, unproductive, or destructive effects. The institutional diversity fostered by flourishing knowledge commons may allow people to put combinatorial innovations into more productive uses while internalizing their complex externalities. At the same time, it may generate socio-cultural resistances to some forms of innovation processes. We illustrate our theory using cases related to several applied topics including intellectual property, competition policy, and the development of unmanned aerial vehicles.