1 Enterprise Knowledge Capital and Innovation: Definition, Roles and Challenges1

The economic analysis of innovation has significantly developed since the 1950s. Classical economists had however already set down the essential foundations in the 18th Century. For example, Adam Smith (1723–1790) observed and described the forms of division of labor in the first factories and highlighted the importance of divided and combined labor, as well as the significance of learning through practice and interaction in the emergence of technological ideas and artifacts. Jean-Baptiste Say (1767–1832) emphasized the characteristics and role of entrepreneurs as well as the institutional conditions that could help or hinder the development and dissemination of knowledge. Karl Marx (1818–1883) analyzed mechanization and its effects on large-scale industry, and also underlined the importance of collective workers in their organization and the gradual integration and incorporation of science at the service of capital. These essential contributions were overshadowed by the increasing popularity of the neoclassical approach, based on the market sphere, in which technological progress did not figure prominently since the main factors of production, capital and labor, were regarded as homogeneous. It was only in the 1950s that Robert Solow’s growth models integrated, although imperfectly, technological progress into the neoclassical analysis of economic growth [SOL 56, SOL 57]. As a factor external ...

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