Innovation, Components and Complements

Every now and then a technology, or set of technologies, comes along that offers a rich set of components that can be combined and recombined to create new products. The arrival of these components then sets off a technology boom as innovators work through the possibilities. This is, of course, an old idea in economic history. Schumpeter (1934), p. 66 refers to “new combinations of productive means.” More recently, Weitzman (1998) used the term “recombinant growth.” Gilfillan (1935), Usher (1954), Kauffman (1995) and many others describe variations on essentially the same idea. The attempts to develop interchangeable parts during the early nineteenth century is a good example of a technology revolution driven by combinatorial innovation. The standardization of design (at least in principle) of gears, pullies, chains, cams, and other mechanical devices led to the development of the so-called “American system of manufacture” which started in the weapons manufacturing plants of New England but eventually led to a thriving industry in domestic appliances. A century later the development of the gasoline engine led to another wave of combinatorial innovation as it was incorporated into a variety of devices from motorcycles to automobiles to airplanes. As Schumpeter points out in several of his writings (e.g., Shumpeter