Absorptive Capacity of Demand in Sports Innovation

Economics of Innovation and New Technology, Forthcoming

26 Pages Posted: 30 Jun 2017

See all articles by Isabel Almudi

Isabel Almudi

University of Zaragoza

Francisco Fatás-Villafranca

University of Zaragoza

Jason Potts

RMIT University

Stuart J. Thomas

RMIT University - School of Economics, Finance and Marketing; Financial Research Network (FIRN)

Date Written: June 29, 2017

Abstract

We propose a stylized and tractable Neo-Schumpeterian model of sectorial transformations in which demand side knowledge constraints inhibit innovation diffusion and industrial change, causing structural instability. Evolutionary competition in the model implies that innovation can overshoot the absorptive capacity of demand, leading to a slowdown in sectorial dynamism and even to structural collapse. Closed-form analytical results prove the existence of a unique stationary state in the dynamic model that is (globally) asymptotically stable. We show how the dynamic paths and the stationary rest-point depend on the trade-off between innovation and demand absorptive capacity parameters. To illustrate the plausibility and relevance of our results, we examine the Australian windsurfing industry in which diminished demand absorptive capacity (in the terms of the model) was a factor underlying sectoral collapse. We discuss how development of absorptive capacity of demand presents a collective action problem for an industry sector, and the role of demand side factors as constraints in industry and innovation policy.

Keywords: Industrial Dynamics, Sports Industries, Absorptive Capacity, Innovation Models, Demand

JEL Classification: L52, C62, O31, O33

Suggested Citation

Almudi, Isabel and Fatás-Villafranca, Francisco and Potts, Jason and Thomas, Stuart J., Absorptive Capacity of Demand in Sports Innovation (June 29, 2017). Economics of Innovation and New Technology, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2995229

Isabel Almudi

University of Zaragoza ( email )

Gran Via 2
Zaragoza, 50005
Spain

Francisco Fatás-Villafranca

University of Zaragoza ( email )

Zaragoza, 50005
Spain

Jason Potts (Contact Author)

RMIT University ( email )

Stuart J. Thomas

RMIT University - School of Economics, Finance and Marketing ( email )

Business
Level 12, 239 Bourke Street
Melbourne, Victoria 3000
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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