A hstract-This paper develops a model of the decision to adopt interrelated innovations emphasizing the role of innovative ability and a measure of the economic incentive to be informed about innovations. Education, experience, and the availability of information are hypothesized to be measurable dimensions of innovative ability. The results from fitting univariate, conditional, and joint logistic models suggest that innovative ability contributes significantly to explaining the adoption of new technology but does not explain its diffusion. The results also indicate that the diffusion of previously available innovations depends on the introduction and adoption of interrelated current innovations

Many writers subscribe to Joseph Schumpeter's view that, while perfectly competitive firms allocate resources efficiently in a static sense, they perform poorly when it comes to innovation. From this point of view, the optimal form of market structure is unlikely to be perfect competition, but some other type of dynamic competition which includes significant elements of monopoly. Recently, considerable effort has been focused on modelling Schumpeter's notion of competition. Perhaps best exemplified by the 1980 work of Partha Dasgupta and Joseph Stiglitz (hereafter D-S),2 this approach views free entry to the RD see Nelson and Winter (1977). 3Readers will recognize a similarity of this approach with the notion of contestable markets discussed most recently by William Baumol (1982) and by Baumnol, John Panzar, and Robert Willig (1982). For an interesting comparison of the Schumpeterian with the Marxian notion of competition, see John Elliott (1980). 4This was noted, for example, by Robert Wilson (1975). 5In such industries, the long-term gains from dynamically efficient innovation become of paramount importance; consequently, the optimal market structure would consist of a small number of firms. The driving force behind such a result is what Scherer (1972) has called the Lebensraum effect. Firms performing R&D must at least break even. They derive their profits from

In October 1979, the Federal Reserve announced a new commitment to fight inflation. It signalled its resolve by a shift in policy tactics that placed greater emphasis on reducing the growth of money and less emphasis on limiting short-run fluctuations in interest rates. This shift in tactics was accomplished by a change in operating procedures that placed primary emphasis on controlling the growth of reserves available to depository institutions while greatly expanding the allowable range of fluctuations in the federal funds rate. The growth of MI and other monetary aggregates did slow on average, but money growth experienced large short-term fluctuations. Interest rate movements increased, as advertised, but the extent of their fluctuation was severe. Inflation slowed markedly, but this was primarily the consequence of a severe recession. Events gave grim testimony to the truth that it is possible to reduce inflation quickly by producing a sufficiently severe recession. In the second half of 1982, with the economy in disarray and with growing concern about the ability of the financial system to withstand further strain, the Federal Reserve abandoned its new operating procedures. There was a shift back to the more comfortable world of stabilizing fluctuations in the federal funds rate. There is considerable controversy over whether the Federal Reserve actually pursued a policy strategy that was consistent with the teachings of the Book of Monetarism. Concern about limiting money growth and using reserves as the operating variable are consistent with monetarism. The extreme fluctuations in money growth during the period are not consistent with monetarist doctrine, however. Perhaps the Fed had not really embraced monetarism. It may have found that focusing on money growth was a convenient means of absolving itself from responsibility for the record-high interest rates that occurred. Conversely, perhaps the Fed did embrace the principles of monetarism, but was unable to achieve steady money growth. We shall never know for sure whether or not the Federal Reserve was really trying to perform a monetarist experiment on the American economy. We do known, however, that the experiment was far from pure because of the substantial moneygrowth volatility that occurred. There is also substantial controversy over the of the Some observers argue that the primary aim of reducing inflation was achieved; they proclaim the experiment a success. Others point out that this success was the consequence of a severe recession produced by high real interest rates and had nothing to do with monetarism per se. This paper does not contribute to the debates concerning the nature and of the monetarist experiment. Rather, it looks at the role played by financial innovation in complicating the pursuit of monetary policy during the period. Was the great experiment hurt by financial innovation? More specifically, did rapid financial innovation make it infeasible to target on MI (or some other monetary aggregate), and did innovation contribute to the extreme fluctuations in money growth and interest rates that occurred? The conclusions from the discussion that follows is that financial innovation did not make it any less feasible to target on MI during 1979-82 than for other periods. Financial innovation does not appear to have made money growth an unusually unreliable target, and innovation was not the source of the volatility of money growth and interest rates that occurred

,_ The Rate of Imitation of a Capital-Embodied Process Innovation, Economica 44 (Feb. 1977), 63-69. Sahal, Devendra, Patterns of Technological Innovation (Reading, MA: Addison-Wesley, 1981). Saxonhouse, Gary R., Estimated Parameters as Dependent Variables, American Economic Review 66 (Mar. 1976), 178-183. Theil, Henri, On the Estimation of Relationships Involving Qualitative Variables, American Journal of Sociology 76 (July 1970), 103-154. , Principles of Econometrics (New York: Wiley & Sons, 1971). Walker, David, An Analysis of Financial and Structural Characteristics of Banks with Retail EFT Machines, Working Paper # 79-1, FDIC, 1979

This paper surveys the development of cost accounting and managerial control practices and assesses their relevance to the changing nature of industrial competition in the 1980s. The paper starts with a review of cost accounting developments from 1850 through 1915, including the demands imposed by the origin of the railroad and steel enterprises and the subsequent activity from the scientific management movement. The DuPont Corporation (1903) and the reorganization of General Motors (1920) provided the opportunity for major innovations in the management control of decentralized operations, including the ROI criterion for evaluation of performance and formal budgeting and incentive plans. More recent developments have included discounted cash flow analysis and the application of management science and multiperson decision theory models. The cost accounting and management control procedures developed more than 60 years ago for the mass production of standard products with high direct labor content may no longer be appropriate for the planning and control decisions of contemporary organizations. Also, problems with using profits as the prime criterion for motivating and evaluating short-term performance are becoming apparent. This paper advocates a return to field-based research to discover the innovative practices being introduced by organizations successfully adapting to the new organization and technology of manufacturing

The author reviews the latest information on productivity and the alternative explanations of the slowdown, which he concludes was partially due to a decline in innovation and work effort and mostly due the post 1973 energy price increases. Identical policy responses to the worldwide inflation were also a reason why so many countries experienced slow growth at the same time, as cyclical productivity declines were added to the structural decline. There are signs that productivity growth is recovering, which gives credence to the view that the temporary shocks of the 1970s were the culprit