ABSTRACT
Even though the survival and profitability constraints are obviously of the greatest importance in explaining firm behaviour, we conclude from Chapter 10 that rational profit maximizing behaviour (or growth maximizing) is seldom possible in the face of the uncertainties associated with individual innovation projects. This is not to deny that neoclassical short-run theory is a valuable, precise, abstract model of firm behaviour, but it means that this model has limited relevance, and that other ways of interpreting and understanding innovative behaviour are needed (Nelson and Winter, 1977, 1982; Dosi et al., 1988). One possible approach to such a theory (and it is no more than a first approach) is to look at the various strategies open to a firm when confronted with technical change. Such an approach does not look to an equilibrium which is never attained, but does take into account the historical context of any industry in a particular country. This chapter classifies some possible strategies, and discusses them in relation to R&D, and other innovative activities of the firm.
