ABSTRACT
This chapter examines the theoretical foundation of the innovation flow matrix is developed that accounts for complementarity among heterogeneous technologies. It aims to explore a bridge between endogenous growth and input–output literature by using an intersectoral general equilibrium model that directly focuses on the propagation patterns of technology and innovation across sectors. The chapter outlines the intersectoral effects of technology shocks along with a simple quantitative analysis using Japanese research and development data. It argues that the production function represents a technological system. Some attempts have been made to fill the gap between input–output analysis and the endogenous growth literature, an input–output model that completely accounts for the intersectoral aspect of technological relations with a rigid microfoundation remains undeveloped. The commodity sector uses the produced technology components and labor for the production of the commodity. Intermediate suppliers provide one technology component unit inelastically to each intermediate sector and the commodity producer.
