Demand-pull and technology-push: What drives the direction of technological change? An empirical network-based approach

01 August 2022

Kerstin Hötte
View Journal Article / Working Paper

Demand-pull (DP) and technology-push (TP) are drivers of technological
change. For policy-makers, it is important to understand how both
interact and differ by impact. Using a two-layer network of input-output
(market) and patent citations (innovation) links among 307 6-digit US
manufacturing industries in 1977-2012, I study two mechanisms of TP and
DP: (1) TP and DP are between-layer spillovers when demand shocks in the
market pull innovation and innovation pushes growth in the market. (2)
Within the same layer, DP arises from downstream links when output users
trigger upstream growth, while TP effects spill over from up- to
downstream industries. The results support between- and within-layer TP:
innovation spillovers from upstream industries drive market growth and
innovation. There is also support for within-market TP: positive
upstream supply shocks may stimulate market growth, but this effect is
heterogeneous across industries. DP is not supported, but the results
show that DP forces are associated with a factor bias in favor of labor,
while TP comes with a labor demand shift towards non-production work.
The results enable a nuanced view on the drivers of technological change
and its impact on labor, capital, and productivity. This may inform
policy-makers on how to steer the technological evolution.

This paper was revised on 21st December 2021. For the original version please see here.