Technological and Disruptive Innovations in a Nation's Industrialization and Leadership Development

Introduction

The recent development of artificial intelligence motivates several leading nations, such as the US, Japan, France, England, and China, to embrace for the next round of industrialization. By referencing to successes of past industrializations (Rostow, 1960; Forrest et al., 2018), these nations vigorously pursue their goals by focusing on innovations, especially technological and disruptive ones. However, main stream economics provides inconsistent conditions for industrialization to emerge (Forrest et al., 2018). These current efforts of the leading nations and the inconsistencies of main stream economics naturally motivate the investigation of the following natural questions: How are technological innovation (TI) and industrialization related? And, how does disruptive innovation (DI) help a nation become a global leader?

These are important practical and theoretical questions. In particular, to maintain their leadership in the increasingly globalized world, developed nations introduce relevant policies and provide necessary governmental supports to realize their goals (Hall & Pesenti, 2017; OSTP, 2012; Hermann et al., 2016; Government of Japan, 2015; Marc et al., 2018). On the other hand, developing countries face the challenge of falling further behind the developed nations economically, socially, and politically. Thus, they have to consider what to do to at least keep up with the current development across the world (Forrest et al. 2018), while possibly providing their citizens with their longed life styles (Rostow, 1960).

While similar questions have been considered in the past, conclusions have been mostly derived using data- and anecdotes-based approaches (e.g., Nasution et al., 2018). Although stated as generally-true results, these conclusions are definitely subject to the constraints of the employed approaches and tend to be inconclusive or inconsistent (Rostow, 1960; Forrest et al., 2018). Because of such issues, Rostow (1960) calls for the development of a reliable method and efficient way of thinking to produce theoretically sound conclusions and practically useful recommendations. As an answer to this call and a major contribution to the literature, this paper establishes generally-true results for scholars and useful recommendations for nations to potentially lead the next round of industrialization. Because of the employment of the rigor and logical thinking of game theory, conclusions developed herein are not subject to the constraints of conventional data- and anecdotes-based approaches.

More specifically, this paper fills three gaps that exist in the literature. First, although there is a large body of literature on innovation, scholars have measured this concept differently (Becheikh et al., 2006). Such diversity in measurement has produced unreliable and inconsistent conclusions. Second, numerous practical failures of modernization in the past century (Forrest et al., 2018) point to the fact that the literature upon which those nations based their attempts did not truly capture the essence behind how to kick start a self-sustaining momentum of economic growth; and it did not fully grasp the systemic relationship between TIs and industrialization. Third, although various scholars, e.g., Galli (2020), have investigated the influence of TI on efficiencies of various kinds and revealed potential drivers of technological development and industrialization, our literature search does not show studies regarding roles TIs/DIs play on a nation’s industrialization and development of international leadership.

The rest of this paper is organized as follows: After literature review, the market on which the rest of the paper sits is studied in terms of how to normalize such variable factors as production costs, customer reservation prices, economic entities’ boundary conditions, and magnitudes of loyal-customer bases. The main results are developed regarding the relationship between TIs and industrialization, and what great potential DIs can bring to a nation. In the conclusion, recommendations for government policymakers and open questions for future research are provided.