Not too many years ago most economists were content to treat the process of technological change as an exogenous variable. Technological change – and the underlying body of growing scientific knowledge upon which it drew – was regarded as moving along according to certain internal processes or laws of its own, in any case independently of economic forces. Intermittently, technological changes were introduced and adopted in economic activity, at which point the economic consequences of inventive activity were regarded as interesting and important – both for the contribution to long-term economic growth and to short-term cyclical instability. Schumpeter, for example, saw the engine of capitalist development as residing in this innovative process in the long run, and at the same time he developed a business cycle theory which centred upon the manner in which the capitalist economy absorbs and digests its innovations. In Schumpeter's model, exogenous technological changes stimulated investment expenditures, the variations of which, in turn, generated cyclical instability.

In the years after the Second World War the economist's attitude gradually changed. The vast expenditures on Research and Development made it increasingly obvious that inventive activity was – or could be made to be – responsive to economic needs (or even to noneconomic needs if such needs received sufficient financial support). Clearly much of the search activity of R and D was highly purposive: business firms were looking for new techniques in specific categories of products, they spent much money upon this search, and they were sometimes highly successful. Similarly, government agencies had long directed research into specific problem areas and in some cases had achieved conspicuous successes – as in agriculture.