Formation of the Railway Network: Diffusion of Epochal Innovation and Economic Growth

Abstract

The article considers, based on the example of the formation of the world railway network, the process of appearance and diffusion of epochal innovation in interrelation with economic growth. The influence of the previous level of economic and institutional development on the time of the appearance of railways in each country and the dynamics of subsequent development of the railway network has been revealed. It is shown that the institutional conditions that have developed in the UK, which ensure technological creativity of society, individual freedom and entrepreneurial activity, predetermined the country’s leadership in the first half of the 19th century, both in the appearance of railways and further development of the railway network, and in industrial development in general. As a higher level of economic development and quality of institutions in the country contributes to a more dynamic diffusion of innovations, the gap in the level of economic development between the more developed and less developed countries is widening. Overcoming this gap and implementing the strategy of “catch-up” development are possible only through fundamental institutional changes. Cardinal acceleration of economic growth can be achieved only on the basis of a synergy of institutional and innovative development. Given the major role of transport, which is the material basis of global commodity exchange, in the modern economy, economic growth can be successfully stimulated through a synergy of quality institutions and transport innovations.