L1

Technological innovation is the act of introducing a new device, method, or material for application to commercial or practical objectives. Technological innovation is now the most important driver of competitive success.

Foreign competition has put pressure on firms to continuously innovate in order to produce differentiated products and services.

Innovation enables a wider range of goods and services to be delivered to people worldwide. The impact can be observed by looking at gross domestic product (GDP). The gross domestic product is the total annual output of an economy as measured by its final purchase price.

Sometimes technological innovation results in negative externalities. Production technologies may create pollution that is harmful to the surrounding communities. Externalities are costs or benefits that are born or reaped by individuals other than those responsible for creating them.

Successful innovators have clearly defined innovation strategies and management processes.

The innovation process is often conceived of as a funnel, with many potential new product ideas going in the wide end, but very few making it through the development process.

Improving a firm’s innovation success rate requires a well-crafted strategy. A firm’s organizational structure and control systems should encourage the generation of innovative ideas while also ensuring efficient implementation.

In Part One, we will cover the foundations of technological innovations. Chapters 2-5.

In Part Two, we will turn to formulating technological innovation strategy. Chapters 6-9.

In Part Three, we will turn to implementing the technological innovation strategy. Chapters 10-13.

Innovation is the practical implementation of an idea into a new device or process. Innovation can arise from many different sources. It can originate with:

Individuals;Firms;Universities;Government-Funded Research;Private Nonprofits.

Innovation begins with the generation of new ideas. An idea is something imagined or pictured in the mind. The ability to generate new and useful ideas is termed creativity. Creativity is defined as the ability to produce work that is useful and novel.

An individual’s creative ability is a function of his or her intellectual abilities, knowledge, style of thinking, personality, motivation, and environment.

The creativity of the organization is a function of creativity of the individuals within the organization and a variety of social processes and contextual factors that shape the way those individuals interact and behave. The most familiar method is the suggestion box.

Intranet is a private network, accessible only to authorized individuals. It is like the Internet but operates only within (´intra´) the organization. There employees can submit their ideas and actively interact and collaborate on the ideas of others.

Innovation is the implementation of creative ideas into some new device or process. Innovation requires combining a creative idea with resources and expertise that make it possible to embody the creative idea in a useful form.

Innovation sometimes originates from individual inventors. The most prolific inventors tend to be:

trained in multiple fields,be highly curious,question previously made assumptions,and view all knowledge as unified.

The most well-known inventors tend to have both inventive and entrepreneurial traits.

Innovation can also originate with users who create solutions to their own needs. The birth of the snowboard gives a good example (page 25).

One of the most obvious sources of firm innovation is the firm’s own research and development efforts. Research can refer to both basic research and applied research. Basic research is research targeted at increasing scientific knowledge for its own sake. It may or may not have any long-term commercial application. Applied research is research targeted at increasing knowledge for a specific application or need. Development is activities that apply knowledge to produce useful devices, materials, or processes.

In the United States, firms spend significantly more on R&D than government institutions spend on R&D, and firms consider their in-house R&D their most important source of innovation.

Firms often form alliances to jointly work on an innovation project or to exchange information and other resources in pursuit of innovation. Collaboration might occur in the form of alliances, participation in research consortia, licensing arrangements, contract research and development, joint ventures, and others.

The most frequent collaborations are between firms and their customers, suppliers, and local universities. Firms may also collaborate with competitors and complementors. Complementors are producers of complementary goods or services.

External sources of information are more likely to be complements to rather than substitutes for inhouse research and development. Doing in-house R&D helps to build the firm’s absorptive capacity, enabling it to better assimilate and utilize information obtained externally. Absorptive capacity is the ability of an organization to recognize, assimilate, and utilize new knowledge.

Another important source of innovation comes from public research institutions.

The intellectual property policies of a university embrace both patentable and unpatentable innovations, and the university retains sole discretion over the right to commercialize the innovation. To increase the degree to which university research leads to commercial innovation, many universities have established technology transfer offices. Technology transfer offices are designed to facilitate the transfer of technology developed in research environment to an environment where it can be commercially applied.

Governments actively invest in research through their own laboratories, the formation of science parks and incubators, and grants for other public or private research entities.

Science parks are regional districts, typically set up by government, to foster R&D collaboration between government, universities, and private firms.

Incubators are institutions designed to nurture the development of new businesses that might otherwise lack access to adequate funding or advice.

Private nonprofit organizations also contribute to innovation activity in a variety of complex ways.

Collaborative research is especially important in high-technology sectors, where it is unlikely that a single individual or organization will possess all of the resources and capabilities necessary to develop and implement a significant innovation.

As firms forge collaborative relationship, the weave a network of paths between them that can act as conduits for information and other resources. It can enable firms to achieve much more that they could achieve individually.

Sometimes geographical proximity appears to play a role in the formation and innovative activity of collaborative networks. A well-known regional cluster is Silicon Valley.

Technology clusters are regional clusters of firms that have a connection to a common technology, and may engage in buyer, supplier, and complementor relationships, as well as research collaboration. Technology clusters may span a region as narrow as a city or as wide as a group of neighboring countries. Regional clusters cause a benefit of proximity in knowledge exchange.

Proximity and interaction can directly influence firms’ ability and willingness to exchange knowledge.

First, knowledge that is complex or tacit may require frequent and close interaction to be meaningfully exchanged.Second, closeness and frequency of interaction can influence a firm’s willingness to exchange knowledge. Think about trust and reciprocity norms.

Complex knowledge is knowledge that has many underlying components, or many interdependencies between those components, or both.

Tacit knowledge is knowledge that cannot be readily codified (documented in written form).

Firms that are proximate thus have an advantage in sharing information that can lead to greater innovation productivity. This can, in turn, lead to other self-reinforcing geographical advantages. The benefits firms reap by locating in close geographical proximity to each other are known collectively as agglomeration economies.

Downsides to geographical clustering:

The proximity of many competitors serving a local market can lead to competition that reduces pricing power with buyers and suppliers.Close proximity of firms may increase the likelihood of a firm’s competitors gaining access to the firm’s proprietary knowledge.Clustering can potentially lead to traffic congestion, inordinately high housing costs, and higher concentrations of pollution.

Technological spillovers are a positive externality from R&D resulting from the spread of knowledge across organizational or regional boundaries. Technological spillovers occur when the benefits from the research activities of one firm spill over to other firms.