Funda 1 Flashcards
What are ‘stylized facts’ in the context of innovation studies, and what purpose do they serve
Stylized facts are simplified representations of empirical findings in innovation studies. They capture the main lessons of research and are considered to be essentially true, though not applicable to all situations. They help to survey the broad area of innovation without focusing on individual details
How does the text describe the historical view of innovation?
The text indicates that the interest in innovation is not new, citing a complaint about the “fury of innovation” from Samuel Johnson in 1772. It also highlights the increased interest in innovation from the popular press, governments, and businesses in the past thirty years, noting that it has been described as the “industrial religion of the late 20th century”.
What is the relationship between innovation and economic growth according to the text?
Innovation is considered a main driving force of economic growth, primarily by increasing the rate of productivity. Early estimates attributed a large portion of economic growth to “technical change,” a residual that was later more fully incorporated into new growth theory, which highlights the importance of spillovers. Recent research indicates that investments in intangibles or innovation account for a large share of productivity growth.
Explain the combinatorial nature of innovation.
Most innovations are not entirely novel but are new combinations of existing elements. The challenge for innovators is to find new ways to combine existing things. The potential for recombination is vast and can lead to further innovation
Is innovation confined to certain sectors?
No, innovation is pervasive throughout the economic system, not just in high-tech sectors. Even traditional sectors can experience significant innovatio
What is the difference between incremental and radical innovation?
Most innovation is evolutionary and incremental, involving modest improvements to existing products. Radical innovations are rare, often defined by significant shifts in performance-price ratios, and can spur new industries
Describe the relational aspect of innovation.
Innovation is a relational activity that requires interaction between different people, teams, and functions. While individuals may spark innovation, teams do the work of turning ideas into innovations. Innovation also involves customers, suppliers, and other external parties.
What is the distinction between creativity, invention, and innovation?
Creativity is the ability to develop novel and useful ideas, and is an input to the development of an invention, which is a novel idea with practical application. Innovation is the rarest of the three - ideas that can be commercialized or implemented to allow the developer to capture value from their efforts
Why is it difficult to capture returns from innovation?
Returns from innovation are highly skewed, with a small number of activities accounting for the majority of the returns. The skills needed to create innovations are different from the skills to capture the value from them. Additionally, many innovators see their returns captured by competitors
What is the “appropriability regime” and how does it affect innovation?
The appropriability regime refers to the industrial environment that shapes the links between innovators and the returns to innovation. This includes the nature of knowledge in an industry, the availability of intellectual property protection, and the importance of complementary assets
What are the different types of innovation, and what do they entail?
The main types are product vs process innovation. Product innovation involves new goods or services while process innovations are changes to operations. There’s also architectural (changes in interfaces) and modular (changes in components). Disruptive innovation describes how companies that over-serve customers may be attacked by competitors with simpler and cheaper products
How does the text describe the patterns of innovation over time?
The text outlines several patterns of innovative activity:
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Long Waves: Drawing on Kondratieff’s concept, the text suggests that economic growth driven by innovation occurs in waves of about fifty years. These waves are associated with transformative technologies like the steam engine, electricity, and computers.
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Product Life Cycle (PLC): This model, proposed by Abernathy and Utterback, suggests that a technology’s lifetime involves shifts in focus between product and process innovation:
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Fluid Stage: Characterized by a variety of product designs incorporating a new technology.
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Transitional Stage: A dominant product design emerges, leading to a decrease in product innovation and the start of process innovation.
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Specific Stage: The product becomes a commodity, with innovation focusing on process optimization.
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Reverse Product Life Cycle for Services: In some service sectors, particularly financial services, the PLC may be reversed. Process technologies are established and standardized first, which then allows new services to develop.
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Complementarities: There are strong complementarities between different types of innovation. Service innovation can create opportunities for product innovation, and vice versa. This simultaneous creation of multiple forms of innovation can improve firm performance.
What role does geography play in innovation?
Innovation is a “sticky” activity, meaning it is concentrated in specific locations:
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Global Centers: Innovation investments and outputs tend to be concentrated in global centers where leading actors interact and compete.
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Co-location: Within organizations, the physical proximity of individuals is important for knowledge flow. Companies often design R&D facilities to maximize interaction. For example, BMW designed its R&D facility so that engineers working on related problems are no more than 25 meters apart.
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Sticky Knowledge: Knowledge is often difficult to transfer, and is contextually dependent. This “stickiness” means that knowledge spillovers often occur within short geographic distances.
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Face-to-Face Interaction: Collaborative activity between firms benefits from face-to-face interaction.
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Local Bias: Investments in innovation, such as venture capital, often have a local bias.
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Regional and National Systems: Innovation is influenced by variations in institutional setups that govern interactions between firms and individuals. The existence of a patent system, and its configuration, can also influence domestic and foreign R&D investment. Different national systems can give rise to different inputs into the innovation process, and can be supportive or unhelpful to the innovation process.
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Innovation Clusters: Certain regions and countries have become successful launch pads for innovation. Examples include:
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Silicon Valley and Boston in the USA are known for groundbreaking products and services.
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Regions in Italy and Chile are known for excellence in traditional industries, like shoe-making and wine.
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Balancing Local and Global: It is important to balance tight local links with global connections to ensure diversity in knowledge and access to markets
What organizational routines support innovation?
Organizations develop routines to manage the innovation process effectively:
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Balancing Creativity and Execution: There is a tension between supporting the creation of new ideas and ensuring their execution. Some organizations create separate structures for exploration and exploitation.
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Ambidextrous Organizations: Some firms adopt an ambidextrous approach, using separate organizational units with different practices for different innovative tasks.
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Supporting Creativity: Organizations can support creativity through: * Providing autonomy for innovators. * Tolerating failure. * Creating dynamic teams that include multiple disciplines. * Promoting openness to outsiders.
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Managing R&D Projects: Companies need to develop tools to manage and select R&D projects:
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Stage-gate systems provide opportunities for review at different stages of development.
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Projects should be judged against criteria such as market value and development costs.
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Avoiding Over-Commitment: Tools and routines help prevent firms from over-committing to single projects.
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It’s important to allocate resources effectively between products at different stages and with varying degrees of radicalness.
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Problems with Assessment: Assessing R&D projects before completion can be problematic, as good projects may be killed due to internal processes. There may be a tendency to favor short-term, incremental projects.
What shifts in thinking are challenging traditional views on innovation?
Several shifts are challenging traditional views on innovation:
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Beyond Technical Innovation: There is a move away from focusing solely on technological innovation towards including other types of innovation, like service and business model innovation. Many service innovations are largely organizational.
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Re-evaluating R&D: The role of R&D is being re-evaluated. While R&D is important, it is an incomplete predictor of innovation and growth. There is more focus on other intangible investments. Many corporations have shifted away from R&D-led models of innovation. The measurement of R&D often misses a significant portion of investment in innovation, especially in service industries.
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The Role of the Firm: The firm is no longer seen as the sole driver of innovation. Innovations are often the result of collaboration between a variety of actors. The firm’s innovative potential is determined by its ability to draw on external resources.
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Public and Private Knowledge: The traditional distinction between private knowledge developed by firms and public knowledge created by universities is becoming blurred. Universities are increasingly patenting their discoveries, and firms are creating public knowledge.
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Universities are seeking to patent their discoveries to profit from them.
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Firms are publishing in scientific literature and donating patents to support open-source software
What are the two Schumpeterian models of innovation, and how do they differ?
Schumpeter Mark I (“Creative Destruction”):
Innovation driven by new entrants (startups or small firms).
Dynamic and competitive markets with frequent disruption.
Focus on radical and disruptive innovation (e.g., typewriters replaced by computers).
Schumpeter Mark II (“Creative Accumulation”):
Innovation dominated by large incumbent firms.
Stable and concentrated markets with fewer firms.
Focus on incremental and cumulative innovation (e.g., big pharmaceutical companies improving drugs).
