Chapters 1,2,3

Chapter 1 Importance of technological innovation

1. Technological innovation – the act of introducing a new device, method or material for application
to commercial or practical objectives. Important driver of competitive success. Many firms receive
more than one-third of their sales and profits from products developed in the past 5 years.

Role of globalization – foreign competition has put pressure on firms to continuously innovate in
order to produce differentiated products and services.

2. Impact of technological innovation on society – fostering increased GDP, enabling greater

communication and mobility and improving medical treatments.

Externalities – Costs or benefits that are reaped by individuals other than those responsible for
creating them. If a business emits pollutants in community, it imposes a negative externality on the
community members, if a business builds a park in a community, it creates a positive externality for
the community members.

3. Innovation by industry: the importance of strategy

While government plays a significant role in innovation, industry provides the majority of R&D funds

The innovation funnel – most innovative ideas do not become successful new products.

Improving firm’s innovation success rate requires a well-crafted strategy. To achieve this firm needs:

 An in-depth understanding of the dynamics of innovation – how and why innovation occurs
in industry. Why some innovations rise and dominate. Sources of innovation play role
 A well-crafted innovation strategy.
 Well-designed processes for implementing the innovation strategy

Chapter 2 Source of innovation

Innovation – the practical implementation of an idea into a new device or process.

1. Sources

 Individuals – lone inventor or use who designs solutions for his own needs
 Universities’ research efforts
 Government
  Non-profit organizations
 Firms – primary engine of innovation. They have greater resources and a management
system to marshal those resources toward a collective purpose.
 Linkages between them – networks of innovators that leverage knowledge and other
resources are one of the most powerful agents of technological advance.

2. Creativity - the ability to produce work that is useful and novel.

Innovation begins with the generation of new ideas. The ability to generate new ideas is termed
creativity.

Degree of novelty – minor deviation or major leap – A product could be novel to the person but
known to everyone (reinvention).

The most creative works are novel at the individual producer level, the local audience level, and the
broader societal level.

Individual creativity – the ability to function of his or her intellectual abilities, knowledge, style of
thinking, personality, motivation and environment. Most appropriate intellectual abilities:

 Unconventional way of looking at problems

 Analyze which ideas are worth pursuing and which are not
 The ability yo articulate those ideas and convince the others that the ideas are worthwhile

 Double-edged impact of knowledge

 Too little knowledge in a field – unlikely to understand it weel enough to contribute to it
 Too well knowing a field – can be trapped in the existing logic and paradigms
 Moderate level of knowledge – could be able to produce more creative solutions

Organization creativity – function of creativity of the individuals within the org and variety of social
processes and factors that shape the way those individuals interact and behave. Structure, routines
and incentives can thwart or amplify creativity.

 Suggestion boxes, idea management systems

3. Translating creativity into innovation

Innovation is more than the generation of creative ideas, it is the implementation of those ideas into
some new device or process. Innovation requires combining ideas with resource and expertise to
make them possible to embody the idea in useful form.

 The inventor – they possess the following traits:

o They have mastered the basic tools and operations of the field in which they invent
o They are curious and more interested in problems than solutions
o They question the assumptions made in previous work in the field
o They seek global rather than local solutions
 Innovation by users – may alter the features of existing products, approach manufacturers with
design suggestions or develop new products themselves.
 R&D by firms – most obvious source of innovation. Strong positive correlation with firm’s sales
growth rate, sales of new products and profitability.
o Basic research – effort directed at increasing in understanding of a topic or field without
a specific commercial application in mind.
o Applied research – directed at increasing understanding of a topic to meet a specific
need.
o Development – activities that apply knowledge to produce useful devices, materials or
processes. Extend the early exploration of domain to specific commercial
implementations.
 Firms linkages with customers, suppliers, competitors, complementors – jointly work on projects
or exchanging info and other resources in pursuit of innovation. In the form of alliances,
research consortia, licensing arrangements, contract research and developments, joint ventures.
Pool resources such as knowledge and capital, share the risk of new product development
project.
 External versus Internal sourcing of innovation – Critics that firms are using external sources
rather than investing in original research. In reality, external sources more like complements
rather than substitutes. Absorptive capacity – firm’s ability to understand and use new
information.

Universities research – companies report that research from public and nonprofit insitutions enables
them to develop innovations that they would not have otherwise developed. Technology transfer
offices – designed to facilitate the transfer of technology developed in a research environment to an
environment where it can be commercially applied.

Government-funded research

 Science parks – regional districts, set up by G to foster R&D collaborations between G, Us and
private firms
 Incubators – institutions designed to nurture the development of new businesses that might
otherwise lack access to adequate funding or advice.

Non-profit orgs – In-house research or fund others researches

4. Innovation in collaborative networks – important in high-technology sectors, where is unlikely that

single individual or org will possess all the resources and caps necessary to develop and implement a
significant innovation.

Joint ventures, licensing, research associations, government-sponsored joint research

Technology clusters – Regional clusters of firms that have a connection to a common technology, and
may engage in buyer, supplier, and complementator relationships, as well as research collaboration.
May span a region as narrow as a city or as wide as country. Primary reason for the mergence – the
benefit of proximity in knowledge exchange. Silicon Valley

For firms, understanding the drivers and benefits of clustering is useful for developing a strategy that
ensures the firm is well positioned to benefit from clustering. Process of building trust and influence
the willingness to share knowledge.

Agglomeration economies – the benefits firm reap by locating in close geographical proximity to each
other.

Knowledge brokers – individuals or organizations that transfer information from one domain to
another in which it can be usefully applied.

Technology spillovers – a positive externality from R&D resulting from the spread of knowledge
across organizational or regional boundaries.

Chapter 3 Types and patterns of innovation

Technology trajectory – the path a technology follows through its lifetime. The path may refer to its
rate of performance improvements, its rate of diffusion, or other change of interest.

1. Types of innovation

 Product innovation vs Process innovation – Product innovations are embodied in the output
of an org – Honda developing new model. Process innovations are innovations in the way an
organization conducts its business such techniques of producing or marketing goods or
services. New product innovations and process innovation often occur together. New
processes enable the production of new products.
 Radical innovation vs Incremental innovation – Radical innovation is that one that is very
new and different from prior solutions. Incremental – that makes a relatively minor change
from existing practices. Till 51

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