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Summary articles Innovation Strategies of Firms and Entrepreneurs (GEO3-2221)
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Summary articles1. The innovation journey: you can't control it, but you can learn to
maneuver it - Van de Ven (2017)
Innovation = a unique, new idea → developing innovations from concept
to implementation follows a nonlinear cycle of divergent and convergent
activities that may repeat in unpredictable ways over time.
→ innovation journey:
(a) a set of coincidental events leading to a new innovative direction.
(b) some of these events shock entrepreneurs enough to launch an
innovative venture by developing a proposal and obtaining funding
for it.
(c) the venture develops in an initially planned convergent direction, the process evolves into
a divergent cycle of exploring new directions, changing goals, learning by discovery,
pluralistic leadership and building new relationships.
(d) occuring problems lead innovators into a convergent cycle of exploiting a direction.
(e) this ends either in a convergent pattern of innovation implementation or the divergent
behavior is terminated when resources run out.
→ entrepreneurs and managers cannot master innovation success, only its opportunities by
developing skills to overcome obstacles → innovation journey = like an uncharted river.
Transitions between divergent and convergent flows are problematic because: (a) when people gain
comfort and skill in going with a convergent flow, the innovation river may transition into a
divergent pattern that requires very different managerial skills (ambidextrous management
skills). (2) paths of transitions are unpredictable and beyond the control of those involved → BUT
innovation leaders can place boundaries on divergent and convergent patterns with resource
investments, organizational structuring and by selecting participants who have skills in
maneuvering around obstacles in the innovation journey.
→ innovation has to be actively managed → important to let managers practice innovation skills
in relatively safe environments (small and inexpensive innovations).
2. You Can’t Always Get What You Want: How Entrepreneur’s Perceived Resource Needs
Affect the Incubator’s Assertiveness - Van Weele et al. (2017)
Start-ups = young, innovative enterprises that contribute to economic growth and solve societal
challenges → known as new technology-based firms → founded by tech-focused entrepreneurs.
Incubator = provides start-ups with a resource-rich environment, such as a physical
infrastructure, business services, specialized technological knowledge and a comprehensive
support network → facilitates their survival and growth and addresses liabilities of newness →
BUT start-ups don’t take full advantage of the incubator’s resources → FEX. they don’t
participate in training programs or engage in networking activities.
→ liability of newness = the resource base of start-ups is incomplete and still developing.
→ incubators and entrepreneurs have different perspectives about the importance of the
incubator’s resources → 3 explanations:
1. Entrepreneurs find the resources of insufficient quality → FEX. entrepreneurs are
unwilling to take advice from mentors who lack experience.
2. Incubators are unable to tailor their resources to the needs of individual start-ups.
3. Entrepreneurs may not recognize gaps in their resource base → they often have a
technological background and little entrepreneurial experience.
, Resource-based view = firms are a bundle of tangible and intangible resources and resources are
stocks of available factors that are owned or controlled by the firm → types of resources/capital:
- Physical: physical tech, plant, location, equipment and
access to raw materials → tangible.
- Financial: monetary resources for the discovery and
exploitation of a venture idea → tangible.
- Knowledge: technological (background of entrepreneurs)
and business knowledge (obtained by training sessions).
- Social: the ability of actors to extract benefits from their
social structures, networks and memberships → in addition to the
incubator’s external network, start-ups can benefit from interacting with each other
(peer-to-peer interaction) as they often struggle with similar problems.
- Legitimacy: the right to exist and perform an activity in a certain way → start-ups lack
legitimacy as they do not have a track record or an established network.
Structuring the resource base: firms engage in accumulating (internally developing resources),
acquiring (externally purchasing resources) and divesting (removing outdated resources).
→ (a) strong intervention (more assertive) incubators: provide intense and pro-active support →
provided by a large interdisciplinary team, closely involved in the start-up’s development.
→ (b) laissez-faire (less assertive) incubators: are demand driven and provide few resources
unless the entrepreneur asks for help → small team, sometimes only an incubator manager.
Start-up needs: (a) expected resource needs: access to tangible resources. (b) experienced
resource needs: business knowledge (developed through coaching or training from specialised
consultants), as start-ups lack entrepreneurial experience. (c) observed resource needs:
technological and business knowledge.
→ entrepreneurs expect to need physical and financial capital, while incubators focus on
business knowledge → entrepreneurs not aware of the incubator’s potential to help, because:
- Entrepreneurs are not aware of the importance of business knowledge → they are
unconsciously incompetent and have a lack of self-awareness.
- Entrepreneurs are short-term oriented (day-to-day business) → prioritize activities that
yield immediate rewards (FEX. writing a business plan or building networks with peers).
- Entrepreneurs are hesitant to step out of their comfort zone.
Strong intervention incubator practice: they provide proactive assistance to stimulate
inexperienced start-ups to make use of their resources → they use the following mechanisms:
Aggressive coaching sessions: incubator managers ask Milestone setting: incubators require start-ups to
critical questions about the start-ups’ business plan. achieve targets/goals → stimulates entrepreneurs to
develop and recognize the value of business knowledge.
Mandatory participation: incubators require Entrepreneur recruitment: incubators install an
attendance to training or coaching sessions → experienced entrepreneur to replace the technological
stimulates entrepreneurs to step out of their comfort founder as CEO of the start-up → compensates for the
zone and address long-term challenges. technological lack of business knowledge.
Laissez-faire incubator practice: they work demand driven = incubators supporting mature,
experienced start-ups → it is up to the entrepreneur to identify the start-up’s needs.
Incubators should provide an environment where start-ups: (a) learn how to identify gaps in their
resource base and (b) develop the willingness and ability to autonomously acquire or develop
these resources → this way start-ups can gain a competitive advantage.
, 3. Introduction product and process innovation - Meeus & Edquist (2006)
Innovation = a new creation of economic significance, causing creative disruption → on one
hand, innovation enhances growth and survival of firms → on the other, innovation is a very
complex and risky process, with low success rates and sometimes lethal effects.
→ product innovation = new or better products/services (changes in what a firm offers to the
world) → what is produced → can be tangible and intangible.
→ process innovation = new ways of producing goods/services (changes in the way a firm
creates and delivers offerings) → how it is produced → technological or organizational.
Distinguish between: (a) continuous small incremental changes (modest modifications), (b)
discontinuous radical innovations (change the entire order of things) and (c) massive shifts in
general purpose tech (GPT) (lead to the creation of brand-new industries).
→ GPT = a tech that has worldwide influence and influences other
innovations → FEX. info and communications techs (ICTs) and electricity.
3 types of changes:
1. Change in technological characteristics, functions and quality
(product/process level).
2. Change in competencies, organizational structures and market
position (at the level of the innovating agent).
3. Change throughout the value chain: go outside the innovating agent
→ higher, systemic level of change → FEX. for supplier involvement.
Architectural rearrangement of the ways in which components relate to each other within a product system
design → changes the way components are put together → FEX. motorcycles with 3 wheels,
nothing on it is new, only the way the components are placed together.
Incremental (a) improvements in component performance in an established technological concept → (b)
refinements in system designs without significant changes in their technical relationships.
Radical a new architecture and a new fundamental technological approach at the component level.
Modular core concepts of components within the product system design are overturned (very new), BUT
the architecture is not → FEX. electric engine in a car, the engine is still connected to the same
components and still looks like a car → outside architecture stays the same (internal does not).
→ 3 types of linkages: (1) market transactions (backward, forward and horizontal), (2) unilateral
flows of funds, skills and knowledge within and between organizations, (3) interactions (FEX.
user-supplier networks) → these linkages are embedded in a wide variety of institutional
arrangements: FEX. laws, norms and traditions - regulations - policy-induced incentives.
Conclusions:
(a) A firm’s gains from innovation are greater in competitive than monopolistic industries.
(b) Innovation is more intensive in the early stages of an industry’s development when
markets are less concentrated.
(c) Large firms are more innovative in concentrated industries with high barriers to entry.
3. Targeting innovation and implications for capability development. Technovation -
Francis & Bessant (2005)
Innovative capacity = an underlying capacity to gain advantage by implementing more and
better ideas than rivals → 4 stages of focused innovation: (1) improve quality, (2) reduce costs, (3)
develop innovative products and (4) invent new methods of sales and financing.
, → innovation capability can be targeted in 4 ways (4 P’s of innovation targeting):
1. P1 - product innovation → influenced by industry maturity; in young industries every
development effort is a platform effort (= to broaden the firm’s market coverage).
2. P2 - process innovation → machines or technological (software) → sequences of
activities, spread horizontally across the organisation, that interact, sometimes in
complex ways → process innovation can be facilitated by: systematic analysis and
comparative benchmarking (comparing with competitors) → not always within firms.
3. P3 - position innovation → product positioning = what a firm would like customers to
feel and say about their product and company → does not affect the composition/
functionality of a product, but the meaning of the product in the eyes of the potential
customer → FEX. the electric bike was first for elderly, while now it is marketed for the
ordinary person to commute between work and home.
→ firms are more innovative in product positioning because of: (a) increasing skills and availability
of market research data and persuasion tools for marketing and advertising agencies to
construct meanings for potential customers. (2) elaborated, practical and instant customer
profiling due to low cost data processing.
→ central feature of an innovative product positioning strategy: management of identities →
through advertising, marketing, media, packaging and the manipulating signals.
4. P4 - paradigm innovation → changes in the underlying mental and business models
which frame what the organization does (self-reflection) → 2 types:
- Type A: innovation in inner-directed paradigms → targets organisational values
and people management policies (administrative techs) → can service other
stakeholders than the management, shareholders and customers; employees.
- Type B: innovation in outer-directed paradigms (business models) → business
model = a system of coherent, comprehensive, explicit and/or implicit constructs
to understand a firm and shape its development → outer-directed, because it
provides an organisational formula for thriving in a competitive environment →
efficacy of a business model: whether it provides the architecture to gain and
sustain a competitive advantage.
→ the 4 P’s have fuzzy boundaries → firms can pursue all at the
same time and there are linkages between them → can be used
for strategic development of firms.
Innovation activities for better strategic decisions: (picture left)
- Building customised products for customer’s individual
orders (paradigm).
- Using sensors in the next generation of lawn mowers to
avoid roots and stones (product).
- Repositioning the company’s products as female friendly
as more women are keen gardeners (position).
- Installing 3D software in the R&D department (process).
3. What 40 years of research reveals about the difference between disruptive and radical
innovation - Hopp et al. (2018)
Disruptive innovation = a process in which new entrants challenge incumbent firms, often
despite inferior resources → not all technological change is disruptive → happens in 2 ways:
(1) Entrants target over-looked segments of the market with a product considered inferior
by incumbent customers and later move up-market as their product improves.
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