Summary innovation, management and strategy, readings included + exam questions
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Innovation management and strategy
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Katholieke Universiteit Leuven (KU Leuven)
This summary is an integration of the powerpoint, my course notes and the key points of the required readings. I obtained 17/20 studying this summary. The document also contains some previous exams
INNOVATION, MANAGEMENT
AND STRATEGY
This summary is an integration of the powerpoint, my
course notes and the key points of the required
readings. I obtained 17/20 studying this summary.
The document also contains some previous exams
,Inhoud
1. Introduction.......................................................................................................................................3
1.1 Why studying innovation?............................................................................................................3
1.2 Linking innovation to the Cobb-Douglas Production Function.....................................................3
1.3 Innovation only an economical subject........................................................................................3
2. Innovation at firm level......................................................................................................................4
2.2 Summary: how the four authors are supporting eachother point of view...................................4
2.2.1 Question 1: Who is responsible for innovation?.......................................................................5
2.2.2 Question 2: If they both contribute is the nature of the contribution similar...........................5
2.2.4 If we have acknowledge the contribution of both types of economical actors, can we account
for a complete picture in terms of innovation dynamics...................................................................5
2.2.5 Baumol’s paper.........................................................................................................................6
2.3 Abernathy& Utterback.................................................................................................................6
2.3.1 What is the paper dealing with?...............................................................................................7
2.4 Pinch & Bijker: Social construction of technology........................................................................8
2.4.1 Paper.........................................................................................................................................9
2.5 Technology push versus market pull..........................................................................................10
2.6 Innovation and market failures..................................................................................................10
2.7 Innovation systems....................................................................................................................12
2.8 Entrepreneurial universities.......................................................................................................12
2.8.1 Do faculty members who are engaged in patenting activity publish less than their colleague
non-inventors?.................................................................................................................................13
2.8.2 Do inventors differ from colleague non-inventors in terms of the nature of their publications
.........................................................................................................................................................14
2.8.3 To what extent does involvement in contract research with industry influence the co-
existence of patent and scientific activities?....................................................................................14
2.9 Antecedents of entrepreneurial performance...........................................................................14
2.9.1 Impact of entrepreneurial universities....................................................................................15
3. Firm level innovation.......................................................................................................................15
3.1 Building blocks of innovation at firm level.................................................................................15
3.1.2 Third generation R&D and innovation: the Partnership model...............................................16
3.2 Innovation on firm level.............................................................................................................16
3.2.1 R&D intensity of industries.....................................................................................................17
3.3 Strategy and the value curve......................................................................................................17
3.4 The implementation of the innovation strategy.........................................................................18
3.4.1 Portfolio’s................................................................................................................................18
1
, 3.4.2 Funnels....................................................................................................................................21
3.4.3 Gate selection criteria.............................................................................................................23
3.4.4 The impact of management....................................................................................................24
3.4.5 Dynamic portfolio approaches to roadmaps...........................................................................25
3.4.6 Complementing portfolio’s, funnels and roadmaps: organizing innovation............................26
3.7 Disruption and ambidexterity....................................................................................................27
3.7.1 technology changes, innovation streams and ambidextrous organizations............................27
3.7.2 How sustainable are ambidextrous organizations...................................................................28
3.8 Radical, disruptive, discontinuous and breakthrough innovation..............................................28
3.8.1 On the ambiguity of innovation terminology..........................................................................29
3.8.2 Novelty....................................................................................................................................30
3.8.3 Impact: sustaining or disruptive..............................................................................................32
3.8.4 Towards a typology of trajectories..........................................................................................33
3.9 Organization of open innovation: the role of alliances...............................................................34
3.9.1 Why do firms cooperate within the framework of innovation?..............................................34
3.9.2 Effects of cooperation.............................................................................................................34
3.9.3 Open innovation.....................................................................................................................34
3.9.4 Toward an integrative perspective on alliance governance.....................................................35
3.9.5 Keypoints of paper about open innovation.............................................................................38
3.10 Intellectual property................................................................................................................38
3.10.1 What is a patent?..................................................................................................................38
3.10.2 Bringing knowledge into the production function equation.................................................38
3.10.3 Patents as an incentive to innovate.......................................................................................39
3.10.4 Advantages and disadvantages of patents............................................................................40
3.10.5 Economic value of a patent...................................................................................................40
3.10.6 Patent strategies...................................................................................................................41
3.10.7 Alternatives for patents........................................................................................................43
3.10.8 Paper on patents...................................................................................................................44
4. Operational concerns.......................................................................................................................45
4.1 Communication..........................................................................................................................45
4.1 Communication networks in R&D..............................................................................................46
4.2 Organizing NPD projects............................................................................................................47
4.2.1 The process of innovation.......................................................................................................47
4.2.2 The organizational structure space.........................................................................................48
4.2.3 Leading project teams.............................................................................................................49
4.2.4 Conclusions.............................................................................................................................51
2
, 4.3 Critical functions: needed roles in the innovation process.........................................................51
4.3.1 Needed roles...........................................................................................................................51
4.4 Impact of design technologies...................................................................................................52
4.5 Alcatel........................................................................................................................................52
5. Exam questions................................................................................................................................53
5.1 August 2023...............................................................................................................................53
5.2 Christmas 2011..........................................................................................................................53
1. Introduction
1.1 Why studying innovation?
Engine of welfare
Driving force of competition
Where do we find evidence of that?
o Evidence at firm level (see infra)
o Evidence at supranational level
OECD data on TFP
o Evidence at geographical level
Clusters and networks
1.2 Linking innovation to the Cobb-Douglas Production
Function
1.3 Innovation only an economical subject
Other fields can help us understanding the dynamics of innovation
o Sociology
The institutional context for innovation
o Management
Innovation matrics and performance
o Psychology
Work climates for productive innovation
o History
3
, 2. Innovation at firm level
Example in class to start the chapter: the electrical Fretchle didn’t sell anymore, because of
the cheap Ford substitute on gasoline
o Innovation will make a new form of transportation possible
2.2 Summary: how the four authors are supporting eachother point
of view
The three authors are supporting each other
The exogeneity of science
o People are reluctant to what’s new, because in a way an invention means the
destruction of the old
o One of the difficult things in an innovative process is to convince stakeholders that
your invention is valuable and worth all the complexities which are necessary when
you change
Schumpeter I was clashing with Baumol’s paper <-> Schumpeter II conforming the idea
o Schumpeter I had only attention for the heroic engineer without attention to
institutions who can contribute to innovation as well. Schumpeter II confirms
indeed that also institutions and firms can contribute to innovation, and not only the
heroic engineer
o Schumpeter I had only attention for the fluid stage
o In summary, Schumpeter I emphasizes the disruptive role of entrepreneurs and
creative destruction as drivers of economic development, while Schumpeter II
extends this view to include institutional and systemic dimensions of innovation,
recognizing that innovation goes beyond just technological advancements and
includes changes in the broader socio-economic system. Both phases contribute to
our understanding of the dynamic and evolutionary nature of economic systems.
Abernathy
o Schumpeters idea of the heroic engineer matches completely with the fluid stage of
product development of Abernathy’s paper
o Making the production process more efficient matches with the specific stage of
Abernathy which matches with Schumpeters idea that its mainly the big firms that
enjoy the benefits of economies of scale (the more you produce the less costs for
one production unit: marginal cost decreases the more you produce)
But Schumpeter also acknowledged that the small heroic entrepreneur could
challenge these big firms with his destructive creativity
Abernathy recognizes the distinction between the influence of entrepreneurs <-> firms on
innovation
o Fluid phase: frequent major changes in product this matches perfectly with
Baumol stating that revolutionary changes come from start-ups and engineers.
Abernathy is also stating that during the fluid phase the organizational form is
informal and entrepreneurial confirming again Baumol’s paper
Pinch & Bijker
o Abernathy recognises that the development of the dominant design in the fluid
phases is a social process: what kind of product enjoys the consumers preference?
What product is the perfect compromise between the advantages and disadvantages
of all the designs that appeared on the market
o Perfect link with Pinch & Bijker: the social construction of facts and artefacts
4
, The government and non-profit organizations, the media
o Design flexibility
There is not one best way to design an artefact, every group has a different
ideal –> finding a compromise (= perfect math with Abernathy’s first fluid
stage)
o Closure
= the second stage of Abernathy
Schumpeter looks to believe more in a technological push than a market pull
2.2.1 Question 1: Who is responsible for innovation?
Entrepreneurs and firms (small and big)
2.2.2 Question 2: If they both contribute is the nature of the
contribution similar
They are complements (and not substitutes as Schumpeter I thought)
o Schumpeter I thought that big innovative firms were going to replace the inventing
engineers
o Schumpeter II confirms the existence of the two at the same time
The combined efforts of both groups result in substantial overall contribution
The role of the entrepreneur remains critical, but collaboration with firms is essential in
modern times
Difference between big and small firms: risk management within big firms <-> individual
engineer is more risk taking
o We need both for optimal economical progress
Big firms are responsible for cumulative incremental improvements while small firms and
start ups are more responsible for revolutionary breakthroughs (as a consequence of their
position towards risk)
2.2.4 If we have acknowledge the contribution of both types of
economical actors, can we account for a complete picture in terms
of innovation dynamics
In other words: are engineers and firms the only relevant players?
Answer Baumol
Governments and universities play a very important role as well according to Baumol
because
Governments are there to correct market failures optimizing welfare
o Creation of legal framework supporting innovation
Encouraging entrepreneurship and investments in R&D
Creation of the framework of intellectual property
Avoiding free riding problems
o Supporting basic researching correcting market failure
Who’s seeking profit will never invest in research because the money you
invested will make profit way too late: market value comes years later
In a free market nobody would invest in research which is a market failure
because it would be at cost of the wealth of a society
Who will do this research Universities as the engine of novelty
Examples:
5
, the development of the lithium ion battery took more than 150
years, but created a gigantic breakthrough (battery of laptops,
mobile phones, electric vehicles): would this increase of welfare
have been established without research of universities? No
o Necessary in development of electrical cars
The production of Mrna without cell culture (in vitro transcription)
(30 years): base of vaccines
2.2.5 Baumol’s paper
Inventions as revolutionary breakthroughs or as cumulative incremental improvements
Large firms tend to prefer conservative approaches that result in predictable, incremental
changes, but these small improvements can have a significant impact on growth
The combination of those two categories of inventions is shaping the powerful technology
we know today
BUT: Baumol also recognizes that there are multiple players
2.3 Abernathy& Utterback
Abernathy recognizes the distinction between the influence of entrepreneurs <-> firms on
innovation
o Fluid phase: frequent major changes in product this matches perfectly with
Baumol stating that revolutionary changes come from start-ups and engineers.
Abernathy is also stating that during the fluid phase the organizational form is
informal and entrepreneurial confirming again Baumol’s paper
Uncoordinated phase
o Market expansion and redefinition result in frequent competitive improvements
o Rates of product and process changes are high and there is great product diversity
among competitors
o The product itself is composed of unstandardized and manual operations
Systemic
o Process becomes more integrated so making changes costs lots of money
Product development
o A product innovation is a new technology or combination of technologies
introduced commercial to meet a users need
Performance maximizing phase 1
Uncertainty
Sales maximizing phase 2
As obvious improvements are introduced it becomes increasinlgt
more difficult to better past performance
Process changes will largely be stimulated by the demand for
increased output and these may tend to be discontinuous process
innovations that involve new methods of organization and product
design as well production
Cost minimizing phase 3
The basis of competition begins to shift to product price, margins are
reduced, the industry often becomes an oligopoly and efficiency and
economies of scale are emphasized in production
Price competition increases production processes become more
capital intensive companies try to lower their costs
6
, No radical innovation
PRODUCT INNOVATION (dalende hollende curve) - PROCESS INNOVATION (stijgende bolle
curve): there is a moment where there rate of innovation is equal
Innovations introduced in stage I will require little perceived change in process technology.
Innovations introduced in Stage II will require the greatest degree of perceived changed in
process technology, while those in Stage III will result in only incremental and or adopted
process changes
2.3.1 What is the paper dealing with?
Confirming the complementarity of engineers and large firms
If the dynamics of a firm change the dynamics of innovation change
Stage of development has a big impact
The life cycle of an industry
o In the beginning the numbers of firms goes up, because technical opportunities
attract entrepreneurs, start-ups appear
o Then: maturity sets in, the amount of market players decreases and entrance
barriers appear
Why does this happen?
The three stages of product development:
o Fluid
Competition is about the functionality and performance of the product
Frequent major changes in the products
The production process is flexible and inefficient
The organization form is informal and entrepreneurial
o Specific
Competition is about cost reduction and having the lowest price to offer tge
consumer
Changes in products are mainly incremental building further on earlier
inventions. Improving the productivity of the process and the quality of the
product
The production process is efficient, capital-intensive and rigid
Organization is very structured
o Stage in between: transition
At which moment the market changes into a specific market?
o During the fluid stage the battle is mainly about market shares and developing a
design satisfying the consumers. Once all firms have developed that design that
meets the average design and price requirements of the consumers the dynamics of
the market change this phase = the battle for the development of the dominant
design (! This does not mean that after this stage innovation becomes irrelevant, it
just focuses on another aspect: here focusing on satisfying the consumer while after
the focus goes to the optimalization of the production process using economies of
scale and reducing production costs)
o The search for the dominant design is a social process
For example: the bike as we know it now is a compromise between speed
and safety (before in the fluid stage you had bikes with bigger wheels going
faster, but causing terrible accidents: social rejection of these bikes)
o The firm who created this dominant design takes over the market and takes over the
market share pushing other firms out of the market
7
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