Innovation BM 24-25 RUG
W1
Joseph A. Schumpeter:› introduced distinction between;
Invention: an idea, a sketch or model for a new or improved device, product, process or system
Innovation: the process and outcome of creation and commercialization of something new.
Innovation includes opportunity identification, ideation or invention to development,
prototyping, production, marketing and sales.
Entrepreneurship only needs to involve commercialization (depending which definition of
entrepreneurship is applied)
- Innovation = Invention + Exploitation
So, entrepreneurship and commercialization overlap each other.
Standard economics of strategy can be boring:
Analyzing …
● existing structures,
● equilibriums, …,
but innovation is about
● creation (and destruction)
● change
● Novelty
Why so difficult?
› Innovation funnel
● Most innovative ideas do not become successful new products.
› Carefully crafted strategies required
› Barriers, Competitors, Innovation patterns, Environment, etc.
meaning of the funnel!!!
Innovation and failure: Most new ideas fail in the market (an estimated 70 90 %)
,(2) Sources of Innovation:
De lijnen tussen deze bronnen geven aan dat
innovatie vaak ontstaat door samenwerking tussen verschillende actoren. Bijvoorbeeld:
● Bedrijven en universiteiten werken samen via R&D-partnerschappen.
● Overheid kan innovatie stimuleren door subsidies aan universiteiten of bedrijven.
● Individuen kunnen samenwerken met zowel bedrijven als universiteiten om hun ideeën
te ontwikkelen.
R&D by firms
› Research refers to both basic and applied research.
● Basic research aims at increasing understanding of a topic or field without an
immediate commercial application in mind.
● Applied research aims at increasing understanding of a topic or field to meet a specific
need.
› Development refers to activities that apply knowledge to produce useful devices, materials, or
processes.
› R&D thus refers to a range of activities that extend from early exploration of a domain to
specific commercial implementations.
Demand Pull / Technology Push
› Originate from linear models:
›“Technology/Science push”
● Scientific discovery > invention > manufacturing > marketing
● Linear model emphasizes “supply side”
›“Need/Demand pull’
● Customer suggestions > invention > manufacturing
● Linear model emphasizes “demand side”
› Innovation process likely to be non-linear
,› Most current research emphasizes that innovation originates from a variety of sources and
follows a variety of paths.
Supply and demand determinants
› Supply determinants of innovation:
● technological opportunity > state of the relevant scientific and technological knowledge
● cost and availability of inputs > knowledge workers, scientific personnel, equipment
● appropriability > ability to capture profit from innovation
› Demand determinants of innovation:
● cost reduction potential from innovation (process innovation; new sources of supply;
organizational change)
● consumer or producer benefit from novel product (product innovation)
● consumer or producer benefit from improvements (incremental product innovation)
TP/DP risks
› Technology push > develop solution for which there is no problem, so no market at the end
› Demand pull > missing ability to invent technology to solve problems, there is a market.
Development of innovation models
Progress in conceptualizing innovation: Rothwell’s five generations of innovation models
External Sources and Combinations
› External Sources(outside the firms boundary)
● Licensing, Purchasing
● Externalities (technological, pecuniary)
› Combinations of External and Internal Sources
● Strategic partnership
● Cross licensing
, ● (Networks for exchange, Joint venture, collective research associations, government
sponsored joint research programs, informal networks, …)
Innovation in Collaborative Networks
› Technology Clusters are regional clusters of firms that have a connection to a common
technology e.g., Silicon Valley’s semiconductor firms, lower Manhattan’s multimedia cluster
● Though today’s information technology enables fast, cheap and easy communication
across the globe, knowledge does not always transfer so easily.
● Encompass an array of industries that are linked through relationships between
suppliers, buyers and producers of complements.
Technological spillovers / Knowledge externalities
› Technological spillovers occur when the benefits from the research activities of one entity
spill over to other entities.
- Likelihood of spillovers is a function of:
- Strength of protection mechanisms (e.g., patents, copyright, trade secrets)
● Nature of underlying knowledge base (e.g., tacit, complex)
● Mobility of the labor pool
(2) Types of Innovation (A)
› Product Innovation vs. Process Innovation
● Product innovation
○ Embodied in firm output (good or service)
○ New product
- Process innovation
■ Techniques of producing output
■ More efficient production
>Appear very often in combination:
>Product innovations can enable process innovations and vice versa
>Product innovation for one firm may be a process innovation for another firm
Types of innovation (B)
› Level of newness
- Radical vs. Incremental Innovation
● Degree of “departure” from existing practices
● Radical = high degree of newness / differentness
● Incremental = marginal degree of newness / differentness
Types of innovation (C)
› Competence Enhancing vs. Competence Destroying Innovation
● Always from the perspective of a specific actor (e.g. firm/organization)
W1
Joseph A. Schumpeter:› introduced distinction between;
Invention: an idea, a sketch or model for a new or improved device, product, process or system
Innovation: the process and outcome of creation and commercialization of something new.
Innovation includes opportunity identification, ideation or invention to development,
prototyping, production, marketing and sales.
Entrepreneurship only needs to involve commercialization (depending which definition of
entrepreneurship is applied)
- Innovation = Invention + Exploitation
So, entrepreneurship and commercialization overlap each other.
Standard economics of strategy can be boring:
Analyzing …
● existing structures,
● equilibriums, …,
but innovation is about
● creation (and destruction)
● change
● Novelty
Why so difficult?
› Innovation funnel
● Most innovative ideas do not become successful new products.
› Carefully crafted strategies required
› Barriers, Competitors, Innovation patterns, Environment, etc.
meaning of the funnel!!!
Innovation and failure: Most new ideas fail in the market (an estimated 70 90 %)
,(2) Sources of Innovation:
De lijnen tussen deze bronnen geven aan dat
innovatie vaak ontstaat door samenwerking tussen verschillende actoren. Bijvoorbeeld:
● Bedrijven en universiteiten werken samen via R&D-partnerschappen.
● Overheid kan innovatie stimuleren door subsidies aan universiteiten of bedrijven.
● Individuen kunnen samenwerken met zowel bedrijven als universiteiten om hun ideeën
te ontwikkelen.
R&D by firms
› Research refers to both basic and applied research.
● Basic research aims at increasing understanding of a topic or field without an
immediate commercial application in mind.
● Applied research aims at increasing understanding of a topic or field to meet a specific
need.
› Development refers to activities that apply knowledge to produce useful devices, materials, or
processes.
› R&D thus refers to a range of activities that extend from early exploration of a domain to
specific commercial implementations.
Demand Pull / Technology Push
› Originate from linear models:
›“Technology/Science push”
● Scientific discovery > invention > manufacturing > marketing
● Linear model emphasizes “supply side”
›“Need/Demand pull’
● Customer suggestions > invention > manufacturing
● Linear model emphasizes “demand side”
› Innovation process likely to be non-linear
,› Most current research emphasizes that innovation originates from a variety of sources and
follows a variety of paths.
Supply and demand determinants
› Supply determinants of innovation:
● technological opportunity > state of the relevant scientific and technological knowledge
● cost and availability of inputs > knowledge workers, scientific personnel, equipment
● appropriability > ability to capture profit from innovation
› Demand determinants of innovation:
● cost reduction potential from innovation (process innovation; new sources of supply;
organizational change)
● consumer or producer benefit from novel product (product innovation)
● consumer or producer benefit from improvements (incremental product innovation)
TP/DP risks
› Technology push > develop solution for which there is no problem, so no market at the end
› Demand pull > missing ability to invent technology to solve problems, there is a market.
Development of innovation models
Progress in conceptualizing innovation: Rothwell’s five generations of innovation models
External Sources and Combinations
› External Sources(outside the firms boundary)
● Licensing, Purchasing
● Externalities (technological, pecuniary)
› Combinations of External and Internal Sources
● Strategic partnership
● Cross licensing
, ● (Networks for exchange, Joint venture, collective research associations, government
sponsored joint research programs, informal networks, …)
Innovation in Collaborative Networks
› Technology Clusters are regional clusters of firms that have a connection to a common
technology e.g., Silicon Valley’s semiconductor firms, lower Manhattan’s multimedia cluster
● Though today’s information technology enables fast, cheap and easy communication
across the globe, knowledge does not always transfer so easily.
● Encompass an array of industries that are linked through relationships between
suppliers, buyers and producers of complements.
Technological spillovers / Knowledge externalities
› Technological spillovers occur when the benefits from the research activities of one entity
spill over to other entities.
- Likelihood of spillovers is a function of:
- Strength of protection mechanisms (e.g., patents, copyright, trade secrets)
● Nature of underlying knowledge base (e.g., tacit, complex)
● Mobility of the labor pool
(2) Types of Innovation (A)
› Product Innovation vs. Process Innovation
● Product innovation
○ Embodied in firm output (good or service)
○ New product
- Process innovation
■ Techniques of producing output
■ More efficient production
>Appear very often in combination:
>Product innovations can enable process innovations and vice versa
>Product innovation for one firm may be a process innovation for another firm
Types of innovation (B)
› Level of newness
- Radical vs. Incremental Innovation
● Degree of “departure” from existing practices
● Radical = high degree of newness / differentness
● Incremental = marginal degree of newness / differentness
Types of innovation (C)
› Competence Enhancing vs. Competence Destroying Innovation
● Always from the perspective of a specific actor (e.g. firm/organization)
