AP/ADMS 4940 Technology Management Session 2

Today’s Agenda Topics: Nature and importance of innovation, sources of innovation Readings: Innovation and Business Strategy, Chapter 2 B, B & B (2011) D, P, & W (2003) Group activity

Nature of Innovation Discovery vs Invention vs Innovation Definitions of innovation Innovation is a process

Two types of innovation

Study administered by the Product Development and Management Association found: Length of development cycle varies with innovativeness of project Incremental projects took 6.5 months from concept to market introduction “More innovative” projects took just over 14 months. New-to-the-world products took 24 months. On average, firms reported 12% to 40% shorter cycle times than they reported in 15 years ago.

Importance of Innovation The impact of innovation on social – economic development More efficient food production, improved medical technologies, better transportation, etc. Increases Gross Domestic Product by making labor and capital more effective and efficient However, may result in negative externalities, E.g., pollution, erosion, antibiotic-resistant bacteria

Impact of innovation on firm

Sources of Innovation Organizational Creativity Governme nt agency Complementors Non-profit organizations CompetitorsCustomersSuppliers

Organizational creativity Organizational Creativity (OC) is not a sum of individuals, rather OC is a function of: Creativity of individuals within the organization Social processes and contextual factors that shape how those individuals interact and behave Drivers of OC/innovation (B, B, & B, 2011; page 45)

Transforming OC into Innovation R&D by Firms Research refers to both basic and applied research. Development refers to activities that apply knowledge to produce useful devices, materials, or processes. Science Push approaches suggest that innovation proceeds linearly: Scientific discovery  invention  manufacturing  marketing Demand Pull approaches argued that innovation originates with unmet customer need: Customer suggestions  invention  manufacturing

Transforming OC into Innovation Firm Linkages with Customers, Suppliers, Competitors, and Complementors Most frequent collaborations are between firm and their customers, suppliers, and local universities. External versus Internal Sourcing of Innovation

Sources of R&D founds

Innovation in Collaborative Networks Collaborations include (but are not limited to): Joint ventures Licensing and second-sourcing agreements Research associations Government-sponsored joint research programs Value-added networks for technical and scientific exchange Informal networks Collaborative research is especially important in high- technology sectors where individual firms rarely possess all necessary resources and capabilities

Innovation in Collaborative Networks Technology Clusters – one form of collaborative networks The underlying mechanism: Agglomeration economies: Proximity facilitates knowledge exchange. Cluster of firms can attract other firms to area. Supplier and distributor markets grow to service the cluster. Cluster of firms may make local labor pool more valuable by giving them experience. Cluster can lead to infrastructure improvements (e.g., better roads, utilities, schools, etc.)

Discussion questions Agglomeration provides many benefits at the cluster level. But, from the firm perspective, do you want to locate in the cluster? Why? Because of the benefits from agglomeration, how would you locate your R&D centers?

Discussion on 2 readings What are key points in B, B & B’s (2011) article? What are key arguments in D, P, & W’s (2003) article?

What’s on next week Topics: Radical innovation, innovation performance Readings: The Council of Canadian Academies, Innovation and Business Strategy: Why Canada Falls Short: Chapter 3 Stringer, R. (2000). How to manage radical innovation. California Management Hill, C.W.L. (1997). Establishing a standard: Competitive strategy and technological standards in winner-take-all industries. Academy of Management Executive, 11 (2), 7-25.