Managing Innovation - Essay Example

1. Assess the relationship between science and technology, highlighting the differences in their respective roles across industries. Science seekstheoretical or abstract models for natural phenomena, while technology seeks to develop practical devices for human use. In the past, the connection between the two was not systematic nor sustained or continuous. As years went along, the interaction of science and technology followed two different paths. One path led to science being used to develop knowledge which can be used to improve or predict technologies. In this case , the flow of information is from science being translated to technology. In the second path, there is a reversal of information flow, from technology to science. This occurs when technology has developed new instruments which can profoundly affect scientific theories; or, technology has discovered new methods which require explanation through the development of new theories by scientists to explain occurrences. The first pathway is exemplified by the invention of the telescope, which started the development of better astronomical instruments which made the old theory of the universe having the earth at its center so inexplicable that the idea of a sun-centered solar system became more realistic. Interaction between science and technology has increased especially in the 20th century. It often takes the path from scientific knowledge resulting to practical devices. However, this path is often long, and can be subject to stops, starts and changes in direction. Thus, the flow of information in this case is not linear, but is non-linear or can take any direction or sub-directions. Governments have in recent decades implemented measures designed to speed up the flow from scientific knowledge to technology. As an example, the automotive industry had been able to come up with theoretical developments within decades. In contrast and prior to government interventions, such developments may have taken centuries to develop. The minimal interaction between science and technology in the past can be attributed to the limited areas they work in, which also limited their chances of bumping into each other. As both expanded, this allowed them more contact with each other. Industries are able to develop technologies to put theories into practical use and to aid in the development and production of products and commodities. As technologies improve, new applications are also discovered which may require explanations based on scientific knowledge. Thus, science produces new ideas or theories to explain occurrences or phenomena from technologies. The new theories and ideas produced by science or scientific knowledge would again bring about the development of new devices and tools for practical application in industries. Thus, the interaction between science and technology results in a continuous and dynamic cycle of development among the two elements. This benefits industries through the continuous generation of innovations. The more dynamic the interaction between science and technology within an industry, the more innovative that industry becomes. And establishments or businesses within that industry who have better and faster access to information about innovations, scientific knowledge and technologies, often have the winning edge over the competition. Innovation through the interactions of science and technology have also become faster. It used to be that innovation meant the slow build-up of changes passed along from one generation to another. It used to be that changes were done using the "cut and tried" method, wherein an innovation is developed and tried to find out if it works. This is not only slow but also expensive. It is faster and less expensive if to already have an idea on how the change or innovation would result to, even before it is made. However, this method requires a theory. Thus, science is needed in this faster and cheaper method of arriving at change. 2. For a firm, diversification into new product markets is constrained by the character of their technological trajectory.' Discuss, using relevant illustrative examples where appropriate. The ability of firms to diversify into new product markets is determined by their capability to move from one stage of their technology trajectory to the next stage. There are two models generally applied to developed and developing countries, respectively. How capable and how fast they can move from one trajectory stage to the other would determine how successfully they can implement product diversification. The technology trajectory of developed countries are said to follow three stages: fluid, transition and specific. Fluid patterns of innovation are found in firms which are within a new technology area. Radical rather than incremental product innovation is high and the product technology is usually crude, unreliable and expensive. However, it is able to satisfy the needs of some market niches. Product changes are often and are patterned closely to market changes. This entails that the production system is fluid and the organizational structure should likewise be flexible and adaptive to meet the radical and immediate changes in the market and technology. As the needs of the market become clearer and understood and alternative product technologies either merge or are removed, the firm enters the transition stage, wherein a dominant product design and mass production methods are developed. These innovations would lead to competition in price and product performance. Cost competition would drive production costs down. In order to achieve scale economies, production capability and scale would now gain greater importance. As both the industry and its market mature, there is closer price competition, the production processes become more automated. Production also becomes more systematic, rigid and specific, producing highly-standardized products. Greater efficiency is achieved through incremental improvements in the process. As firms reach this specific stage, they are less inclined to engage in research and development aimed at radical innovations. They become increasingly vulnerable to radical changes introduced by new players in the industry. These are often innovations from other areas which eventually find their way into the industry. Industries would face this type of challenge by introducing incremental changes to add value to their products. This would incline industries to locate their production I developing countries where the production costs are lower. In developing countries, the three stages of technology trajectory are: acquisition, assimilation and improvement. Developing countries often acquire mature foreign technologies at the very start of their industrialization. These mature technologies are from industrially advanced countries. However, developing countries often do not have the local capability. Thus, local firms acquire packaged foreign technology, which translates to a mere assembly line of foreign inputs. The outputs are standard products and are not very differentiated. Mostly engineering activities are required at this stage. In the assimilation stage, the growing competition among new players or competition encourages indigenous technical efforts to assimilate foreign technologies so that products may become differentiated. The emphasis in this stage is still on engineering with limited attention given to development instead of research. As assimilation becomes successful, the emphasis becomes focused on the promotion of export. This developments combine with the improvements in the capability of local scientific and engineering people, would result in the gradual improvement of mature technology. Local efforts are made in research, development and engineering and applied to different product lines. 3. Discuss the roles that internationalisation can play within firm-specific technological accumulation, paying attention to their relative importance. Cantwell (1991, 1995) explained that multinational firms utilized international research and development strategies to establish interfirm and intrafirm networks so that firm-specific knowledge and technological capabilities would be strengthened. This role is expected to take on increasing importance in the coming years. It was argued that in order form firm-specific technological capabilities to be acquired, accumulated and maintained, contacts with external sources of expertise from both the home and foreign economies should be built up. Because technologies are difficult to transfer through conventional channels, these external contacts should either be physically present or be support by an organization mechanism. The local infrastructure may be concentrated in a specific region. Thus, these regional sites become hubs or centers for specific technological competencies and they attract investments from multinational firms in research and development, not to mention production. Firms also have the option of establishing production facilities in foreign centers of innovation so that they may access technological developments which are relevant to firms in that region but may also be of complementary significance to their operations. These foreign innovations can then by used by the firm to expand its own pathway in technological development. This results in the replacement of intra-industry trade by intra-industry production. This will also result in the most innovative firms expanding their research and production in all the significant locations for technological activity. This tendency to conduct offshore research and development would eventually result to outward flows of technology to other industrial economies. The trend towards cross-national investments in research and development and other international cooperative efforts in innovation acquisition witness the growing focus on specific technological activities or competencies. This means that firms begin to divest themselves of seemingly unrelated business concerns and begin to concentrate on their core competencies. They also give more emphasis on the international dispersion of these competencies. This is why there are firms which actively seek to establish "centers of excellence" in various locations all over the world, even if these firms specialize on specific products. New products can be developed and manufactured through the formation of strategic alliances between firms. These firms would combine their core competencies and other technological know how and skills. These strategic alliances would result in interfirm learning or accumulation of new knowledge and innovations. It also has a homogenizing effect in the sense that the participating firms would tend to have the same level of technological capabilities. Thus, the tendency of research and development is to go to regional and national economies that have the capability to nurture specific technology-based capabilities. This does not necessarily mean that the differences in capabilities and infrastructurein such localized settings. This shows that globalisation and the need for national specialization are complementary to each other and are not conflicting paradigms. Localised capabilities are also a response to demand and supply factors and history. 4. Why would one expect technology transfer between two firms to be problematic Indicate and evaluate measures by which it might be facilitated. The business landscape substantially changed after the decline of the Soviet Union. Many companies dependent on government defence contracts found that there would be difficult times ahead. Even universities in the United States had the same, although not as devastating experience. Those who are affected by fundamental changes in the status quo would always find ways to adapt and overcome the challenges. The loss of a major threat and the end of the Cold War required businesses and research institutions to undergo paradigm shifts and determine where they stand and where their directions lie. The reduced spending in the defence industry required these entities to discover new channels by which they can continue business. The transfer of technology may have provided the answers and gave these businesses and universities/research institutions, the adaptability to respond to the changes which occurred these past few years. "Technology transfer" pertains to the patented technologies which a university has developed and patented, and marketed. The presence of a patent provides technology transfer with a legal aspect, usually regulative in character. Since the university holds the patent for the technology, it normally gets a royalty or portion of the revenue generated from the sale of the technology once it is mass produced. Problems therefore arise in licensing, which hinder technology transfer. The university may also create its own private company which would then be responsible for the establishment of new companies that will mass produce the technology. In the 1980s, universities were being allowed to gain profits from projects funded by the federal government. Private companies interested in the university-generated technologies, acquired their licenses and marketed these technologies. The universities also became interested in marketing their outputs themselves. There are those who argue that there is conflict of interest once universities engage in marketing their own technologies. The question lies on who stands to lose money. Universities and businesses also have a big difference in how they do things. The internal bureaucratic machinery found in business is often absent in universities. In some cases, universities have an excess of this bureaucratic machinery, even more than can be found in most businesses. This lack (or excess) of bureaucracy makes it difficult for universities to implement plan and acquire the desired results. Thus, there are some areas like technology transfer wherein business has the better capability to deliver. Businesses also have a better feel of demand. Therefore, it has an edge over universities in determining the pulse of the market and delivering what is being demanded by the buying populace. Another problem is the development of new technology. Most changes or innovations are incremental improvements on existing technologies. Singular incremental improvements to an existing technology may not be substantial enough to be appreciated by end users, especially ion business. There might not be enough value added to a technology to substantiate its transfer. It therefore becomes a requirement to accumulate several incremental innovations in order for a substantial return to cover costs for generation of the new technology. The lumping or packaging of several incremental innovations would have greater value and would provide distinctive changes and improvements to already existing products. Those who are responsible for the commercial application of new technology should have an understanding of how research works and what expectations are reasonable. Most of the problems involving technology transfer can be worked out in a matter of a few years. There would be a change in how people perceive problems and how their solutions should be. The legal aspects involved in technology transfer have to be resolved and clear-cut policies be made so that they would be consistent with the increasing tend towards globalisation. 5. Describe and comment on Schmookler's analysis in support of 'demandpull' explanations of technological change. Demand pull is a model where an invention where a need is clearly recognized, and a product was created to satisfy that need (Freeman 1997). It can also be explained as "necessity is the mother of invention" (Freeman 1997). Schmookler's demand pull model gives emphasis on the role as a stimulus demand plays on technical change. Using patent data on railroading, petroleum refining and building showed that profits derived from invention, investments inputted to support it, the number of inventors, and the dissatisfactions which stimulate them, are closely connected with sales. The classical concept of innovation states that incremental innovation is a normal occurrence in economic life which is brought about by the "technology push" of available inventions. Incremental innovations are also brought about by the "demand pull" resulting from increased incomes and changing tastes. The relationship between the number of inventions and the level of demand in relation to different industries was studied by Schmookler. His studies showed that "technology push" was influenced by other factors and not an independent variable. Changes in demand resulted to changes in the number of inventions. This means that the changes in the number of inventions are lagged reflections of the changes in demand. It is therefore demand pull which determines the intensity of innovation in industry. Demand pull determines the number of inventions and innovative activity. The demand-side emphasis made by Schmookler contradicts the supply-side position of Schumpeter. However, there are significant differences between the studies of Schmookler and Schumpeter which would lead us to assume that their analyses were on different areas. Incremental and adaptive change were not included in Schumpeter's study, while these were factored in by Schmookler. Schumpeter also excluded any automatic links between inventions and innovations, whereas Schmookler assumed that these were naturally present. Another difference was that Schumpeter focused on individual innovations while Schmookler dealt with the aggregates of inventions and innovations. However, empirical studies showed that there is no automatic relationship between invention and innovation (Mowery and Rosenberg (1979). There were also problems arising from the concept of demand. Schmookler's studies dealt with observed market demand. Subsequent studies expanded their coverage to include focus on the basic wants of the buyer and expected demand. The creation of different patterns of causation through incremental and radical innovations is a significant observation in Schmookler's demand pull studies. It also directs attention to the role of user needs in innovation activity. Researchers are also driven to move from linear models and investigate the complex interaction of various factors. Schmookler also emphasised the importance of investigating aggregate innovations and inventions, instead of simply focusing on individual innovations. The demand pull model is important because its focuses on the shaping of technological progress. It explains the role of demand as a catalyst for technological change in industries. Changing demand in the market serves as the guide for innovation activities towards profitable areas. Demand dynamics influences investment in inventing activities and the direction of innovative efforts across products and industries. Schmookler was able to show the economic nature of technological change. It contrasts with the traditional view that technological change is independent external factor in the growth process. Schmookler showed that demand conditions determine the desirability and realization of inventions and the existence of expected profitability and the expansion of market demand represents the key stimulus to which inventive activity reacts. Patents and investments are directly correlated. The increase in investments gives rise to the need for new processes which encourages innovation activities. Investments are stimulated by market demand. In turn, investments stimulate the need for more efficient and effective processes which can be answered through the development of new knowledge and technology. 6. Assess the links between basic science and technology that arise from flows of both information and skills. It is often the case that the investigation of a natural phenomenon would result to scientific discoveries. The resulting scientific breakthroughs would then be used to meet social needs. New fields of science are also explored with the anticipation that they hold vast potentials for practical application. The normal course of information is from science to technology. Although scientific activities do not necessarily require specific end-products in mind, they are often able to develop new inventions that have practical applications for industry. One example were the experiments done by Bell Laboratories which led to the invention of the transistor. Bell Laboratories investigated Group IV semiconductors to find ways of creating solid state amplifiers that would replace vacuum tubes. It is common to be general in the applicability context of research for industry and the military. The military has invested or supported in various non-specific activities in biomedical research, condensed matter physics and molecular physics, in the hope that specific applications can be developed with new scientific knowledge. The processes of acquiring new knowledge and the process of design are closely connected. Their relationship has increasingly become important as the cost of testing prototypes begin to mount. The use of theoretical prediction and the simulation of large systems, th empirical testing of subsystems, has replaced the full scale empirical testing of complex systems. This trend requires design tools and methods of analysis which are based on phenomenological understanding. This allows designers to anticipate modes of failure in complex technological systems subjected to extreme yet realistic conditions. The technical knowledge employed in design is known as engineering science and is a major activity in engineering research. Their implementation is very similar to those followed in the pure sciences. It is another form of basic research which just happens to be commonly labelled as "engineering". It has a downstream flow from research and generation of knowledge towards practical application in technology design. Human skills are developed in the form of research skills. Many of the researchers and advanced trainees acquiring these skills move on to applied activities. They do not only bring with them the knowledge they acquired in research but also the skills, methods and the network of contacts that they developed. The development of skills in science and technology follows the same flow, from generation of knowledge through research and development activities, to practical industrial applications. Academic training is increasingly becoming important and provides strong foundations for the development of new inventions by engineers and designers. Many who have been trained in scientific fields began in research, then gradually moved on to technological development. The increase in scientific training has resulted in the development and improvement of new devices and systems of innovation. 7. Discuss the internationalisation of innovation within firms, and its relationship to the internationalisation of production. Industrialised countries are all undergoing rapid and fundamental changes. With the revolutionary developments in information technology and the deregulation and liberalisation of markets, globalisation has become the driving force for firms and markets. Globalisation is the new arena for the world's economy. According to (Giddens 2001), globalisation is "the growing interdependence between different people, regions and countries in the world as social and economic relationships come to stretch worldwide". Internationalisation describes the increasing border-crossing of economic activities. It is an important component of a global economy. Although lagging behind, technological activities are also following globalisation trends. The internationalisation of technology means that the inventions, the inventors and the owners of the inventions frequently cross borders. Technology generated or invented in one country can be utilized for production purposes in another country. High-skilled workers such as engineers and scientists who were raised and educated in one country can be employed in other countries. Firms based in a country ca establish research and development linkages and alliances globally. Internationalisation has brought about several phenomena among which is the ownership of technology. A technology or invention may be developed or produced in one country but owned by a firm in another country. Another phenomenon is the international generation of knowledge wherein various research and development facilities located in different countries cooperate in the generation of knowledge. Ownership of an invention in one country by a firm located in another is a common occurrence in contemporary times. One of the reasons for this is it came about as an accident. Through increasing cross-border mergers and acquisitions of companies. Thus, the acquiring firm located in a country like the United States, instantly acquires the assets including the technologies of the acquired or merged firm. This phenomenon does not necessarily follow a research or economic strategy. It just happened that a research facility owned by a foreign company, transfers ownership to the firm which acquires it through merger or acquisition. Firms can also own technologies abroad by having research facilities in foreign countries. This is borne out of the will of firms to adapt their products to local markets. It also allows them to provide technical support to local subsidiaries. Having research and development laboratories abroad also enables them to monitor developments in technology in those regions. It gives firms the ability to tap foreign technology, through the penetration of local research networks at lower cost. It also allows the form to provide special technology which gives the recipient country comparative advantage while complementing the core technologies of the investing firm. By tapping into foreign research networks and acquiring complementing technology from other countries, firms put into effect a form of technology transfer flowing from the recipient country into the investing firm. New inventions are also produced through the joint cooperation or joint venture of researchers based in different countries. It is upheld that knowledge diffuses across borders and serves the public good. This type of cross-border cooperation is made possible by the reduced costs of communications which makes networking more feasible. The trend towards specialisation by researchers also increases the benefits derived from networking. International cooperation allows for the convergence of knowledge from various sources which results in the generation of new inventions. This is more so since the increasing trend towards specialisation means that different countries have specific research expertise and it requires the coming together of various experts and discipline to generate new technologies. Cross-border cooperation also contributes to the increase in innovation activities among local research facilities. 8. What are the key hindrances to corporate strategy in the field of innovation Comment on the part that simple rules might play in an effective technology strategy. Many firms which have fostered innovations have been unable to capitalize on their capabilities and remain unable to get new products through to their markets. The problems were not technology, talent or skill. Corporate strategy can be well designed but problems in effecting innovations still remain a problem for many firms. Among the foremost problems in the failure of innovations to make it to market is that organizations do not have the ability to discuss internal problems. Thus, the innovations get stuck inside the organization and are not given the opportunity to show what it can do in the marketplace. To remedy this, corporate leaders should realign their firms to promote open and honest conversations about barriers that their organization encounters. It becomes necessary for management to look closely on the roles each department performs and how employees interact. Business innovation requires changes in decision-making, especially in who makes the decisions and who exercises power. Authority should be delegated to product development teams. However, these changes are often resisted by senior functional leaders who are used to making the decisions. Managers also find it difficult to deal with complex situations. Their tendency is to reduce complex situations into simple ones. The results are that managers seek seemingly simple if not simple-minded solutions to problems. This makes managers susceptible to the preachings of so-called management "gurus". Panaceas may be adopted which may be successful initially and in some situations. The initial successes would lead managers to promote these simple solutions which would prove unsustainable and ineffective in the long-term. Firms also find it difficult to develop new products which the market or consumers could not conceptualise. They also lag behind if not fail to identify and provide supports required in a rapidly changing business environment. To do this, firms must develop synthetic thinking which allows for the better understanding of complex systems. It is a method of thinking about and designing a system in which the properties, characteristics and behaviour of its parts are based on what is required of them by the whole system and its design. It is the whole system which has the properties not possessed by its parts. Analytical thinking tends to break down a system into its various parts. It then tries to explain and understand the behaviour of these parts and brings these analyses together as an aggregate, to explain the behaviour of the whole. Analytical thinking may reveal how a complex system works. However, it does not explain why it works the way it does. Synthetic thinking allows managers to do both. Synthetic thinking applied to firms gives knowledge on how the system works and why it works the way it does. Problems also arise in resource allocations. Management must be able to evaluate and compare the relative advantages of proposals coming from different sectors. These proposals have different competitive positions, time horizons, risk profiles, and management teams of varying abilities. The dilemma faced by managers is that it becomes uncertain whether they are investing in the right proposal given that there are numerous departments vying for funds and supports. Portfolio management also offers problems in light of innovations. Even if certain businesses meet the economic requirements of the portfolio, they remain incongruent with the overall corporate family. Managers who have extensive experience with mature businesses can find it difficult to handle new spin-off businesses which are located in sectors that are dynamic and unfamiliar. 9. In what sense do firms follow a technological trajectory To what extent is it a firm's reliance upon its distinctive capabilities that drives path-dependency in technological accumulation It can be expected that all industrialized economies would have relatively the same level of technological development as a result of the adoption of market-based economies by these countries. The gap between industrialized economies is small compared to the rest of the world. Though small the gaps may be, they still remain significant and follow very different technological trajectories. Schumpeter argued that technological innovations are "exogenous". This means that innovations are a result of advances in science and technology, and are therefore occurring outside economic systems. However, new views such as that of Schmookler contend that innovations are endogenous to economic systems. The endogenous character of innovations makes it "path-dependent" in its development. Innovations are path-dependent because current product, process, application and activities determine or influence the direction of technological development. As an example, the United Sates' emphasis on military technology created a technological trajectory or path-dependence that was advantageous for the development of inventions and products for heavy industries. However, this same path-dependence made it difficult for the U.S. to compete given the innovations in information technology. Asian economies have taken the lead in knowledge-based industries, taking the edge from the U.S. which had been hindered by their existing path-dependence. It is not enough for the United States or any country to acquire technological knowledge through cross-border alliances to ensure the absorption of technologies, enhanced competitiveness or producing innovations. There are certain technological knowledge that cannot be immediately integrated into production processes unless the proper environment is present or the technological trajectory that would allow integration. There are cyclical and incremental processes involved using accumulated learning and iteration which is gained by being engaged in the production process. Cumulative learning results in the formation of a skilled workforce and proprietary technology and techniques. This creates a specific path-dependence that makes it difficult for other countries or firms to duplicate without going through the process. Certain elements such as skilled labour force, infrastructure and the appropriate production organization must exist before any new technologies could be effectively applied. Though new technologies are available and could be acquired through international markets. This is made possible by the increasing internationalisation of science and technology. It is not difficult for countries like the United States to monitor and tap into the technological developments occurring in other countries. However, the capability to adopt and apply them into a state's production system would be dependent on political and economic factors. Most important of these are the country's or firm's technological trajectory. If the technological trajectory is incongruent with the new technology, meaning the new technology does not coincide with the direction taken by the firm in terms of innovations, then it is required that the necessary paradigm shifts and elements in a production system be created before any application should be made. Pat-dependence becomes a barrier which prevents countries from immediately adopting new technologies. The requisites of a sustaining environment and infrastructure must be present before new technologies can be successfully adopted. Sources: Bowne, David (1997) On the Relationship Between Science and Technology. Time's Harvest, Last updated: November 24, 1997. http://www.is.wayne.edu/drbowen/thf97/scitech.htm Brooks, H. (1994) The relationship between science and technology. Research Policy, Vol. 23. Freeman, C. Soete, L. 1997) The Economics of Industrial Innovation. #rd Edition. 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National Solar Power Research Institute. http://userwww.sfsu.edu/ciotola/solar/newsletter/15_obstacles.html Read More