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  1. INNOVATION MANAGEMENT 2006 Dr Ilan Bijaoui

  2. THE KNOWLEDGE DRIVEN ECONOMY • Knowledge, new factor of production” Drucker P.(1998”From capitalism to knowledge society “in Neef D. The Knowledge Economy Woburn MA Butterworth) • Knowledge in Production (learning by doing) and in Consumption (learning by using) • Broadened type of measures, not only R&D • Fostering innovation culture, Setting up legal and financial framework, Gearing research closer to innovation • Systemic Approach –Diffusion of innovations- impact on knowledge Source: Cowan R. Van de Paal G.(2000) Innovation Policy in a Knowledge-Based Economy A MERIT study Commissioned by The European Commission Enterprise Directorate General

  3. Schumpeter identifies innovation as the dynamic "deus ex machina" of capitalism. In his own words (1934): The fundamental impulse that tests and keeps the capitalists' engine in motion comes from the new consumers' good, the new methods of production or transportation, the new markets, the new forms of industrial organization that capitalist enterprise creates. (p. 137) Schumpeter, J.A. (1934). The theory of economic development. Cambridge, MA: Harvard University Press


  5. THE INNOVATION ECOLOGY AND BREAKTHROUGH DILEMNA • University-Education – Multi disciplinary • Research Organizations – Not development • Government funding agencies -Alternatives • Technology companies - Risk • Investors • Consumers


  7. INNOVATION DEFINITION • The ability to manage knowledge creatively in response to market-articulated demands & other needs. (Source: Managing National Innovation Systems, OECD 1999) • New Creations with Economic Significance • Products what is being produced; Process How goods are produced • Source: Edquist C. & Johnson B.(1997) “Institutions and organisations in systems of innovation in Edquist(ed) Systems of Innovations: Technologies, Institutions and Organizations, London & Washington Pinter/Cassell Academic)

  8. TYPES OF INNOVATION • Product Innovation: • The creative development and commercialization of radically new products, often grounded in new technology and linked to unmet customer needs • Process Innovation: • The development of new ways of producing products that lead to advantage in cost. • Business Innovation: • The development of new business and new way of conducting business that provides unbeatable competitive advantage Source:Arthur D. Little “ Global Survey on Innovation” in Jonash R.S. The Innovation Premium, Persus Books, 1999 p 114-136

  9. TYPES OF INNOVATION • Product Innovation: • Changes in the things (products/services), which an organization offers. • Process Innovation: • Changes in the way in which they are created or delivered • Position Innovation: • Changes in the context in which they are created or delivered.(Ford, Lucozade drink) • Paradigm Innovation: • Changes in the underlying mental models which frame that the organization does,(low cost airlines) Source:Tidd J. Bessant JManaging innovation John Wiley 2006 p 10

  10. Platform Robust Design Intel PG cyclodextrin detergents odor control Febreze

  11. RESEARCH & DEVELOPMENT • RESEARCH • Search • Planning • New Knowledge • Non Public Knowledge • Future Implementations • DEVELOPMENT • Implementation • Direction • Product/Process • Improvement • Business Objective

  12. THE PLACE OF R&D/INNOVATION AS A COMPONENT OF GNP Management Labor Education Goods & Services Capital Consumer R&D Innovation New Concepts Raw Materials

  13. MARKETING HIGH TECH Source: Mohr j. Sengpta S Slater S Marketing High Technology Products and Innovations Second Edition Pearson Prentice Hall 2004 p 1-16

  14. INITIATING FACTORS TO INNOVATION • Business Objectives • Financial goals • Sales growth • Market Share • Globalization • Material costs-availability • Shorter Life Cycle • Suppliers initiatives • Environmental Change • Technology • Regulation • Invention • Demography, lifestyle • Customer requests • Rivalry-Alliances

  15. ENTREPRENEURIAL BREAKTHROUGH VERSUS CORPORATE INCREMENTAL IMPROVEMENTS • Entrepreneurial breakthroughs: unorthodox approach, creativity • Incremental Improvements: body of knowledge conventional way of thinking • Edison little schooling. Steve Wozniak Apple, no graduation; Bill Gates, dropped out Harvard, Michael Dell quite university –Dell Computers (Bhide2000 p36 • Large firms: Intel instruction per second grew per 3milion % ; P&G 1250 PhD, 3800 per years 24000 active patents • Hybrid education? Source; Baumol W.J.(2005) “Education for Innovation” in Innovation Policy and the Economy Vol 5 National Bureau of Economic Researches

  16. Inventor and Innovator: Electric suction sweeper : J.Murray Spengler WH Hoover Sewing machine: Elias Howe Isaac Singer

  17. DEFINITION OF INNOVATION POLICY • A Set of Policy Actions to Raise the Quantity and efficiency of Innovative Activities • Innovation Activities Refers to the Creation, Adaptation and Adoption of new improved Products, Processes, or Services • At the Level of the Firm or the Institution, Local, National • To Increase Competitiveness: Productivity, Profit or Market Share Source: Cowan R. and Van de Paal G (2000). Innovation Policy in a Knowledge Based Economy Merit The European Commission p 9

  18. Tacit & Specialized knowledge • Geographic clustering in knowledge generation • Models of diffusion process: Education system broader than the industry structure of the innovative industries • Knowledge Bases. Norwegian offshore and food processing industry Smith K.(1998 Indicators and data for European analysis (IDEA) European Commission )

  19. FOUNDATIONS • From system of production to system of innovation: backward linkages Learning by doing and learning by searching; Life cycle perspective; Open economy; Quality of Demand • Home market and economic specialization • From innovation interactive process to National innovation system • Dimensions:Structure of the system: What are the most developed production and competencies? Institutional set up: How does production, innovation an learning take place?(Freeman C.1995“History co evolution and economic growth” IIASA working paper 95-76 IIASA Laxenburg)

  20. Schumpeterian strategies • Pioneers; Adaptionist; Imitators; Complementors (NaleBuffB.J. & BrandenburgerA.M. (1996) Co-opetition Harpers Collins London).Danish –(Edquist C. Lundvall B.A.(1993) “Comparing the Danish and Swedish Systems of innovation” in Nelson R.R. National Innovation Systems A comparative Analysis Oxford University Press Oxford • Mixed strategies: Japan Adaptionist, Imitators,Complementors (Freeman C.(1988) “Japan: an ew national innovation system? In Dosi G. Freeman C. Nelson R.R.Silverberg G. Soete L.Technology Chang and Economic Theory Pinter London Source: Lundvall B.A. Johnson B. Adessend E.S Dalum B.2002 “National Systems of production, innovation and competence building. Research Policy 31(2002) 213-231

  21. Evolutionary Nature: Paradigmatic Changes, Structural Adjustments (Galli and Teubal 1997); Predictive Elements (Edquist) • Learning economy: • Short Term economic efficiency • Long Term knowledge efficiency (Jessop B.1999 “The state and the contradictions of the knowledge-driven economy. Development Research Working papers. Department of Development & Planning )

  22. THE SYSTEM OF INNOVATION-DEFINITION • The Network of Institutions in the Public & Private Sectors whose the Activities & Interactions, Initiate, Import, modify & Diffuse Technologies. Freeman C.(1987)Technology Policy and Economic Performance: Lessons from Japan London Frances Pinter) • Narrow Definition-Organizations exploring & Searching R&D dept., Institutes, Universities; Broader-Economic Structure (Production, Marketing) Lundvall (1992) National Systems of Innovation: Towards a Theory of Innovation & Interactive Learning London Pinter): Archibugi D. Howells J., Michie J(1999). “Innovation Systems and Policy in a Global Economy’ in Innovation Policy in a Global Economy Cambridge University Press,

  23. Technological Innovation Edquist (1997)Systems of Innovation Their emergence and characteristics in Edquist C.1997 Systems of Innovation: Technologies, Institutions and Organizations London Pinter(Nelson, Rosenberg –1993 Technological Innovation and national systems in Nelson R.R.1993 National Innovation systems: : A comparative analysis New York Oxford Press University ). • Institutional Innovation (Lundvall); • Social-Educational Innovation – Freeman (1988 ) Source: Lundvall B.A. Johnson B. Adessend E.S Dalum B. “National Systems of

  24. Set of distinct institutions which jointly and individually contribute to the development & diffusion of new technologies and which provide the framework with which governments form and implement policies to influence the innovation process OECD (1999) • Source:Metcalfe 1995 The Economic Foundations of Technology Policy: Equilibrium and Evolutionary Perspectives” in Stoneman P. Handbook of the Economics of Innovation and Technological Change pp 409-512 Blackwell, London

  25. SYSTEMS OF INNOVATION GOVERNMENT BOUNDARIES COMPONENTS Organizations Institutions Firms Universities Other services Standards Patents Support Interaction Relation FUNCTIONS R&D Production Supply Education Marketing OVERALL FUNCTION

  26. COMPONENTSEdquist C. & Johnson B.(1997) “Institutions and organisations in systems of innovation in Edquist(ed) Systems of Innovations: Technologies, Institutions and Organizations, London & Washington Pinter/Cassell Academic • Organizations: Perform activities Structures with Purposes: Companies, Universities, Venture capital • Institutions: Provide incentive framework. Regulate relations between, Individuals, Groups, Organizations (Patents, Laws). Rate & Direction of innovative activities(Johnson B. 1988 “Institutional approach to the small country problem” in Freeman, Lundvall Small Countries Facing the Technological Revolution, Pinter London New York ) Edquist C.(2001) “The Systems of Innovation Approach and Innovation Policy: An account of the state of the art” DRUID Conference June 12-15 2001

  27. Time-Horizon of agents; Role of Trust, Actual mix of Rationality(Lundvall B.A.”National Systems of production, innovation and competence building, Research Policy 31(2002) 213-231) • Relations, Interaction between Organizations/Institutions FUNCTIONS • Overall function: Produce, Diffuse, Use Innovations • Research (Basic, Development); Implementation (Manufacturing); End Use (customers, process outputs); Linkage(bring together knowledge); Education Liu X.& White S.(2000): “Comparing Innovation Systems: A Framework and Applications to China’s Transitional Context’ Research Policy 2001)

  28. Create New knowledge; Guide the direction of the search process, Supply resources, Facilitate creation of external economies, facilitate formation of marketsJohnson A., Jacobsson S.(2001). “ The Emergence of a Growth Industry:Analysis of the German, Dutch and Swedish Wind Turbine Industries Schumpeter Conference Manchester 2000 )

  29. Create human capital; create & diffuse technological opportunities; products; incubate in order to provide facilitie; facilitate regulation for technologie, materials & products; legitimise technology & firms; create markets; enhance networking; direct technology & market; facilitate financing; create labour marketJohnson A., Jacobsson S.(2001). “ The Emergence of a Growth Industry:Analysis of the German, Dutch and Swedish Wind Turbine Industries Schumpeter Conference Manchester 2000 )

  30. RELATIONS FUNCTIONS / COMPONENTS • Several organizations can fulfill one function (R&D: firms research centers) • One organization can fulfill several functions: university provides new knowledge & education • Function and institutions (R&D and governmental support and educational system) • Institutions & organizations: mutual embedded: organizations in institutional environment and institutions in firms (book keeping)

  31. BOUNDARIES • Supranational, National, Regional, Sectorial • Spatially(Geographically), Sectorially, Functionally • Public Action from Supply & Demand Side • Deficient functions-system failure: Problems solving Functions missing or inappropriate Organizations inappropriate Institutions inappropriate Interactions or Links inappropriate • Design & Implementation of Innovation Policy

  32. THE STATE-INNOVATION POLICY • R&D Policy • Technology Policy • Infrstructure Policy • Education Policy • Regional Policy

  33. NATIONAL SYSTEM OF INNOVATION Environment and Infrastructure conditions Innovation Systems Knowledge Generation Diffusion & Use Country Performance: Growth, Job creation, Competitiveness Source: OECD, Managing National Innovation Systems, Paris 1999 p 21-48

  34. ENVIRONMENT & INFRASTRUCTURE CONDITIONS – Institutions & Support Organizations Macroeconomic and Regulatory context Education & Training systems Communication Infrastructure Corporate governance & finance Product & factor market conditions National Innovation Capacity

  35. KNOWLEDGE GENERATION, DIFFUSION & USES – Active Organizations Firm Capabilities & Networks Science System Other Research Bodies Supporting Institutions

  36. INNOVATION SYSTEMS/NETWORKS Global Innovation Networks Regional Innovation Systems Clusters of Industries National Innovation System

  37. LEVELS OF NIS ANALYSIS Macro Clustering analysis Macro Level Functional analysis Interactions among firms, , firms and others, technology diffusion, personnel mobility Sectoral clustering approach Meso Level Spatial clustering approach Functional clustering approach Other firms Micro Level-Firm Non market institutions

  38. SPECIALISATION IN NIS- overall function Technological Specialisation Scientific Specialisation Agro food Health Computing M.Eng. AUS. B, DEN B, DN, FR, NL, J, K SW, D NL D, IT, S UK Size Standard of Industrial Living Specialisation Export Specialisation Food Pharmaceuticals Computing AUS, DN, NL B, DN, SW J, USA, UK, NL


  40. NORVEGIAN SYSTEM OF INNOVATION Support Organisations (Venture Capital) &Institutions (Technological Transfer)