6 Δεκ 2012 (πριν από 8 χρόνια και 7 μήνες)

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(INN001, 5 p.)

Lecture 10 September 2007

Olof Ejermo

From ”positions” to ”paths”

Two fundamental questions underlying
innovation strategy:

Where are you today…?

… and where can you go tomorrow?

The first question is about ”positions” =>
see chapter 4 and last week’s theme

The second question is about paths and
dependence => chapter 5

Where can you go tomorrow?

Cannot choose freely where to go = firms
innovative activities are path

Innovators are constrained by (at least)
two factors:

Present and likely future state of technological
knowledge (not everything is technologically

Limits of corporate competence (no firm has
the competence to do everything!)

Learning is path

Innovation involves a lot of trial, error and

Learning tends to be incremental, since major
step changes in too many parameters both
increase uncertainty and reduce the capacity to

As a consequence, firms’ learning processes are

Moving from one path of learning to another can
be costly, even impossible…

… although success stories do exist

How to jump to a new path?

Hire new employees with the desired

=> Difficult, because a FIRM’s

competencies are
rarely the same as those of an INDIVIDUAL!

=> A firm’s competencies are deeply embedded into
specialized, interdependent and coordinated groups,
teams, divisions…

Acquire a firm that has the desired competencies?

=> Difficult because of different practices, cognitive
structures and corporate cultures

Interesting alternative: ”Corporate ventures” => see
further chapter 10

Technological constraints
depending on sector

Firms in different sectors follow different ”technological

Some firms build up huge R&D laboratories and operate
scale manufacturing plants, while others have
merely 5
10 employees…

Some firms focus first and foremost on product
innovation, while others focus more on process

Some firms perform most of their innovative activities
within the firm (”in
house”), while others rely heavily on
external partners

For some firms the R&D lab is the central place for
innovation, in other firms it is rather the ”design office” or
the ”systems department”

Five Major Technological Trajectories


the Pavitt taxonomy

intensive (e.g. cars, steel)

based (e.g. electronics,
chemistry, pharmaceuticals)

Specialized suppliers (e.g. instruments,

dominated firms (e.g. agriculture,
traditional manufacture)

intensive (e.g. finance,
retailing, publishing, travelling)

Characteristics of innovation in the
Pavitt taxonomy

Size of innovating firms

big in chemicals
vehicles material, aircraft…, small in machinery, instr.,

Type of products

price sensitive in bulk goods,
performance sensitive ethical drugs

Sources of innovation
: suppliers in agriculture
and traditional manufacture (e.g. textiles), customers in
instrument machinery & software, in
house in chemicals
& electronics…., basic research in ethical drugs

Locus of own innovation
: R&D
labs in chemicals
& electr., prod. eng. depts in automob. & bulk, design in
machine building, systems depts in service industries

’Revolutionary technologies’ and their
impact on technological trajectories

specific technological trajectories
change over time as improvements in the
knowledge base open up new
technological opportunities

Since the early 1980s: three fields pointed
at as a source of new opportunities:



Microelectronics and IT

The biotechnology revolution

1970s: ’Recombinant DNA’ as a scientific breakthrough
(inserting new DNA into organisms)

Vast technological opportunities created through gene
therapy, antisense technology, automated gene
sequencing, gene discovery, genome analysis

Greatest impact on firms have so far been on R&D
programmes in pharmaceuticals, agriculture and food

Many specialist biotech companies formed in response
to these trends

New applications expected in textiles, leather, paper &
pulp, oil refining, metals and mining, printing,
environmental services, speciality chemicals etc.

However, many disappointments (no radical short
cuts to
profitability in pharmaceuticals)

Important interactions between scientists, biotech
entrepreneurs and user industries

The materials revolution

Traditionally a wide separation between materials
engineering and materials science

First step towards uniting the two was through chemicals
R&D in 19th century…

… but it is only during the last half
century that the
collaboration between engineering and science in
materials has really started to thrive

Driven by powerful new scientific theories and improved
instrumentation (microscopy, spectroscopy)

As a result, innovation in materials has become much
more science

Examples: ceramics, polymers, optical fibres,

The microelectronics and IT revolutions

The microelectronics and IT revolutions

The technological trajectories of firms and
countries in software and hardware are
becoming decoupled

Three features of the IT revolution that are
increasingly important for innovation strategy:

Increasing systemic nature of economic and
technological activities

Decreasing cost of product development

Disappearance of low/medium/hi
tech distinction

Pavitt taxonomy applied to service
sectors (Miozzo & Soete)

Pavitt taxonomy

early 80s (yet still highly

Services have developed enormously and
today account for ~ 2/3 employment in
modern economies


personal services (restaurants, hotels, barber etc)

publ. & social services (health, education, publ. adm)


Physical networks: transport & travel, wholetrade &

Information networks: finance, insurance,

based and specialized suppliers :

Business services linked to: R&D, software,
development and appl. of information

The rise of services (esp. science
based and specialized suppliers)

Importance highly growing

e.g. development and use of data,communication,
storage and transmission

Banking, insurance, cell phones, air reservations etc.


Digitalization of information

> data processing to information handling, e.g. information
network services, logistics, route planning

Single distribution network for a growing number of

> telecommunications infrastructure (mobile phone networks,
internet etc)

Trends in service industries



Increased storability & transmission of services: collapse of time
& space

Traditionally services produced & consumed simultaneously

Higher demands on consumers knowledge


New divisions of labor
> e.g. Indian software support

Linkage structures change: Factor endowments not as important,
increased emphasis on linking up
> competitive advantages

Outsourcing of innovative activities

Much specialized activities are ’moved out’ of firms

Overall knowledge requirements & intensity rise

Developing Firm
specific Competencies

‘Core competencies’, according to Hamel and
Prahalad (1990):

Sources of competitive advantage is in competencies,
not in products

Found in more than one product and in more than
one division

Stress the importance of associated organizational

Five or six core competencies

Multidivisional firms as bundles of core competencies

Importance of a strategic architecture

The weaknesses of the

core competencies approach

Overestimates the potential of technology
diversification in all industries

Underestimates the importance of

for coordination and benefit from
outside linkages

Underestimates the importance of

due to rapidly developing fields
(ICT, new materials, biotechnology, etc.)

The problem of ‘core rigidities’

Better concept: ’
Distributed competencies’

Proposed alternative by Tidd et al. (2005)

Technological paths in small firms

dominated firms

Specialized suppliers


New Technology
Based Firms (NTBFs)


Their existence and success is typically based on the
exploitation of a major invention (e.g. Instant
photography) or a rich technological trajectory (e.g.
semiconductors, software)

They are often spin
offs from large firms or have tried to
offer their inventions to large firms but were refused!

In some sectors entry barriers seem to be too high for
superstars to emerge (chemistry, pharmaceuticals)

Main challenge is to manage the difficult transition from
small to large, scale up production etc. while
aggressively update its own and competitors’ original

Examples: Polaroid, Xerox, Intel, Microsoft, Sony,
Benetton, Lenovo

New Technology
Based Firms

They usually emerge from large firms or
(corporate or academic) laboratories

Specialized in the supply of a key component,
subsystem, service or technique to larger firms,
who may often be their former employers

Question for the future is whether to aim to
become a ’superstar’ or a ’specialized supplier’

Many NTBF entrepreneurs are not interested in
term growth of their small firms, but prefer
to sell them within a few years


Firms’ innovative activities are path
they rarely jump to a completely new path

We may discern at least five types of
’technological trajectories’

The emergence of revolutionary technologies
open up new opportunities for a firm to change
its paths

Concept of ’core competencies’

use it
carefully, the concept has weaknesses,
especially for our understanding of how firms
can learn new competencies

Small firms are more difficult to classify in terms
of their technological paths