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Science and technology from a business and economics perspective . Lecture 1 2007-10-22 Emelie Stenborg. Teaching week 1. Monday 10-12: Creative destruction and industrial innovation Schumpeter + Fagerberg (125-135, 141 f) Utterback (4, 2, 7, 10) Wednesday 10-12: Innovation in firms

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Science and technology from a business and economics perspective

Science and technology from a business and economics perspective

Lecture 1

2007-10-22

Emelie Stenborg


Teaching week 1
Teaching week 1 perspective

  • Monday 10-12: Creative destruction and industrial innovation

    Schumpeter + Fagerberg (125-135, 141 f)

    Utterback (4, 2, 7, 10)

  • Wednesday 10-12: Innovation in firms

    Tidd et al (1, 2, 12)

  • Friday 10-12: Seminar with presentations


Information
Information perspective

Week 1 – Emelie Stenborg

Week 2 – Astrid Szogs

Week 3 – Lars Coenen

Week 4 – Home exam


The plan is then
The plan is then perspective

  • To start with the greatest influencer in evolutionary economics and see how he is relevant today

  • Explain industrial dynamics in industries

  • See how firms can manage innovation

     Hopefully we will be able to see both why innovation is important and how it can be managed in firms!



Schumpeter
Schumpeter perspective

  • First half of the 20th century

  • Ideas resurfaced in the 1980s

  • Influenced evolutionary economics and capitalist dynamics

  • Was early in objecting to classical models (influenced by Marx)

  • Still important as the ”holistic” view still today often is not used


Schumpeter s opinions 1
Schumpeter’s opinions (1) perspective

  • Argues against ideas of ”perfect competition”

  • Even under mono- or oligopolistic competition great advances are made

  • Effects the standard of life for people

  • Includes quality and marketing in the competitive advantage of firms


Schumpeter s opinions 2
Schumpeter’s opinions (2) perspective

  • Also wants to move on from equillibrium models

  • Sees them as nice ideal models

  • Equillibrium would be destroyed by innovation

  • New products, processes, organizations, markets poses the greatest threat

  • Innovation only gives an initial advantage


Schumpeter s opinions 3
Schumpeter’s opinions (3) perspective

  • Defies the static view of economics

  • Firms are shaped by the past and by the future

  • Have to see the context to understand the firm

  • Firms are organic in their structure

  • Uncertainty is a genuine concern – constrains innovation


Schumpeter s opinions 4
Schumpeter’s opinions (4) perspective

  • New way of looking at how innovation is produced

    New combinations of existing things – not only technological

    The role of institutions

    Has to do with the non-technological issues

    From new entrants

    The role/characteristics of the entrepreneur


Creative destruction
Creative destruction perspective

  • Replacive new technology – creating a new industry, destroying an old

  • Creates new proffesions

  • Big firms are innovative but under constant threat by young firms

  • Comes as business cycles

  • Is a societal reality and concern

  • Key factor; cheap, universally available input, rapidly falling cost, used in many sectors  pervasive!


Now some discussions
Now, some discussions! perspective

Two and two, give example of creative destruction and (if you know) what happened to the old players and how has the industry changed?


About organizational innovation
About organizational innovation perspective

Discuss fordism and post-fordism in terms of

  • efficiency

  • culture

  • how to make it work



This model tries to
This model tries to… perspective

  • Link innovation, market and industry

  • The level of product and process innovation can be related to the stage of the industry

  • Handels both incremental and radical innovation

  • Explanatory, general model

  • Academically very influental (together with Abernathy)


Innovation and industrial evolution
Innovation and Industrial Evolution perspective

  • Assembled products

  • Not universal

  • Links the following to the industry life cycle

    • Product innovation

    • Process innovation

    • Organizational change

    • Market

    • Competition


Innovation in an assembly sector
Innovation in an assembly sector perspective

http://www.zanthus.com/databank/innovation/docs/abernathy_utterback.ppt



What happens after the specific phase
What happens after the specific phase? perspective

  • New vawes of innovation

    • Next generation

    • Skip a generation

  • Organisational innovation

    • Japanese style

    • Corporate ventures

    • Networking organisation

    • Mass customization


Dominant design
Dominant design perspective

  • The design that wins the competition…

  • Not based on technological superiority but instead on a mixture of market and organizational factors

  • Creates

    • What defines the product

    • What is required by the product

    • Meets the need of most customers

    • New proffesions


How does it come about
How does it come about? perspective

  • Interplay between market and technology

  • Important non-technological factors

    • Collateral (Complementary) assets

    • Policy

    • Firm strategy

    • Communication


Effects of dominant design
Effects of dominant design perspective

  • Competition

    • Shifts the basis from product to process

    • Less and less firms

    • Slower introduction of change (maybe less true these days…)

  • Implication  Organisational change is necessary!


Organizational implications
Organizational implications perspective

  • Leadership or followership

  • Sets the boundaries for change (I thought about plastic waterbottles the other day…)

    • Constraints, users, habits, complementary assets…

  • Can we spot it? At least three variables

    • Chance

    • Technology

    • Social process

  • Disruptive change comes from outside of the industry (More on Wednesday)


Radical innovation
Radical innovation perspective

  • In industries times of stability are disrupted by times of discontinuity

  • Example of generations of the ice industry in the USA – manually harvested  mechanical ice-making  refrigerators

  • In this context we talk about replacive products


Performance of old and new technology
Performance of old and new technology perspective

Product performance

t1

t2

t3

Time

Utterback, Mastering the Dynamics of Innovation


Dynamics of radical innovation
Dynamics of radical innovation perspective

  • First inferior to old ones – but with potential

  • Early, demanding users – but has to have mass market potential

  • Timing – decline of improvements of old technology, rapid improvement of new

  • ”Sailing ship” – old technology fights back


Old vs new firms
Old vs New firms perspective

  • Existing customers

  • Existing products

  • Resources (investments)

  • Other stakeholders (shares, staff, funders…)

  • Existing organisational structure

  • Bureaucracy

  • Mindset – emotionally comitted

  • More?


So how to be an innovative firm according to utterback 1
So, how to be an innovative firm? perspective (According to Utterback) (1)

  • Technology, markets and organisation

    1) Support radical developments

    • Wide experimentation

    • Learning organisation

    • External vision

    • Developed and balanced core competences

    • Strategies

    • Alliances

    • Accept change – it will happen!


So how to be an innovative firm according to utterback 2
So, how to be an innovative firm? perspective (According to Utterback) (2)

2)The importance of incremental innovation!

  • Improve and extend existing lines

  • Parallell innovation

  • Right structure

  • Develop complementary assets


Summary
Summary perspective

  • Utterback

    • Innovation, market and industry

    • Industry life cycle

    • Fluid, transitional and specific phases

    • Dominant design

    • Radical innovation

  • Schumpeter

    • ”Imperfect competition”

    • Innovation is the driver of the economy

    • Dynamic economics

    • Innovation and non-technological aspects

    • Creatve destruction


Wednesday
Wednesday perspective

  • We will continue with how firm’s have to relate themselves to the management of innovation to stay in the business.


Seminar assignment
Seminar assignment perspective

Work in groups of 2 to 3 people. Choose a firm (possibly a technology of a firm) and relate it to concepts introduced today and on Wednesday:

  • Creative destruction

  • Industrial dynamics

  • Management of innovation

    Presentation (10-15 minutes) on Friday!


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