Economia e gestione dell'innovazione

INTRODUCTION

Innovation is often hidden in simple episodes

eg. In 2015 key-note speech at Moscone Center in San Francisco, Kim Cook -

Apple CEO - called on stage Bono Vox, U2 leader. Cook announced a new

initiative: iTunes users could download for free last U2 album

What was the rational for Apple on one side and U2 on the other?

Which more substantial reasons can explain this?

Not all innovations are fundamental

eg. Butter stick type

banana case

How to identify a fundamental innovation?

A. Rely on the concept of subjective utility function

B. Rely on degree of diffusion as a proxy of utility

Dealing with innovation might lead to unfortunate predictions

eg. The most prominent and in uential of all American newspaper, the New York

Times, solemnly declared: “Television will never be a serious competitor for radio,

because people must sit and keep their eyes glued on a screen; the average

American family hasn’t time for it”

in 1943, Thomas Watson (IBM president) said that there was room only for ve

computers

+ technology evolves a lot during the time

eg. First commercial portable phone

How to classify innovation:

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INNOVATION AND ECONOMIC THEORY

Division of labor and exchange

Adam Smith: where the wealth of nations comes from

1. Natural resources

2. Division of labor that leads to specialization

Eg. Pins’ factory

To get realized, economic exchange must be:

Voluntary

• “Fair”

• Satisfactory

• Not binding

• “Anonymous” = personal features are irrelevant

•

Division of labour is bene cial increases productivity [= rate of output per unit of input]

- learning by doing

- time-saving (no set up costs)

- design of machines and robots gets the job

easier

Schumpeter (1883-1950)

Vision:

- capitalism is an evolutionary system

“Capitalism is by nature a form or method of economic change and can never be stationary”

- creative destruction as key feature

“Industrial mutation incessantly revolutionalizes the economic structure from within, incessantly

destroying the old one, incessantly creating a new one”

- Instability is the rule Invention ≠ innovation

A technical, technological or A technical, technological or scienti c

scienti c breakthrough breakthrough AND market diffusion (and

possibly, success)

outcome of:

Small, innovative and

• entrepreneurial rms

Large rms with organized R&D

• labs

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Video: Vibram’s shoes vs Michael Jackson shoes

Solves his speci c problem

- trying to sell

- Different purpose from MJ

- Accomodate large customers needs

Schumpeter considered innovation as the outcome of:

1° part of his life: small, innovative and entrepreneurial rms

2° part of his life: large rms with organized R&D labs

Innovation requires breaking the rule rstly, Schumpeter focalized his attention on small rm

→

that want to change

BUT between the two wars, large rms entered in innovation organizing R&D labs

Schumpeter shifted his attention on large rms

→ Chain of steps that are dependent

How to classify innovation:

New products and new processes (new combinations of resources)

New ways of organizing adjustment to new conditions

→

New markets’ opening

New procurement sources

innovation is not an incremental adaption BUT is disruptive

Why should rm engage into innovation? You are a monopolist because you are

the only one that has introduced the

new product

you can charge any price

→ extra-pro t

It is temporary because the

extra-pro ts attract other

rms that want to enter in

the same business

etrxa-pro ts drop At the beginning,

negative pro ts

To make the monopolistic position constant, you have to set high barriers of entry

=

any factors that prevents a rm

to enter in the business

Government

• Intellectual property rights

• Capital required

•

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The myth of the invisible hand by Adam Smith

According to several economists and policy-maker, innovation is a companies’ business

A smart innovation agenda, in short, would be quite different from the one that most rich

governments seem to favor. It would be more about freeing markets and less about picking

winners; more about creating the right conditions for bright ideas to emerge and less about

promises like green jobs. But pursuing that kind of policy requires courage and vision - and most

of the rich economies are not displaying enough of either.

A different view about the role of states (by Mariana Mazzuccato)

Set the conditions for the Instrumental in making

Finance basic and + +

rise of several innovation, the emergence of new

risky research even radical and disruptive markets possible

Examples: aero-space, information technology, internet, nuclear energy

the “Entrepreneurial State” plays a crucial role in the innovation race through

Establishing monopolies

1. Setting the rules of the game Encouraging free competition

2. Financing and supporting research and development

A contractual example: United States

The DARPA project (Defense Advanced Research Projects Agency) was launched in 1958

goal: af rm the technological superiority of US in several University

‣ industries and protect from military attacks

budget: 3 billions $

‣ DARPA

staff: 240 people with high operational autonomy

‣ brokering Large

Start-ups companies

Example: the iPhone case iPhone is so smart because Apple took advantage

from public good and enjoyed the pro t whereas the

State paid the cost of the research [Mazzuccato]

BUT when the researches are public, anybody

could leverage on them

only Apple was so good in connecting all

the spots and implementing something new

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Other examples:

NSF - National Science Foundation nanced the Google algorithm

One of the last Genzyme’s products (revenue > 1 billion $ per year) was originally developed by

National Institute of Health (NIH) scientists.

Mazzuccato thesis

The Entrepreneurial State approach:

- Innovation in a long, risky ride that requires several resources the process is unbalanced

→

States pay a high bill

- Costs are unevenly shared Pro ts are captured by rms

we need institutions (public rms) and new rules (taxation) to mitigate such an unbalance

Possible criticism to Mazzuccato thesis

NSF started the program that allowed Google to set its revolutionary algorithm

true BUT without Page and Brin, Google would not exist

→

States do nance basic research, rms get the bene t

partly untrue indeed side effects of public research are different in national systems

→ (e.g. Silicon Valley is dif cult to replicate)

States should directly extract value from the research they promote

possibly true BUT economic performance of TTO and academic spinoffs are so far

→ poor

A different perspective what makes the iPhone the iPhone, a product that managed to

→ put Apple in the position it is, is design, its iOS operating

system, a correct technological integration and a careful

quality assurance process. All this factors are essentially

internal to Apple itself. Without these things we would have an

smartphone that wouldn’t be an iPhone.

“The important thing for Government is not to do things which individuals are doing already, and

to do them a little better or a little worse; but to do those things which at present are not done at

all” John Maynard Keynes

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SOURCES OF INNOVATION

Innovation can arise from many different sources and the linkages between them

Firm

Individuals Universities

Private Government-

Non-Pro t funded research

Innovation can be the outcome of different actors linked together NO actors are independent

and need others to innovate

Creativity = The ability to produce work that is useful and novel

Function of:

Intellectual abilities

‣ Knowledge

‣ Style of thinking

‣ Individual creativity

Personality

‣ Motivation

‣ Environment

‣ Organizational creativity function of:

→ Creativity of individuals within the organization

‣ Social processes and contextual factors

‣

Method of encouraging/tapping:

Idea collection system (eg. Suggestion box)

Creativity training programs

Culture that encourages creativity

Example: inspiring innovation at Google range of formal and informal mechanisms to

→ encourage its employees to innovate

- 20% time

- recognition awards

- ideas contest

- innovation review

Innovation is the implementation of creative ideas into some new device or process

requires combining creativity with resources and expertise

→

fi Inventors’ features:

Master the basic tools and operations of his eld but not only

‣ Curious, interested in problems

‣ Question the assumptions

‣ Seek global solution, generalist by nature

‣ develop of many devices or processes BUT commercialize few

Example: Segway HT invented by Dean Kamen the solution was reformulate the problem

→

Transforming creativity into innovation:

Innovation by users Deep understanding of their own needs and motivation to ful ll them

initially users innovators create innovations purely for their own use

eg. Birth of the snowboarding industry

R & D by rms Development = apply knowledge to produce useful devices,

Basic research materials or processes

=

Increasing understanding

of a topic or eld with NO

commercial application

+

Applied research

=

Increasing understanding

to meet a speci c need

two possible approaches:

→ Science push

‣ 1. Scienti c discovery

2. Invention

3. Manufacturing

4. Marketing

Demand push

‣ 1. Customer suggestions

2. Invention

3. Manufacturing

4. Marketing

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Firms linkages with customers, suppliers, competitors, and complements

external and internal sources are complements

→ In-house External collaboration

+

R&D network

May help build absorptive capacity that enables

to better use information obtain externally

Universities encourage research that leads to useful innovation

→ +

Can collect royalties on inventions

inventions still very small BUT great contribution through publication of research

Own labs

Government-funded research through Science parks and incubators

Grants

In-house R&D

Private non-pro t organizations Fund R&D by others

Collaborative networks

Joint ventures

‣ Licensing and second-sourcing agreements

‣ Research associations

‣ Government-sponsored joint research programs

‣ Formal network for technical and scienti c exchange

‣ Informal network

‣

especially important in high-technology sectors

→ Technology clusters = regional clusters of rms that have a connection to a

‣ common technology may work with the same suppliers, customers, or

→

complements

bene ts of agglomeration economies:

- Proximity facilitates knowledge exchange

- Cluster of rms can attract other rms to area

- Suppliers and distributor markets grow to service the cluster

- Cluster of rms may maket local labor pool more valuable by giving

them experience

- Cluster can lead to infrastructure improvements (eg. Roads, utilities,

schools, etc)

Likelihood of innovation activities being geographically clustered depends on:

The nature of the technology

• Industry characteristics

•

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The cultural context of the technology

•

Knowledge brokers = individuals or rms that transfer information from one domain to

another in which it can be usefully applied bridge between two separate group of rms

→

and unique combinations of knowledge

possessed by the two groups

Pivotal role in the innovation network [Hargadon and Sutton]

eg. Marathons pills

pills for belly pain

Smart by Mercedes

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TYPES AND PATTERNS OF INNOVATION

Case: Tesla Motors

In 2015, Tesla Motors was $3.2 billion company on track to set history. It had created two cars

that most people agreed were remarkable. Consumer reports had rated Tesla’s Model S the best

car it had ever reviewed.

It was also planning a sports utility vehicle, and a more moderately priced mass market car.

Unlike other automakers that were using new, expensive large-format batteries, Tesla used

thousand of small-format laptop batteries, connected together.

To help ease people’s anxieties about purchasing an electric vehicle, Tesla was also building

Supercharger stations across the country, and was providing a roadside assistance program, and

a guaranteed resale value.

Though it was not yet posting pro ts, sales were growing rapidly and analysts were hopeful that

pro ts would soon follow.

Several dimensions are used to categorize innovations these dimensions help clarify how

→

different innovations offer different opportunities (and pose different demands) on producers,

users and regulators.

Technology trajectory = the path a technology follows through time

may consistent patterns have been observed helping us understand how technologies

improve and are diffused

Types of innovation

Product innovation Process innovation

= =

Innovations embodied in the Innovations in the way an

outputs of an organization organization conducts its business,

its good or services such as in techniques of producing

→ or marketing goods or services

Product innovation can enable

process innovation and vice versa

+

What is a product innovation for one organization

might be a process innovation for another

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Radical innovation Incremental innovation

= =

The radicalness of an innovation is May involve a minor change from (or

the degree to which it is new and adjustment to) existing practices

different from previously existing

products and processes

it is relative = it may change over

→

time or with respect to different

observers

Competence-enhancing innovation Competence-destroying innovation

= =

Innovations build on the rm’s Innovations render a rm’s existing

existing knowledge base competencies obsolete

Whether an innovation is competence enhancing

or competence destroying depends on the

perspective of a particular rm

Architectural innovation Component innovation

= =

Innovation that entails the overall Innovation that entails changes to

design of the system or the way one or more components of a

components interact product system without signi cally

most architectural innovations affecting the overall design

→

require changes in the underlying

components

Technology S-Curve Both the rate of a technology’s improvement and

its rate of diffusion to the market typically follow

and s-shaped curve

Aim: understand where technology lays on the

curve and behave consequently

Technology improves slowly at rst because it is

poorly understood.

Then accelerates as understanding increases and

tapers off as approaches the limit.

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Technologies do NOT always get to reach their limits may be displaced by new,

→ discontinuous technology

=

Ful lling a similar market need by

means of an entirely new knowledge

base

BUT may initially have lower

performance than incumbent

technology

Firms may be reluctant to adopt new technology because performance improvement is initially

slow and costly, and they may have signi cant investment in incumbent technology.

Technology diffusion adoption is initially slow because the technology is unfamiliar and it

→ accelerates as technology becomes better understood

eventually market is saturated and rate of new adoption declines

Saturation

=

Any potential customer has

already bought that item

+ Technology diffusion tends to the far longer than information diffusion

may require acquiring complex knowledge or experience and

→

complementary resources to make it evaluate

Managers can use data on investments and performance of their own technologies or data on

overall industry investment and technology performance to map S-Curve.

While mapping the technology’s S-Curve is useful for gaining a deeper understanding of its rate

of improvement or limits, its use as prescriptive tool is limited

True limits of technology may be unknown

‣ Shape of S-Curve can be in uenced by changes in the market, component

‣ technologies or complementary technologies

Firms that follow S-Curve model too closely could end up switching technologies

‣ too soon or too late.

S-Curve of diffusion are in part a function of a S-Curve in technology improvement

learning curve leads to price drops which accelerate diffusion

→

Discussion questions about Tesla Motors:

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1. Is the Tesla Model S a radical innovation or an incremental innovation? Competence

enhancing or destroying, and from whose perspective? Is It a component or an architectural

innovation?

- Radical innovation because Tesla introduced the rst total electric car

- Competence destroying for incumbent and existing rms whereas competence

enhancing for hybrid industry as Toyota

- Architectural innovation

2. What factors do you think in uence the rate at which consumers have adopted (or will

adopt) the Tesla Model S?

- Expensive price

- Market price

- Limited product

- Recharge stations

- In acceleration, electric car performs well respect to engine car BUT the autonomy is

the problem

3. Where do you think electric vehicle battery technology is on the technology S-Curve?

Autonomy

Not close to the limit Dismiss of battery cleaner and greener

4. Do you think Tesla Motors will be pro table? Why or why not?

Tesla is the one of the most pro table rm on the stock market

Diffusion of innovation and adopter categories

Everett M. Rogers created a typology of adopters:

Inn