Article - Innovation Theories (Joe Tidd) (Part 2)

Question 1

On what does the capacity of a firm to appropriate the benefits of its investment in technology depend?

Answer 1

1. Their capacity to translate it;s technological advantages into commercially viable products and processes;
2. The firms capacity to defend its advantage against imitators;

Question 2

Which 9 factors influence a firms capacity to benefit commercially form its technology?

Answer 2

1. Secrecy;
2. Accumulated tacit knowledge;
3. Lead times and after-sales service;
4. Learning curve in production;
5. Complementary assets;
6. Product complexity;
7. Standards;
8. Pioneering radical new products;
9. Strength of patent protection;

Question 3

How does secrecy influence the ability to benefit commercially?

Answer 3

Protection of innovation and its processes. Although, sharing can be beneficial if you are able to influence market standards;

Question 4

What is accumulated tacit knowledge?

Answer 4

Knowledge that is hard to imitate that a firm has in its possession.

Question 5

How does lead times and after-sales service aid in benefiting commercially from your technology?

Answer 5

Brand loyalty and credibility;

Question 6

What is the benefit of learning curve in production?

Answer 6

• Generates lower cost and accumulated and tacit knowledge;

Question 7

Why is product complexity a factor that influence the ability to benefit from your technology?

Answer 7

The more complex -> more lead time to imitate -> more effective barrier;

Question 8

What is meant by standards as factor that influences the ability to benefit from your technology?

Answer 8

If your product is considered the standard, it widens your market and raises barriers against competition

Question 9

When is pioneering radical products a good idea?

Answer 9

If a company has the vision for innovation, but also the ability to mass market/produce;

-> It can be difficult otherwise to be technological leader –> high R&D cost, unclear requirements from customers, quick copies from competition;

Question 10

What 5 characteristics of an innovation influence its diffusion into a market?

Answer 10

1. Relative advantage;
2. Compatibility;
3. Complexity;
4. Trial-ability;
5. Observability;

Question 11

What is meant by relative advantage?

Answer 11

Degree to which an innovation is perceived as better than the previous, - or competing products. Often measured in economic terms, but can also in broader terms (convenience, satisfaction, etc.). The greater perceived advantage, the greater adoption.
This is a secondary attribute (subjective to the beholder). Primary attribute can be price, size, etc.

Question 12

What is meant by compatibility?

Answer 12

Degree to which an innovation is perceived to be consistent with the existing values, experience and needs of potential adopters.

Can refer to two aspects:
(1) Existing skills and practices – cost of adoption due to training/available information/technical assistance/easy-hard to operate. (2) Values and norms – does the innovation require many changes in the organization/does it align.
The latter is often more important.

Question 13

What is meant by observability?

Answer 13

Degree to which the results of an innovation are visible to others. The easier to see the benefits, the more likely it will be adopted.

Question 14

What are the 2 problems with the S-shaped (logistic) curve?

Answer 14

• Only works in hindsight, does not provide guidance for future patterns of adoption.
• In reality it depends on the interaction of demand-side and supply side factors

Question 15

Which demand-side diffusion models are there?

Answer 15

1. Epidemic
2. Bass model
3. Probit model
4. Bayesian model

Question 16

What is the epidemic diffusion model?

Answer 16

• Most commonly used.
• Assumes homogeneous population of potential adopters. Innovations are spread by information transmitted by personal contact and geographical proximity.

–> Focus on: provision of clear technical and economic information
Critique: Assumes all adopters are similar.

Question 17

What is the bass model?

Answer 17

Includes two groups of potential adopters: Innovators (not subject to social emulation) and imitators (diffusion is epidemic).

Skewed S-curve due to early adoption by innovators.
Different marketing processes are needed for the two groups.
Highly influential in economics and marketing research

Question 18

What is the probit model?

Answer 18

• Potential adopters have different threshold values for costs and benefits
• They will only adopt beyond some critical threshold value.
• Differences in treshold values explain differences in adoption rates.

BUT: unlikely that adopters have perfect knowledge of the value of an innovation.
- The more similar potential adopters, the faster diffusion.

Question 19

What is the Bayesian model?

Answer 19

• Includes that lack of information is a constraint for diffusion.
• Different potential adopters have different beliefs regarding value –> these believes can also change based on new information.
• Better informed potential adopters may not necessarily adopt an innovation earlier than less informed people –> This was assumed in the previous models

Question 20

What are the best models for which purposes?

Answer 20

Epidemic is best for new processes, techniques and procedures;

Bass is the best fit for consumer products;

All of them work best when the potential market is known. Not for totally new innovations;

Question 21

What are the limitations of demand-side models?

Answer 21

1. They do not consider rationality and profitably of adopting a particular innovation to differ for adopters.
2. The population is assumed to be the same at the beginning and end of the diffusion period.
3. They ignore supply-side factors.

Question 22

Which supply models are for innovation diffussion?

Answer 22

1. Appropriability
   Emphasizes relative advantage of an innovation
2. Dissemination
   Emphasizes availability of information
3. Utilization
   Emphasizes reduction of barriers to use
4. Communication
   Emphasizes feedback between developers and users

Question 23

What is better about the supply side models of innovation diffussion?

Answer 23

These models put greater emphasis on the relationship between demand and supply side factors.

Question 24

What are the conclusions of this article?

Answer 24

1. Shift away from an emphasis on inputs (the science base and radical technological advances) towards a more balanced support for the whole innovation process (including development and diffusion for all types of innovation – technological, commercial and organization)
2. Innovation is not only a consequence of coupling technological opportunity and market demand. It also includes social concerns, expectations and pressures.
3. Cumulative incremental improvements to platform technologies often create significant commercial and social benefits.
4. Long-term investments in and development of organizational processes and capabilities are necessary to transform opportunities into widely adopted products.
5. More emphasis is needed on the outputs of the innovation process