lecture 1 Flashcards
Fundamentals of innovation
what does the notion of technology entail?
The term technology is very broad
Technology encompasses several fields, including tools, methods and material extraction
Technology is a scientific application that assists humans in overcoming obstacles
What is innovation?
An initial definition: Transformation of an existing state of things to introduce something NEW
Basically, involves improvement in how something is being done or offered
It also suggests a contextual relevance - how are things done currently in a specific context and how they can be improved
Innovation is processual (4 steps)
Identify a need or a problem
Develop a feasible solution
Produce/manufacture and market the solution
Achieve adoption/diffusion of the innovation
Fixing ideas for useful definitions of innovation
From an entrepreneurs innovators perspective, a problem-solving process that involves searching for new combinations of various information, knowledge
In this sense it is the use of new knowlede to offer a new product or service that customers want
new knowledge can be technological or market related or both
The role of the entrepreneurial innovator (small or large firm) is to activate and coordinate all the relevant factors for the production of the innovation
Process view of innovation
1) obtain and gather information and knowledge (what are the sources)
2) organize
3) deploy for commercial purpose
What does innovation involve
Application of knowledge to solve/address a problem
Technical approaches to improve business operations and business model enhancements to capitalize on knowledge
Application of science for commercial and industrial objectives
Theoretical and practical knowledge and skills, artefacts useful for developing produces and services as well as their production and delivery systems and mechanisms
Innovation is often time these four things
Resource-intensive, uncertain, complex and untidy
The OSLO manual (OECD) considers innovation as
A new or improved product or process (or combination thereof) that differs significantly from the units previous products or processes and that has been made available to potential users (product) or brought into use by the unit (process). The definition also includes organizational and marketing innovations.
Technology push and demand pull factors
Technology push:
Invention and commercialization of science and R&D as well as competition lead to new knowledge and methods which lead to innovations
Demand pull: Nature and type of customers, size and distribution affect affect new needs and demands of consumers, which leads to innovations
Joseph schumpeter on the notion of “creative destruction”
Joseph schumpter pointed that both small and large firms can create innovations by creating new technological knowledge.
The schumpterian view of innovation emphasizes the determinants of technology push innovations
The kirznerian view on innovations
Assumes the availability of knowledge and emphasized the role of entrepreneurship in staying alert to demand side opportunities and applying knowledge to address those demands and needs of consumers
economic value
is the value that a person places on an economic good based on the benefit that they derive from the good
Value (V) == Willing to pay for a product or service
innovation to improve the economic value pie explained
C = cost (including the opportunity cost of capital)
Price (P) = Cost + profit margin (profit margin = P-C)
Value -Price = Consumer surplus
Consumer surplus
an economic concept that measures the benefit or satisfaction that consumers derive from purchasing goods and services at a price lower than the maximum price they are willing to pay. In other words, it represents the difference between what consumers are willing to pay for a good or service and what they actually pay.
Does firm size matter for innovation (Small, med, large)
small firm: Generally no radical innovations (size has no effect)
Mid-size to large firm: Size promotes radicalization of innovation
Very large firm: Size inhibits radical innovation
Very large firm size can inhibit radical innovation due to increased bureaucracy, rigid organizational structures, and a focus on maintaining existing operations. Large organizations often become more risk-averse and resistant to change, making it challenging to foster the disruptive and unconventional thinking required for radical innovation. Additionally, decision-making processes can become slow and cumbersome in large firms, hindering the agility needed to pursue and implement groundbreaking ideas.
