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Fundamentals of Innovation and Industrial Change > Lesson 1-7 > Flashcards

Lesson 1-7 Flashcards

1
Q

Which is the specific characteristic of the firm for nelson and winter?

A

The Firm for Evolutionary Theory:

  • Bounded Rationality
  • Satisficing Behavior
  • Search process: Contingent, Local, Cumulative->
  • > Technology as Knowledge
  • Routines: recurrent, invariant, automatic, contextual.
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2
Q

What is the difference between technology as information and technology as
knowledge?

A 
Technology as information:
- Automatic Diffusion
- No Cost 
- Firms can move along the isoquant
(Arrow’s disclosure paradox)

Technology as knowledge:

  • Cognitive dimension
  • Costs effort through time
  • Cumulative learning
  • Different for each firm
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3
Q

Are there difference in sectors as generators of technology?

A

Some sectors are net users, others are net generators.
This is established by the ration R&D used/R&D done.
ratio > 1, net users.
ratio < 1, net generators.

Net users: Metallurgy, Textiles, Wood/Furniture.
Net generators: Computer, Pharmaceuticals.

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4
Q

What is appropriability and the role of patents?

A

Appropriability is the ability to gain profit from one’s own innovation and protecting it from imitation.

Patent are a way to gain profit from an innovation by obtaining exclusive rights in the execution of the innovation and its licensing.

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5
Q

Are patents the main means of appropriability?

A

Means of appropriability:

  • Patents -> Static
  • Secrecy
  • Lead Times ->Dynamic
  • Learning Curve -> Dynamic
  • Complementary Assets/Post Sales

Main Means:
For product: Comp.assets, Lead Times, LearningCurves
For process: Lead Times, Learning Curves, Secrecy

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6
Q

Discuss the Pavitt taxonomy and discuss the major dimensions:

A

Pavitt sampled 2000 innovations in 1945 and defined 4 groups of sectors:
1. Supplier dominated (Textiles)
2. Scale intensive (Auto)
3. Specialized supplier (Industrial machinery)
4. Science based (Pharmaceuticals)
Each of these groups is characterized by the following variables:
• Net users or Net generators
• Types of innovation
• Sources of innovation (R&D, design, marketing, universities…)
• Factors affective competitiveness
• Appropriability mechanisms
• Size of firms

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7
Q

What is the relationship between technological regimes and Schumpeterian patterns?

A

Schumpeter Mark I:

  • new innovators, low barriers
  • high turbulence/ high entry & exit
  • low concentration/stability  Creative Destruction

Schumpeter Mark II:

  • innovation by large firms, high barriers
  • low turbulence/ low entry and exit
  • high concentration/stability  Creative Accumulation

Technological regimes: technological environment of an industry.
It affects the dynamic of market structure:
Entry & Exit, Stability, Concentration.

Has 4 dimensions:

  1. Technological Opportunity.
  2. Appropriability Conditions
  3. Cumulativeness
  4. Properties of Knowledge Base (Basic Science, Applied Research)

Schumpeter Mark I:

- High technological opportunity
- Low appropriability
- Low cumulativeness
- Knowledge base: Applied, Low concentration

Schumpeter Mark II:

- High technological opportunity
- High appropriability
- High cumulativeness
- Knowledge base: Basic, High concentration
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8
Q

Why basic science (applied science) has a positive (negative) sign in the regression for mark II sectors?

A

In mark II sectors, basic science: this leads to High concentration, since it is accessible to few firms.

In mark I sectors, applied science: this leads to Low concentration, since it is accessible by many innovative firms.

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9
Q

Explain what demand as incentive to suppliers mean?

A

Schmookler: The size of the market affects innovation. The higher the market size, the higher the supplier’s incentives to invest in innovative activities.

Proof analysis of railway industry late 1800s. The patent data lags behind the firm’s profitability. Meaning that innovation happened because there was demand. (?)

Demand pull.
Demand must be heterogeneous to justify product variety.

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10
Q

What Is the technology push and demand pull? Provide an example.

A

Technology push – first the innovation and then the demand.
Science -> Manufacturing -> Marketing
X-Rays
Demand pull – first the need and then the innovation.
Market Need -> Development -> Manufacturing -> Sales
Internet, Digital X-Rays

Sometimes it’s not clear: Mainframe computer, first technology push, then demand pull.

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11
Q

What is an innovation system?

A

An Innovation System is an Ecosystem of actors that interact in the innovation process.

Actors: Buyers, Suppliers, Universities, Financial Organizations, Government, Institutions.

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12
Q

What is a sectoral system?

A

Innovation systems in one sector is a Sectoral Systems.
Innovation in Sectoral systems is characterized by:
- Technological Regimes
- Actors in the system
- Institutions
(- Firm capabilities)

Example of a sectoral system: BIOTECHNOLOGY

  • Science as a technological regime
  • Large firms, universities, VC
  • Institutions (regulation, national health system)
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13
Q

What are the roles of users in the innovation process?

A

Users benefit from a product or service that is the result of an innovation process.
Sometimes users have an active role in the innovation process, becoming the innovators themselves.

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14
Q

Why do individual consumers or professionals innovate?

A 
Demand as a Source. 
Heterogeneity of demand results in generalization of product from manufacturers.
Users innovate because:
- they are dissatisfied 
- or product doesn’t exist

Such users are called Lead Users. They benefit the most from a solution to their needs. Or anticipate a need.

Users can be:

  • Individual consumers
  • Professionals
  • Firms
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15
Q

Industrial users: Innovate or buy?

A

Why do it yourself:
- Information Asymmetries, users know exactly what they want.
- Avoid transaction cost
“Sticky Information”
- Avoid lock-ins and dependencies.
- Product too niche for supplier to produce.
- Product quality: producers often distort the need to fit the existing producing capabilities.
Buy:
- You don’t have and can’t obtain the right manufacturing capabilities.

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16
Q

Why may users reveal their innovation?

A

When an innovation is revealed it becomes public good. Why do it?

  • Reputation
  • Network advantages -> everyone works on it, reciprocal benefit.

This results in the creation of Innovation Communities.
Open Source Software.

17
Q

What is co-invention or co-creation? (industry example)

A

Co-invention, develop complementary invesntions.
Co-creation: Collaboration between user and manufacturer in the development of a product or service.
Common in GTPs, engines, semiconductors…

18
Q

What is open innovation?

A

Firms using external knowledge to accelerate internal product innovation. They might invite in some users to innovate with them, they might use a two-innovation platform.

19
Q

Why are trademarks important as indicators?

A

Trademark: a graphic sign that distinguishes good or services of one entity from others. Enhances reputation and allows appropriation of market profits. Patents protect inventions, Trademarks protect brands.

They represent marketing innovation, and are good indicators in sectors where patents are not available, i.e. low-tech sectors.

They are an important indicator of Dynamics:

  • product circulation
  • product differentiation (number of products)

Patents and TM are often complementary.

20
Q

Which is the relationship between demand and entrepreneurship? Examples of user entrepreneurship.

A

Often users become entrepreneurs themselves: they might start a company that produces a good satisfying their need.

This might happen at a firm level too.
User-industry spinouts: a new company may originate from a firm in the user-industry of the company’s product.
This is possible because/when:
- new company has direct application of its knowledge
- Low fixed start-up costs and capital equipment costs

Different from spinoffs, where the new company is in the same industry of the mother firm.
Example: semiconductors industry.
1/2 spinoffs
1/3 spinouts
User-industry spinouts performed better than spinoffs, because of the direct knowledge application.

21
Q

Which are the different roles of users in the innovation process? 5-6 examples

A

Users as receivers of the product: Demand as incentive.

Users as innovators: user entrepreneurship, user-industry spinouts, co-invention, co-creation, open innovation.

22
Q

Provide a restricted definition of learning by doing.

A

Learning by doing is the gain of productivity due to on-the-job experience gained by workers as the firm produces/provides more of a given item or service.

This is represented in the Learning curve, where the average cost of production decreases as the cumulative output increases.
!= Economies of scale.

It is a continuous flow of incremental innovation.
Example: Ford, Model T. Mass production and assembly chain, Incremental innovation enabled reduction of production time and cost, hence price.

23
Q

Provide a restricted definition of learning by using.

A

Learning by using has some overlaps with learning by doing, but it relates specifically new products or equipment. It’s when users become better at operating the equipment as they use the equipment.
This is particularly relevant in complex system products. For example.

24
Q

Do strategies based on cumulative output produce the same suggestions to firms as strategies based on time?

A

If your strategy is based on cumulative output, you want to enter big: with high capacity. (You learn as you produce more)
If your strategy is based on time, you want to enter early. (You learn with time)

Learning curve based on cumulative output vs learning curve based on time

25
Q

What is the difference between exploration and exploitation?

A

Exploration is the search for completely new knowledge and technology.
Exploitation is the combination of knowledge that already exists.
There is a tension between the two:
Too much exploration suffers from its high costs.
Too much exploitation results in saturation of product variety and lock-in obsolete products.

26
Q

Which are the main sources of learning and how do you measure it?

A

Sources of learning:

  • Internal: R&D, Learning by doing etc
  • External: learning from suppliers, users, actors in the sectoral system, joint ventures etc.

How to measure learning: very difficult.

  • Productivity increase (general scope)
  • Case studies of individual firms
  • Ad-hoc surveys
  • CIS
27
Q

What is the difference between tacit and codified knowledge?

A 
Tacit knowledge is: (manual production processes)
- Result of experience
- Implicit
- Hard to transfer/communicate
- Contextual
- Localized 
More about skills

Codified knowledge is: (Product design process in ICT)
- Explicit
- Easier to transfer/communicate
More about information

Taxonomy of Knowledge: 
Know why: codified
Know what: codified
Know how: tacit
Know who: tacit
28
Q

What are the main dimensions of knowledge?

A 
Tacit – Codified
Not teachable – Teachable
Non observable use – Observable use
Complex – Simple
Element of a system - Independent
29
Q

Can you discuss the Nonaka dynamics of knowledge in companies?

A

Nonaka’s theory pertains the way knowledge is created and transforms in companies.
When employees interact, they exchange tacit knowledge: Socialization (tacit-tacit).
When a company has to market its culture, it has to codify it; i.e. describe it in words to communicate it to the external world:
Communication (tacit-codified)
When people learn about it they exchange it and recombine it:
Elaboration of information (codified-codified)
When a company takes this codified knowledge and implements in in the organizational culture, it has to learn it:
Organizational Learning (codified-tacit)

30
Q

What is architectural innovation? Explicit change vs implicit change? Industry examples.

A

Architectural innovation in an innovation in the architecture of a product: in the way components are re-arranged.
It is an implicit change: cannot be directly recognized as superior.
Whilst an explicit change: component A is better than component B.

Technical change is defined by the two types of change: Component and Architectural.

Enhancing technical change: Same architecture, better component.
Modular technical change: Same architecture, different component.
Architectural change: Different architecture, better component.
Radical technical change: Different architecture, different component.

Implicit change (architectural and radical) is hard to see and replicate, hence is a competitive advantage.

Fundamentals of Innovation and Industrial Change (3 decks)

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