Week 3

Question 1

Explain the difference between innovation and R&D.

Answer 1

R&D is the creation of new inventions and ideas
Innovation is the implementation of these inventions and ideas

Question 2

Why are innovation and R&D so important?

Answer 2

Primary means through which firms establish, sustain, and enhance long run competitiveness and profitability

Question 3

What is basic R&D?

Answer 3

Fundamental research with unclear objectives

Question 4

What is problem solving R&D?

Answer 4

Research focused on producing innovations with particular applications for solving specific problems.

Question 5

What is product/service improving R&D?

Answer 5

Intended to lead to incremental improvements in product/service

Question 6

What is efficiency improving R&D?

Answer 6

Search for improvements in manufacturing/organisational process efficiency.

Question 7

What is reverse R&D?

Answer 7

Strategic learning from other firms.
I.e. information and knowledge acquisition, reverse engineering, industrial espionage

Question 8

What are alternative approaches to R&D?

Answer 8

Doing, using interacting

Question 9

In what other areas could a firm innovate?

Answer 9

Managerial innovation - improve info flows and speed of decision making
Marketing innovation - new methods to reach customers

Question 10

Why are technology intensive sectors dominated by large firms?

Answer 10

R&D and innovation are capital intensive and require substantial sunk costs. Scale economies are essential to reduce unit costs.

Question 11

What is technological leapfrogging?

Answer 11

Firms that currently dominate markets may be sluggish and less likely to innovate. Complacent firms can be leapfrogged by rival firms

Question 12

How is successful R&D and innovation incentivised.

Answer 12

Legal protection over tangible knowledge is extended which grants firms temporary monopolies

Question 13

Why is innovation and R&D good?

Answer 13

Knowledge is a public good. New know-how and tech permanently improve product/process efficiency.

Question 14

What gives firms long run competitiveness and profitability?

Answer 14

IPRs granting firms temporary monopolies in products and processes

Question 15

What can we expect as IPR protection nears expiry

Answer 15

We can expect rivals to imitate either legally or illegally

Question 16

What are patents?

Answer 16

Patents protect clearly definable and distinct product and process innovations.

Question 17

What is copyright?

Answer 17

Protects written, performance and recorded intellectual material. Includes blueprints

Question 18

What are trade marks?

Answer 18

Protect brand names etc

Question 19

Hymer observed that innovation was strongly related to the characteristics of what

Answer 19

Home country market

Question 20

What is the pattern of innovative activity and R&D?

Answer 20

Changes rapidly as an increasing number of countries develop technology capacity

Question 21

What does SPF identify as the three key factors for where innovation takes place?

Answer 21

National innovation infrastructure
Cluster specific environment
Quality of linkages

Question 22

How does national innovative infrastructure support national innovation?

Answer 22

Well it’s the country’s level of technological sophistication

It’s the government’s policies towards innovation activity (taxes, patent regime, openness to trade)

And the human and financial resources devoted to technological advance.

Question 23

How do cluster-specific environments support national innovation?

Answer 23

A disproportionate share of innovations are located in clusters. This is the concentration of inter-connected firms and institutions.
Therefore there’s high quality specialised inputs
A setting encouraging investment and rivalry

Question 24

How to the quality of linkages support national investment?

Answer 24

The strength of linkages between innovation infrastructure and clusters.

Question 25

How does the national innovation environment relate to patents.

Answer 25

SPF find that 99% of variation in patent output is explained by the national innovation environment

Question 26

What global trends have we been seeing in R&D and innovation?

Answer 26

New innovative activity has been occurring outside of OECD. Countries have been upgrading their national innovative capacity and a large increase in patent rates has followed

Question 27

What do SPF argue is important in choosing locations for R&D?

Answer 27

Have a presence in countries whose innovation environments are most favourable. You do not want intra-cluster knowledge spillovers though

Question 28

What else is important to consider with R&D other than location?

Answer 28

Area of R&D - computers, measurement, comms etc

Question 29

What does it imply that innovation and R&D are changing locations?

Answer 29

Firms need to be increasingly aware of global developments. This will impact a firm’s future competitive advantage

Question 30

What does it mean that we are getting so many more BRIC graduates?

Answer 30

Increase in size and quality of global talent pool. Still issues with university quality and the capacity of their economy to absorb graduates.

Question 31

What does more BRIC students in UK mean for UK economy?

Answer 31

UK firms get additional sources of talent

Question 32

What is Posner’s technology gap model? What’s it about?

Answer 32

About innovation, monopolies and imitation.

Question 33

Outline how posners technology gap model works

Answer 33

Innovation creates a temporary technology gap which generates monopoly profits for the firm. Imitation by rivals erodes this competitive advantage and the market becomes perfectly competitive again

Question 34

What is the Vernon Product Cycle? Who’s behaviour does it capture?

Answer 34

Extends technology gap approach to explain FDI behaviour of US MNEs in 1950s.

Question 35

What elements does Vernons product cycle add to posners technology gap?

Answer 35

The geography or spatial location element of international investment

Question 36

Outline the first stage of Vernon’s product cycle

Answer 36

The new product phase Firms in wealthy counties generate new income elastic goods which are tech and human capital intensive. (Designed for home market) Innovating firms enjoy monopoly power in home markets protected by patents

Question 37

Outline the second stage of Vernon’s product cycle

Answer 37

The Mature Product Phase Demand rises domestically and abroad, production is standardised and they reap economies of scale. Imitation increases but barrier to entry is economies of scale

Question 38

Outline the third stage of Vernon’s product cycle

Answer 38

The Standardised Product Phase Imitation by rivals erodes power of innovating firms. The pressure of increased competitive intensity forces firms to reduce costs by shifting production to Host countries through FDI