Week 3 Flashcards
Explain the difference between innovation and R&D.
R&D is the creation of new inventions and ideas
Innovation is the implementation of these inventions and ideas
Why are innovation and R&D so important?
Primary means through which firms establish, sustain, and enhance long run competitiveness and profitability
What is basic R&D?
Fundamental research with unclear objectives
What is problem solving R&D?
Research focused on producing innovations with particular applications for solving specific problems.
What is product/service improving R&D?
Intended to lead to incremental improvements in product/service
What is efficiency improving R&D?
Search for improvements in manufacturing/organisational process efficiency.
What is reverse R&D?
Strategic learning from other firms.
I.e. information and knowledge acquisition, reverse engineering, industrial espionage
What are alternative approaches to R&D?
Doing, using interacting
In what other areas could a firm innovate?
Managerial innovation - improve info flows and speed of decision making
Marketing innovation - new methods to reach customers
Why are technology intensive sectors dominated by large firms?
R&D and innovation are capital intensive and require substantial sunk costs. Scale economies are essential to reduce unit costs.
What is technological leapfrogging?
Firms that currently dominate markets may be sluggish and less likely to innovate. Complacent firms can be leapfrogged by rival firms
How is successful R&D and innovation incentivised.
Legal protection over tangible knowledge is extended which grants firms temporary monopolies
Why is innovation and R&D good?
Knowledge is a public good. New know-how and tech permanently improve product/process efficiency.
What gives firms long run competitiveness and profitability?
IPRs granting firms temporary monopolies in products and processes
What can we expect as IPR protection nears expiry
We can expect rivals to imitate either legally or illegally
What are patents?
Patents protect clearly definable and distinct product and process innovations.
What is copyright?
Protects written, performance and recorded intellectual material. Includes blueprints
What are trade marks?
Protect brand names etc
Hymer observed that innovation was strongly related to the characteristics of what
Home country market
What is the pattern of innovative activity and R&D?
Changes rapidly as an increasing number of countries develop technology capacity
What does SPF identify as the three key factors for where innovation takes place?
National innovation infrastructure
Cluster specific environment
Quality of linkages
How does national innovative infrastructure support national innovation?
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.
How do cluster-specific environments support national innovation?
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
How to the quality of linkages support national investment?
The strength of linkages between innovation infrastructure and clusters.
How does the national innovation environment relate to patents.
SPF find that 99% of variation in patent output is explained by the national innovation environment
What global trends have we been seeing in R&D and innovation?
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
What do SPF argue is important in choosing locations for R&D?
Have a presence in countries whose innovation environments are most favourable.
You do not want intra-cluster knowledge spillovers though
What else is important to consider with R&D other than location?
Area of R&D - computers, measurement, comms etc
What does it imply that innovation and R&D are changing locations?
Firms need to be increasingly aware of global developments. This will impact a firm’s future competitive advantage
What does it mean that we are getting so many more BRIC graduates?
Increase in size and quality of global talent pool.
Still issues with university quality and the capacity of their economy to absorb graduates.
What does more BRIC students in UK mean for UK economy?
UK firms get additional sources of talent
What is Posner’s technology gap model?
What’s it about?
About innovation, monopolies and imitation.
Outline how posners technology gap model works
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
What is the Vernon Product Cycle?
Who’s behaviour does it capture?
Extends technology gap approach to explain FDI behaviour of US MNEs in 1950s.
What elements does Vernons product cycle add to posners technology gap?
The geography or spatial location element of international investment
Outline the first stage of Vernon’s product cycle
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
Outline the second stage of Vernon’s product cycle
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
Outline the third stage of Vernon’s product cycle
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
