Innovation Course Overview

• Course consists of 10 classes, each lasting 2 hours with a 15-minute break.
• The instructor for the course is Michele Pezzoni, and can be contacted at [email protected].

Evaluation

• Assessment includes ongoing assessment.
• Student evaluations consist of a QCM (Multiple choice questions) + 3 open questions that will take 20 minutes during the 5th and 10th class.
• The final grade considers the exam grades and participation.
• Slides and scientific papers provided in class serve as reference materials.
• Additional course information is available on Moodle.

Course Overview

• Classes 1 and 2 are an introduction to innovation, centering on the work of Joseph Schumpeter, include Schumpeter MARK1 and Schumpeter MARK2.
• Classes 3 and 4 discuss innovation models, focusing on how science promotes technological advancement.
• The linear and chain-linked innovation models will be described and debated.
• Classes 5 and 6 explore industrial dynamics, examining the relationship between innovation types and the industry lifecycle.
• The focus will be on how new companies challenge existing ones.
• Classes 7,8 and 9 cover intellectual property rights including patents.
• Class 10 is dedicated to the exam.

Innovation as a subject

• Innovation plays a role in GDP growth, productivity, and competitiveness.
• There is a direct correlation between a country's development and innovation level.
• Strong complementarities exist between different types of innovation like electric cars and efficient batteries.
• Most innovations represent evolution, with only a few being truly radical, for example the first mobile phone and the iPhone.
• Many innovations combine existing elements, which made the Ipod a combination of a hard disc and a Walkman
• The innovation process involves high uncertainty, including technical challenges and market viability.
• Project Loon, supported by Google, aimed to provide internet via stratosphere balloons but was too costly.
• Innovation results from relational processes involving interaction and collaboration among various entities, and between individuals, universities, enterprises and public and private institutions.
• Regional/national policies, universities, research centers, and labor market conditions also affect innovation.
• "Innovation systems" can be categorized as national, regional and sectoral.
• Microeconomics defines innovation as technological change.

Invention vs Innovation

• Invention involves creating a new idea.
• Innovations involves bringing a new product to commercial exploitation.
• The innovator assumes the role of an entrepreneur, distinct from the role of the inventor.
• Delays can frequently occur between an invention and its subsequent innovation, the difference between Leonardo's designs for aircraft and their realization centuries later indicates this.
• In pharmaceuticals, invention often coincides with innovation.
• The first transistor was developed by Walter Brattain, John Bardeen, and William Shockley at Bell Labs in 1941.
• The first transistor won the Nobel Prize in physics in 1956.
• Douglas H Ring of Bell Labs invented the system behind mobile phones in 1947.
• Motorola produced the first mobile phone in 1973.

Innovation Classifications

• For Schumpeter, innovations are a continuous process.
• Examples include cars, steam engines, and planes, which all incorporate ongoing improvements and incorporations.
• Radical innovation involves completely new machines.
• Incremental innovation involves marginal improvements.
• Product innovation involves introducing new products.
• Process innovation involves improving production to lower costs.
• Innovation can be organizational, with a reorganization of the productive process..
• Technology involves finalizing scientific knowledge for specific uses.
• Science involves producing abstract knowledge.
• Technical application involves materializing science and technology into tangible creations.
• Science functions as a public good, while technology is a private good.
• Technology can also drive scientific advancement, using tools in science leads to innovations, like microscopes for medicine and telescopes for astronomy.

Sources of innovation

• The three main sources of basic innovation include R&D, learning by doing, and learning by using .
• R&D involves formalized research and development.
• Learning by doing involves informal learning through experience, and also includes typical small firms Industrial districts
• Learning by using involves the usage of new products and services.
• R&D as defined by the OECD (Frascati Manual, 2002) comprises creative work undertaken to increase knowledge and its applications.
• Basic research acquires new knowledge without specific applications.
• Applied research directs knowledge towards a practical goal.
• Experimental development uses existing knowledge to produce new products, processes, or services.
• R&D is prominent in countries such as Finland, Sweden, the US, Italy, and China.
• Specialization leads to the separation of production and research within companies.
• Research is conducted by specialists with advanced degrees, so there is more research professionalization.

Learning by doing

• Learning by Doing (LBD) depends on informal learning and experience.

The Learning Curve

• According to Kenneth Arrow, technological improvements in many industries come about as a result of on-the-job experience that takes place when a company continues to produce an item more and more.
• As a result, the average cost of labor lowers as total cumulative output rises when a company's output is being held steady.

Learning by using

• Workers' experience with capital goods leads to incremental innovation.
• Software development uses alpha, beta and release candidates.
• Early maintenance on jet engines involves frequent services.
• This involved the the development of diagnostic tools and practices for less caution.

Schumpeter’s focus

• Schumpeter focused on innovation and its role in capitalism.
• Innovation revolutionizes the economic structure from within, including: new consumers goods, the new methods of production or transportation, and new markets
• Incessant creation and destruction is a core aspect of capitalism.
• New firms and entrepreneurs drive innovation.
• "Creative destruction" revolutionizes the economy.

Schumpeterian Models

• The initial Schumpeter model (Mark I) suggests science leads to entrepreneurship, ultimately driving profits, this is valid for biotechnology.
• Later models (Mark II) emphasizes large firms using R&D for innovation, common in oligopolistic markets.
• Key characteristics of Mark I are start-up innovators ,turbulent markets, low concentration.
• Key characteristics of Mark II include large innovators, stable hierarchy, and high concentration
• The assumption that either small firms or monopolistic conditions must be more conducive to innovation than large firms or competitive markets, respectively, has been investigated for twenty years.
• The research provides no definitive solutions to questions about the endogenous and innovative nature of market structure.
• Schumpeter was also interested in the sectoral and temporal concentration of innovation, this includes the communication technology - lasers - hallow pipe - glass fibres.
• Innovation history involves cotton textiles, railroads, steel, automobiles, and electric power.
• He adopted Kondratieff’s long wave theory.
• Specific waves have included Steam power, Railways, and Electricity.
• Electronics and Biotechnology have emerged post Schumpeter.

Economic thought regarding neoclassical and the evolutionary approach

• Innovation is influenced by scientific and technological potential.
• Appropriability of innovations shapes R&D investment, such as drug patents.
• Neoclassical vs. evolutive approach includes Similarities like the appropriability of innovations influence the economic incentives associated with the R&D investment.
• Differences include in the neoclassical approach is Equilibrium while evolutionary is No equilibrium Static and dynamic while evlolutionary is Dynamic.

Measuring innvoation includes

• Detailed case studies on industrial innovation.
• Expert analysis, so counting industry innovations which involve having to go ask experts.
• Surveys on data.
• Measuring a firm's R&D for expenses.
• Assessing data pertaining to firms' accounting.
• Analyzing patents and technology.