Podcast
Questions and Answers
What is absorptive capacity primarily concerned with?
What is absorptive capacity primarily concerned with?
What is a major challenge associated with open innovation?
What is a major challenge associated with open innovation?
Which factor can potentially decrease a firm's absorptive capacity?
Which factor can potentially decrease a firm's absorptive capacity?
What does 'Not-Invented-Here syndrome' reflect?
What does 'Not-Invented-Here syndrome' reflect?
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Which aspect can enhance a firm's ability to utilize external knowledge effectively?
Which aspect can enhance a firm's ability to utilize external knowledge effectively?
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Which of the following is NOT a core concept of the Schumpeterian view of innovation?
Which of the following is NOT a core concept of the Schumpeterian view of innovation?
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What is the primary mechanism through which innovation drives economic progress according to the Schumpeterian view?
What is the primary mechanism through which innovation drives economic progress according to the Schumpeterian view?
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Which of the following is NOT an example of a recombinatory process of innovation, as described in the content?
Which of the following is NOT an example of a recombinatory process of innovation, as described in the content?
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According to the content, what is the primary role of entrepreneurship in relation to innovation?
According to the content, what is the primary role of entrepreneurship in relation to innovation?
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Which of the following is NOT a key element of the Resource-Based View (RBV) framework for analyzing competitive advantage?
Which of the following is NOT a key element of the Resource-Based View (RBV) framework for analyzing competitive advantage?
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How does a pharmaceutical company gain a competitive advantage through physical capital, according to the content?
How does a pharmaceutical company gain a competitive advantage through physical capital, according to the content?
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Which of the following is a key element of human capital that contributes to a pharmaceutical company's success?
Which of the following is a key element of human capital that contributes to a pharmaceutical company's success?
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What is the primary purpose of organizational capital within a pharmaceutical company, as described in the content?
What is the primary purpose of organizational capital within a pharmaceutical company, as described in the content?
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What is the primary difference between invention and innovation according to the text?
What is the primary difference between invention and innovation according to the text?
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What is a key characteristic of a resource that contributes to a competitive advantage, as described in the text?
What is a key characteristic of a resource that contributes to a competitive advantage, as described in the text?
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What is the role of patents in achieving competitive advantage in the pharmaceutical industry?
What is the role of patents in achieving competitive advantage in the pharmaceutical industry?
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Which of these represents an example of invention as defined in the text?
Which of these represents an example of invention as defined in the text?
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What is the primary motivation for research and development (R&D) in the pharmaceutical industry, based on the provided content?
What is the primary motivation for research and development (R&D) in the pharmaceutical industry, based on the provided content?
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According to the linear model of innovation, what is the immediate output of basic research?
According to the linear model of innovation, what is the immediate output of basic research?
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What is the primary strength of the linear model of innovation as described in the text?
What is the primary strength of the linear model of innovation as described in the text?
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What is the key difference between the Linear Model of Innovation and a Stage-Gate Foundation?
What is the key difference between the Linear Model of Innovation and a Stage-Gate Foundation?
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Flashcards
Open Innovation Challenges
Open Innovation Challenges
Difficulties faced when collaborating externally on innovation projects.
Absorptive Capacity
Absorptive Capacity
A firm's ability to recognize, assimilate, and apply external knowledge for innovation.
Not-Invented-Here Syndrome
Not-Invented-Here Syndrome
A bias favoring internal ideas over external concepts, limiting innovation.
Transaction Costs
Transaction Costs
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Factors Influencing Absorptive Capacity
Factors Influencing Absorptive Capacity
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Schumpeterian view of innovation
Schumpeterian view of innovation
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Creative destruction
Creative destruction
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Recombinatory process of innovation
Recombinatory process of innovation
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Entrepreneurship's role in innovation
Entrepreneurship's role in innovation
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Innovation and competitive advantage
Innovation and competitive advantage
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RBV (Resource-Based View)
RBV (Resource-Based View)
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Physical capital
Physical capital
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Valuable, Rare, Imperfectly imitable
Valuable, Rare, Imperfectly imitable
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Non-substitutable resource
Non-substitutable resource
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Importance of internal resources
Importance of internal resources
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Patent exclusivity
Patent exclusivity
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Invention
Invention
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Innovation
Innovation
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Linear model of innovation
Linear model of innovation
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Basic research
Basic research
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Feedback loops in innovation
Feedback loops in innovation
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Study Notes
Lecture 1: Fundamentals
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Schumpeterian view of innovation: Innovation is the driving force of economic progress, and the foundation of capitalist dynamism. New products and processes reshape the economy, making older methods obsolete and leading to improved living standards.
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Creative destruction: This is a core concept, where a new superior invention disrupts an existing market, making the previous method obsolete (e.g., digital photography vs. film photography)
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Innovation as a recombinatory process: New inventions aren't necessarily entirely new, but instead combine existing technologies, processes or ideas in a novel way (e.g., a smartphone combines many different technologies).
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Entrepreneurship as a driving force for innovation: Entrepreneurs introduce groundbreaking products, and business models.
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Innovation creates firm competitive advantage: New products create differentiation, which can lead to monopolies over time. Other firms often cannot copy innovations quickly due to unknown aspects, intellectual property rights (IPR), or other factors.
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Resource-Based View (RBV): A framework for analyzing competitive advantage by focusing on the firm's resources and capabilities – tangible like buildings, technology or machines; intangible like skilled teams, knowledge and research and development (R&D) teams.
Invention vs. Innovation
- Invention: The creation of a new idea, product, process or technology (e.g., the discovery of CRISPR technology).
- Innovation: The application and commercialization of an invention (e.g., developing CRISPR into a gene-editing therapy).
Linear model of innovation
- A sequential process, starting with basic research (scientific inquiry), progressing to applied research (practical use of discoveries), and finally development/testing to produce a commercial product (innovation).
- The model has feedback loops between different stages.
- The model can display the key inputs and outputs at each stage.
Incremental vs. Radical Innovation
- Incremental innovation: Gradual improvements or modifications to existing products (e.g., annual iPhone updates).
- Radical innovation: Significant changes that introduce entirely new products or services (e.g., the shift from block phones to smartphones).
Architectural vs. Modular Innovation
- Modular: Changes to individual components without affecting the overall design (e.g., upgrading components of a bike).
- Architectural: Reorganising or reconfiguring interrelationships of existing components (e.g., a change in bicycle frame design, which may still use the same components).
Product vs. Process Innovation
- Product: Creating new or improved products or services that create value for customers (e.g., Google's AlphaFold development in drug discovery).
- Process: Improving the methods of creating products or services (e.g., Henry Ford's assembly line).
The role of Serendipity
- Planned Innovation: resulting from deliberate R&D efforts to create a product with a specific goal.
- Serendipitous Innovation: Resulting from unexpected occurrences arising from an unrelated goal or experience (e.g., discovery of penicillin, use of Viagra in unrelated study).
Measuring Tech Innovation
- R&D expenses or accounting, patent filings or grants, scientific publications, observational data on product launches.
Lecture 2: Industry Dynamics
- Tech paradigm/trajectories: how technology evolves adapting and improving over time.
- Technology S-Curve: Represents the lifecycle of a technology, from initial slow progress, acceleration, and then to diminishing returns as the technology reaches its limits (Example: CRT TVs to modern flat screens).
- Stages of S-Curve development: Initial slow progress, acceleration of improvement, and then diminishing returns.
Adoption Curve
- Innovators (2.5%): Risk takers and high uncertainty
- Early adopters (13.5%): opinion leaders who carefully consider and approve new ideas
- Early majority (34%): adopt after early adopters, require reassurance and evidence
- Late majority (34%): adopt only after the majority have done so. Sceptical of new ideas
- Laggards (16%): last to adopt, prefer traditional ways
Dominant Design
- A widespread and accepted configuration of an emerging technology, usually established when many competing designs exist at the same time (example: the standard design for smartphones).
- The factors that influence the establishment of a dominant design include factors like performance, compatibility, cost, and scalability.
Factors Influencing Dominant Design Selection
- Increasing returns: Economies of scale, learning curve effect reduces costs over time
- Prior learning: Existing knowledge base of using a particular technology
- Network Effects: Benefits of using are increased, the more people use them
- Government intervention: Policies may establish a standard through regulations or subsidies.
Lecture 3: Corporate R&D & External Innovation
- In search for: promising investment opportunities, innovation-related knowledge (ideas, technologies, new markets,), expertise, and resources.
- Risks of searching locally: Over-reliance on current practices, resistance to disruptive change, and failure to adapt to innovations.
- Broad Search scope (breadth): Increased scope and use of varied sources of knowledge beyond an organization's existing boundaries (external).
- Search depth (depth): Refined and deeper knowledge within the organization.
Comparing Search Depth and Scope
- Deep search focuses on existing knowledge (improving existing things)
- Broad scope is exploring outside of existing domains for new knowledge and ideas.
Exploration vs. Exploitation
- Exploration: Discovering new possibilities, taking risks, and experimenting with new approaches
- Exploitation: Refinement and building on existing knowledge, ensuring efficiency and improvement
Lecture 4: Corporate R&D
Lecture 5: Appropriability Strategies for Innovation
- Appropriability: The extent to which a company can capture the economic benefits from their innovations despite imitation (protecting innovation).
- Methods to protect innovation including legal protections (patents, copyrights, trademarks, trade secrets), contracts (non-disclosure agreements, licensing agreements), regulatory protections (market exclusivity).
Lecture 6: AI
- AI: Application of computer science to create systems capable of performing tasks (like learning, reasoning and decision-making).
- Types of Machine Learning: Supervised, unsupervised and reinforced.
Lecture 7: Financial Markets and Firm Innovation
- Modigliani-Miller Theorem: If there are no market frictions, capital structure does not impact company value
- Imperfect Markets: market frictions mean capital structure does matter
- Common ownership: When the same institutional investors own significant shares in multiple competing companies within the same industry
- Debt financing: a primary method of funding innovations.
Lecture 8: Organization Innovation
- Centralised R&D: Decision-making is centralized at the corporate HQ (usually for large, complex projects and consistent outcomes).
- Decentralised R&D. Decision-making spread across many divisional units/locations with local autonomy (more for rapid responsiveness to market demands).
- Hybrid Structures. A mix of centralised and decentralised structures in an effort to find the best balance of both (best for highly innovative companies that have global needs, flexibility and specialisation).
Lecture 9: Managing the Product Development Process
- Product development considerations: Nature, process perspective, micro-level organization, and objectives
- Project management: Decisions on promoting\terminating projects.
- Micro-level organization: assembling teams to work on the tasks of the projects
- Objectives: Ensuring projects align with customer needs, costs, and timelines.
Lecture 10: Involving Customers in Innovation
- User innovation: Use-centred drive for innovation to solve their specific needs (e.g., individuals needing assistive devices).
- Agile Development: Iterative and incremental processes, working with self-organized teams, delivering a Minimum Viable Product (MVP).
- Design thinking: Focuses on understanding customer needs and creating solutions that address them. Customer research, understanding needs.
Lecture 11: Teams for Innovation and Collaboration
- Team size and composition: Small, homogeneous or mixed are essential for managing risk given expertise issues
- Team Stability: Teams need to be either stable in consistent compositions, or dynamic and fresh given the types of knowledge needed.
- Decentralised self-coordination: Teams coordinate across divisions or locations when required.
- System integrator: The central entity facilitating coordination between decentralised teams.
Lecture 12: Generalists vs. Specialists
- Specialists and generalists have differing strengths, especially in inventive teams.
- Generalists bring a more holistic view and connect ideas from different sources, where specialists are strong in specific areas of expertise.
Lecture 13: The Geography and Timing of Innovation
- Knowledge spillover: Spatial concentrations of innovation, due to clusters of businesses/institutions.
- Time Zone Collaboration: Difficulties in collaboration if groups are in different time zones.
- R&D concentration over time: Increased amount of R&D research in countries like India and China (over time).
Lecture 14: Organic vs. Mechanistic R&D Structures
- Formalisation and standardisation in R&D; Organisational structures.
- Organic structures (flexible, adaptable, good for start-ups.
- Mechanistic (rigid, efficient, good for large or stagnant companies).
Lecture 15: Patents, Trade Secrets, and Trademarks
- Types of Intellectual Property (IP) protections: Patents, Trade Secrets, and Trademarks.
- Patents: exclusive rights to make, sell, and use an innovation for a certain period of years.
Patents for Innovation
- Filing patents: When, How, Importance, Advantages and disadvantages
- Patent thicket: Complexity arising from overlapping patents.
- Patent prosecution: Obtaining a patent when the patent isn't completely clear.
Lecture 16: Open Innovation and Outsourcing
- Open innovation: Sharing and drawing from external ideas and knowledge in addition to internal R&D resources and capabilities.
- Outsourcing (e.g. CROs): Companies that specialise in research and development services or different parts of the process e.g., clinical trials.
Lecture 17: Licensing and Strategic alliances
- Licensing: agreement allowing the use of technology in exchange for payment..
- Strategic alliances: partnerships including joint R&D efforts.
- Criteria for selection: Resource fit, Strategic fit, and considerations.
Lecture 18: Governance in R&D Alliances
- Role of contracts, Defining core parameters (funding, equipment, IPR, and human capital), specifying the degree of control, and specifying the method of risk distribution.
- Joint ventures, Equity investments aligning incentives with resource division (profit and losses).
Lecture 19: Timing and Appropriability
- Filing patents as soon as possible
- Strategic advantages / disadvantages to filing late
- Combining IP protections
- Appropriability: methods protecting a firm's innovations from imitation.
Lecture 20 and 21: Financial Analysis and Investor Incentives
- Financial analysis: investors scrutinising financial documents of a firm to understand a firm's financial stability
- Impact of analysts on innovation.
- Investor incentives: short-term focus often conflicts with innovation efforts (as managers fear being fired before a project produces results)
- Strategies for managing investor incentives (including long-term compensation structures, golden parachutes, etc).
Lecture 22: Technological Environment and Firm Strategy
- Technological trends influence firm strategy and can cause rapid change.
- Firms use technological capabilities to manage and leverage their capabilities, especially if they can be used as a product-feature
- Adapting to technological disruptions, creating new avenues etc is essential for companies to stay successful.
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Description
Explore the critical concepts of innovation and entrepreneurship in this quiz. Learn about Schumpeter's view on how innovation drives economic progress and the idea of creative destruction that disrupts existing markets. Test your understanding of how innovation can offer competitive advantages to firms.
