Innovation and Entrepreneurship: Theory, Policy and Practice PDF

Innovation, Technology, and Knowledge Management Elias G. Carayannis Elpida T. Samara Yannis L. Bakouros Innovation and Entrepreneurship Theory, Policy and Practice Innovation, Technology, and Knowledge Management Series Editor Elias G. Carayannis George Washington University Washington, DC, USA More information about this series at http://www.springer.com/series/8124 Elias G. Carayannis Elpida T. Samara Yannis L. Bakouros Innovation and Entrepreneurship Theory, Policy and Practice Elias G. Carayannis Elpida T. Samara Department of Information Systems Department of Mechanical Engineering and Technology Management University of Western Macedonia School of Business Kozani, Greece George Washington University Washington, DC, USA Yannis L. Bakouros Department of Mechanical Engineering University of Western Macedonia Kozani, Greece ISSN 2197-5698 ISSN 2197-5701 (electronic) ISBN 978-3-319-11241-1 ISBN 978-3-319-11242-8 (eBook) DOI 10.1007/978-3-319-11242-8 Springer Cham Heidelberg New York Dordrecht London Library of Congress Control Number: 2014950887 © Springer International Publishing Switzerland 2015 This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. 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While the advice and information in this book are believed to be true and accurate at the date of publication, neither the authors nor the editors nor the publisher can accept any legal responsibility for any errors or omissions that may be made. The publisher makes no warranty, express or implied, with respect to the material contained herein. Printed on acid-free paper Springer is part of Springer Science+Business Media (www.springer.com) Series Foreword The Springer book series Innovation, Technology, and Knowledge Management was launched in March 2008 as a forum and intellectual, scholarly “podium” for global/local, transdisciplinary, transsectoral, public–private, and leading/“bleeding” edge ideas, theories, and perspectives on these topics. The book series is accompanied by the Springer Journal of the Knowledge Economy, which was launched in 2009 with the same editorial leadership. The series showcases provocative views that diverge from the current “conven- tional wisdom” that are properly grounded in theory and practice, and that consider the concepts of robust competitiveness,1 sustainable entrepreneurship,2 and democratic capitalism,3 central to its philosophy and objectives. More specifically, the aim of this series is to highlight emerging research and practice at the dynamic intersection of these fields, where individuals, organizations, industries, regions, and nations are harnessing creativity and invention to achieve and sustain growth. 1 We define sustainable entrepreneurship as the creation of viable, profitable, and scalable firms. Such firms engender the formation of self-replicating and mutually enhancing innovation networks and knowledge clusters (innovation ecosystems), leading toward robust competitiveness (E.G. Carayannis, International Journal of Innovation and Regional Development 1(3), 235–254, 2009). 2 We understand robust competitiveness to be a state of economic being and becoming that avails systematic and defensible “unfair advantages” to the entities that are part of the economy. Such competitiveness is built on mutually complementary and reinforcing low-, medium-, and high- technology and public and private sector entities (government agencies, private firms, universities, and nongovernmental organizations) (E.G. Carayannis, International Journal of Innovation and Regional Development 1(3), 235–254, 2009). 3 The concepts of robust competitiveness and sustainable entrepreneurship are pillars of a regime that we call “democratic capitalism” (as opposed to “popular or casino capitalism”), in which real opportunities for education and economic prosperity are available to all, especially—but not only—younger people. These are the direct derivatives of a collection of topdown policies as well as bottom-up initiatives (including strong research and development policies and funding, but going beyond these to include the development of innovation networks and knowledge clusters across regions and sectors) (E.G. Carayannis and A. Kaloudis, Japan Economic Currents, p. 6–10 January 2009). v vi Series Foreword Books that are part of the series explore the impact of innovation at the “macro” (economies, markets), “meso” (industries, firms), and “micro” levels (teams, individuals), drawing from such related disciplines as finance, organizational psychology, research and development, science policy, information systems, and strategy, with the underlying theme that for innovation to be useful it must involve the sharing and application of knowledge. Some of the key anchoring concepts of the series are outlined in the figure below and the definitions that follow (all definitions are from E.G. Carayannis and D.F.J. Campbell, International Journal of Technology Management, 46, 3–4, 2009). Global Systemic Mode 3 Quadruple Democracy Democratic macro level helix of capitalism knowledge Structural and organizational Knowledge Innovation Entrepreneurial Academic meso level clusters networks university firm Global/local Sustainable entrepreneurship Individual Creative Entrepreneur/ micro level milieus employee matrix Local Conceptual profile of the series Innovation, Technology, and Knowledge Management The “Mode 3” Systems Approach for Knowledge Creation, Diffusion, and Use: “Mode 3” is a multilateral, multinodal, multimodal, and multilevel systems approach to the conceptualization, design, and management of real and virtual, “knowledge-stock” and “knowledge-flow,” modalities that catalyze, accelerate, and support the creation, diffusion, sharing, absorption, and use of cospecialized knowledge assets. “Mode 3” is based on a system-theoretic perspective of socioeconomic, political, technological, and cultural trends and conditions that shape the coevolution of knowledge with the “knowledge-based and knowledge-driven, global/local economy and society.” Quadruple Helix: Quadruple helix, in this context, means to add to the triple helix of government, university, and industry a “fourth helix” that we identify as the “media-based and culture-based public.” This fourth helix associates with “media,” “creative industries,” “culture,” “values,” “life styles,” “art,” and perhaps also the notion of the “creative class.” Series Foreword vii Innovation Networks: Innovation networks are real and virtual infrastructures and infratechnologies that serve to nurture creativity, trigger invention, and catalyze innovation in a public and/or private domain context (for instance, government–university–industry public–private research and technology development coopetitive partnerships). Knowledge Clusters: Knowledge clusters are agglomerations of cospecialized, mutually complementary, and reinforcing knowledge assets in the form of “knowledge stocks” and “knowledge flows” that exhibit self-organizing, learning-driven, dynamically adaptive competences, and trends in the context of an open systems perspective. Twenty-First Century Innovation Ecosystem: A twenty-first century innovation ecosystem is a multilevel, multimodal, multinodal, and multiagent system of systems. The constituent systems consist of innovation metanetworks (networks of innovation networks and knowledge clusters) and knowledge metaclusters (clusters of innovation networks and knowledge clusters) as building blocks and orga- nized in a self-referential or chaotic fractal knowledge and innovation architecture,4 which in turn constitute agglomerations of human, social, intellectual, and financial capital stocks and flows as well as cultural and technological artifacts and modalities, continually coevolving, cospecializing, and cooperating. These innovation networks and knowledge clusters also form, reform, and dissolve within diverse institutional, political, technological, and socioeconomic domains, including government, university, industry, and nongovernmental organizations and involving information and communication technologies, biotechnologies, advanced materials, nanotechnologies, and next-generation energy technologies. Who is this book series published for? The book series addresses a diversity of audiences in different settings: 1. Academic communities: Academic communities worldwide represent a core group of readers. This follows from the theoretical/conceptual interest of the book series to influence academic discourses in the fields of knowledge, also carried by the claim of a certain saturation of academia with the current concepts and the postulate of a window of opportunity for new or at least additional concepts. Thus, it represents a key challenge for the series to exercise a certain impact on discourses in academia. In principle, all academic communities that are interested in knowledge (knowledge and innovation) could be tackled by the book series. The interdisciplinary (transdisciplinary) nature of the book series underscores that the scope of the book series is not limited a priori to a specific basket of disciplines. From a radical viewpoint, one could create the hypothesis that there is no discipline where knowledge is of no importance. 2. Decision makers—private/academic entrepreneurs and public (governmental, subgovernmental) actors: Two different groups of decision makers are being addressed simultaneously: (1) private entrepreneurs (firms, commercial firms, 4 E.G. Carayannis, Strategic Management of Technological Learning, CRC Press, 2000. viii Series Foreword academic firms) and academic entrepreneurs (universities), interested in optimizing knowledge management and in developing heterogeneously composed knowledge-based research networks; and (2) public (governmental, subgovernmental) actors that are interested in optimizing and further developing their policies and policy strategies that target knowledge and innovation. One purpose of public knowledge and innovation policy is to enhance the performance and competitiveness of advanced economies. 3. Decision makers in general: Decision makers are systematically being supplied with crucial information, for how to optimize knowledge-referring and knowledge-enhancing decision-making. The nature of this “crucial information” is conceptual as well as empirical (case-study-based). Empirical information highlights practical examples and points toward practical solutions (perhaps remedies); conceptual information offers the advantage of further driving and further-carrying tools of understanding. Different groups of addressed decision makers could be decision makers in private firms and multinational corporations, responsible for the knowledge portfolio of companies; knowledge and knowledge management consultants; globalization experts, focusing on the interna- tionalization of research and development, science and technology, and innovation; experts in university/business research networks; and political scientists, economists, and business professionals. 4. Interested global readership: Finally, the Springer book series addresses a whole global readership, composed of members who are generally interested in knowledge and innovation. The global readership could partially coincide with the communities as described above (“academic communities,” “decision makers”), but could also refer to other constituencies and groups. Elias G. Carayannis Preface As today’s global economic landscape is changing rapidly, the ability of businesses to introduce new innovative products to the market faster than their competitors is perhaps their most distinct competitive advantage. This becomes obvious by the significant market share that the innovative companies gain while increasing profitability. Extensive research in this field has shown that companies that are constantly innovating normally double their profits compared to others. The term innovation refers to a process that comprises three stages: the concep- tion of a new idea, its evaluation, and, finally, its practical implementation. Thus, innovation is an important element of modern entrepreneurship. Innovation management, namely, how a new idea is created, how and by what criteria it is assessed, or how it is financed, is a very tedious and demanding process, and a component element of effective entrepreneurship. In this context, innovation management techniques and models of increasing sophistication are being developed internationally; these, in turn, serve as a basis for the development of many methodologies of measuring innovation at the individual, national, European, and international level. It is important to mention that according to the conclusions of the European Commission, based on the European Innovation Scoreboard (EIS), Greece is last in the list of the EU-15 area countries and one of the last in the EU-27. The weakest points of the innovation system of Greece are identified in the production of new products, risk capital, patenting, broadband penetration, lifelong training, investment in research on the part of firms, high-tech exports, and finally employment in medium-high-technology manufacturing. This has resulted in low innovativeness and competitiveness of the Greek economy. Furthermore, it is noteworthy that both the inflow of foreign capital in Greece and the Greek direct investments abroad represent a very small proportion of the total output and input of the eurozone. The important role of innovation in firm profitability and overall sustainable economic growth, coupled with the disappointingly low yield of the Greek Economy in this field, have made the design of an effective innovation policy in Greece imperative. It is obvious that such a policy can be based on young scientists and entrepreneurs who will have a sufficiently high level of knowledge in innovation and entrepreneurship. ix x Preface This book aims to meet the needs of education and training in modern techniques of innovation and entrepreneurship, and focuses on the detailed presentation of successful business practices. The contents of this book are presented initially in two parts. The first part deals with the process of innovation and its relationship to knowledge, learning, and creativity. The second part is about entrepreneurship and its interdependencies with innovation and the various innovation systems and policies. Chapter 1 is an Introduction to Innovation providing the basic concepts and definitions of Technology, Invention, Creativity, and Innovation with emphasis on Technological Innovation. In addition, a historical, social, and technocratic perspective of Innovation is presented, with a brief reference to the process of Innovation Measurement. Chapter 2 deals with Innovation Management, mainly through Education and Knowledge Management. Furthermore, the role of Knowledge in Innovation and the relationship between Knowledge and Learning are analyzed, and the Knowledge Process model is presented. Finally, the difference between Innovation and Invention is clarified, and the types and characteristics of Simple Innovation and Technological Innovation are listed. In Chap. 3, through a detailed case study of a large company, the relationship between Innovation and Competitiveness is elaborated. This chapter also presents the concepts of Creativity, Innovation, and Competitiveness in Public and Private Sectors, and makes an attempt to analyze the role of the Public Sector in promoting these concepts. The management of Technological Innovation and the consequent challenges is the subject of Chap. 4, an issue also presented through case studies. This chapter lists the different standard models of the Innovation Process with reference to (a) Intellectual Property Rights management and (b) the concept and the practice of Knowledge Management and Intellectual Capital. Chapter 5 deals with the study of Innovation Systems. Special emphasis is placed on the presentation of the different types of Innovation Systems and their basic principles, on the Open and Closed Innovation Systems as strategic choices, and on simulation systems. Of particular interest is the configuration of Innovation Systems with the use of Systems Dynamics and the application of these standards in Sectoral, Regional and particularly National Innovation Systems. This chapter concludes with further analysis of Open Innovation Systems, Innovation Networks, Knowledge Societies, International Research Cooperation, and Innovation Indices. In Chap. 6, which opens the second part of this book, there is an introduction to Entrepreneurship and its relationship with Innovation. Moreover, the different types of Entrepreneurship are presented, followed by an analysis of the concepts of Sustainable Entrepreneurship, the Learning Life Cycle model, and Strategic Learning. A reference to Business Incubators and Technology Clusters versus Knowledge Clusters is also made. Preface xi Chapter 7 seeks to shed light on the practices of Entrepreneurship and Innovation, with a focus on procedures such as Technology Management and Transfer, mechanisms and models of Technology Transfer, and barriers and facilitating factors for successful Technology Transfer. Finally, there is a detailed presentation of Cooperation Research and Development Agreements (CRADAs). Washington, DC, USA Elias G. Carayannis Kozani, Greece Elpida T. Samara Kozani, Greece Yannis L. Bakouros Contents 1 Introduction to Technological Innovation............................................ 1 1.1 Basic Concepts and Definitions....................................................... 1 1.1.1 Technology.......................................................................... 1 1.1.2 Technology Management.................................................... 2 1.1.3 Invention.............................................................................. 2 1.1.4 Creativity............................................................................. 2 1.1.5 Innovation............................................................................ 6 1.1.6 The Concept of Technological Innovation.......................... 7 1.2 Innovation Posture, Propensity and Performance............................ 11 1.3 Innovation Measurement................................................................. 13 1.4 Competitiveness............................................................................... 15 1.5 A Historical and Socio-Technical Perspective on Innovation................................................................................... 16 1.6 Common Frameworks and Typologies to Characterize Innovations............................................................. 19 1.7 Innovation Process........................................................................... 21 References................................................................................................. 23 2 Introduction to Innovation Management............................................. 27 2.1 Innovation Management Through Management of Knowledge and Education........................................................... 27 2.1.1 The Role of Knowledge in Innovation................................ 28 2.1.2 Knowledge/Meta-Knowledge.............................................. 29 2.1.3 Knowledge–Learning Relation............................................ 30 2.1.4 The Model of Organizational Cognition Spiral................... 33 2.2 Difference Between Innovation–Invention...................................... 36 2.3 Types and Characteristics of Innovation.......................................... 38 2.3.1 Types of Technological (and Non-technological) Innovation.................................... 38 2.3.2 Characteristics of Innovation............................................... 40 References................................................................................................. 42 xiii xiv Contents 3 Innovation and Competitiveness: Case Study...................................... 47 3.1 Introduction...................................................................................... 47 3.2 Innovation-Case Study XEROX...................................................... 47 3.2.1 XEROX Background and History....................................... 47 3.2.2 Innovation: Sequence of Errors........................................... 51 3.3 Creativity, Innovation and Competitiveness (CIC) in Public and Private Sectors........................................................... 56 3.4 Concepts and Empirical Observations: Case Studies...................... 62 3.4.1 Subject 1: Key Figures of Innovation and Creativity.......... 64 3.4.2 Subject 2: Drivers of Innovation-Catalysts and Prohibitive Factors........................................................ 64 3.4.3 Subject 3: A Quick Look at the Current State of Play in Various Countries-Challenges and Opportunities................................................................ 66 3.5 The Role of the Public Sector in Promoting Creativity, Innovation and Competitiveness (CIC).............................................................. 68 3.5.1 Public–Private Partnerships Promoting CIC....................... 69 3.5.2 The Role of Multilateral Development Banks (MDBs), such as the World Bank in Promoting CIC......................... 70 References................................................................................................. 71 4 Innovation as a Management Process................................................... 73 4.1 Introduction to Technological Innovation Management.................. 73 4.1.1 How Could a Company Enhance Its Capacity for Innovation.................................................. 74 4.2 What Is the Management of Technological Innovation and Why Is It Important?................................................................. 75 4.2.1 A Corporate Perspective...................................................... 79 4.2.2 A National Perspective........................................................ 80 4.2.3 A Theoretical Perspective-Evolutionary Economy............. 81 4.2.4 Significant Characteristics of the New Growth Theory....... 82 4.2.5 An Individual Perspective................................................... 83 4.3 Challenges in Technological Innovation Management.................... 83 4.4 Case Study in Technological Innovation Management.................... 84 4.4.1 Biotechnology Company..................................................... 84 4.5 Innovation Management Techniques (IMTs)................................... 86 4.5.1 Examples of IMTs............................................................... 89 References................................................................................................. 104 5 Innovation Systems................................................................................. 105 5.1 What Is a System?........................................................................... 105 5.2 The Concept of Innovation Systems................................................ 106 5.2.1 Types of Innovation Systems............................................... 108 5.3 Basic Principles of Innovation Systems........................................... 109 5.4 Innovation Systems and Simulation Systems.................................. 110 Contents xv 5.5 System Dynamics as a Concept, Tool, and Process......................... 110 5.5.1 Building a System Dynamics Model................................... 110 5.6 Innovation Systems: Sectoral, Regional, National—Case Studies.. 112 5.6.1 Sectoral Innovation Systems............................................... 112 5.6.2 Regional Innovation Systems.............................................. 114 5.6.3 National Innovation Systems............................................... 116 5.7 Application of System Dynamics in the Study of National Innovation Systems....................................................... 130 References................................................................................................. 133 6 Introduction to Technological Entrepreneurship................................. 137 6.1 Introduction–Definitions.................................................................. 137 6.2 Types of Entrepreneurship............................................................... 139 6.2.1 Mixed Entrepreneurship...................................................... 139 6.2.2 Pure Entrepreneurship......................................................... 140 6.2.3 Social Entrepreneurship...................................................... 140 6.2.4 Collaborative Entrepreneurship........................................... 140 6.2.5 Internal Entrepreneurship.................................................... 141 6.2.6 External Entrepreneurship................................................... 141 6.3 Sustainable Entrepreneurship.......................................................... 144 6.4 The Model of the Learning Lifecycle and the Learning Strategy................................................................ 149 6.4.1 Environmental Context........................................................ 150 6.4.2 Learning Strategy................................................................ 151 6.5 Incubators........................................................................................ 152 6.5.1 What is a Business Incubator (BI)?..................................... 152 6.5.2 Determination of the Five Incubator Services..................... 154 References................................................................................................. 156 7 Entrepreneurship and Innovation Practices........................................ 159 7.1 Technology Management and Transfer............................................ 159 7.1.1 General................................................................................ 159 7.1.2 Technology.......................................................................... 160 7.1.3 Technology Transfer............................................................ 161 7.1.4 Technology Transfer Mechanisms....................................... 164 7.1.5 Technology Transfer Models............................................... 172 7.1.6 The Vicious Circle of Underdevelopment Versus Technology Transfer................................................ 174 7.1.7 Technology Transfer Obstacles........................................... 176 7.1.8 Success Factors for Technology Transfer............................ 176 7.1.9 Cooperative Research and Development Agreements (CRADAs)........................................................................... 178 7.1.10 Spin Offs.............................................................................. 179 7.1.11 Strategic Alliances............................................................... 180 7.1.12 Technology Transfer and Commercialization Metrics........ 180 xvi Contents 7.1.13 The Case Study as an Evaluation Tool................................ 184 7.1.14 NASA Case Studies............................................................. 185 7.1.15 New Mexico Federal Laboratories Originating Case Studies...................................................................... 190 7.2 Conclusions and Recommendations................................................ 196 References................................................................................................. 199 Literature......................................................................................................... 203 Chapter 1 Introduction to Technological Innovation At present, the life cycle of products, i.e the time span from a product launch in the market until it becomes mature, is constantly shrinking. In fact, in some sectors, such as personal computers, the technological ageing of products takes place within just a few months. Therefore, the capacity to introduce new products in the market anticipating their competitors, earning in this way significant shares of sales, constitutes a big competitive advantage for companies. Companies, hence, should be in a position to constantly ‘innovate’ in order to preserve and improve their market position. Many would define innovation as ‘something new, an invention, a new idea’. In reality though, innovation does not only constitute the birth of a new product or process-related idea; it does include all stages, from the design and the evaluation of the way this idea is translated into action effectively. An innovation takes effect with the first commercial transaction regarding a new or improved accessory, product, process or system. On the contrary, the invention is an idea, a design or a model of an improved or new accessory that in most of the times does not result in any commercial transaction, although it could lead to a patent. Many researches have shown that innovative enterprises, namely the ones that constantly innovate, present on average double profit compared to the rest. However, innovation management is particularly difficult, hence the failure of many new ideas to result in successful new products or services. For this reason, various innovation management models have been developed. 1.1 Basic Concepts and Definitions ‘Imagination is more important than knowledge. To raise new questions, new possibilities, to regard old problems from a new angle, require creative imagination and marks real advance in science’. [Albert Einstein] © Springer International Publishing Switzerland 2015 1 E.G. Carayannis et al., Innovation and Entrepreneurship, Innovation, Technology, and Knowledge Management, DOI 10.1007/978-3-319-11242-8_1 2 1 Introduction to Technological Innovation 1.1.1 Technology Technology is defined as something ‘allowing someone to get involved in a specific activity…with a steady qualitative outcome’, or ‘the art of science and the science of art’ (Carayannis 2001) or ‘the science of arts’ (von Braun 1997). Diwan adds that the technological foundations are market size, standards, innovation, high motivation, and supply of capital (Diwan and Chakraborty 1991). The impact of innovation may be directed to multiple sectors. For example, Jonash lists product/service, process and business innovation as key impact areas. Product/service is the development and commercialization of hard goods, process refers to new ways of producing and delivering cost-time-quality advantages and business innovation is new models of conducting business for competitive advantage (Jonash and Sommerlatte 1999). Technology is a Greek word derived from the synthesis of two words: ‘techne’ (i.e. art) and ‘logos’ (logic). Defined as such, technology means the art of logic and the logic of art. It is formally defined as ‘a design for decision/action that reduces the uncertainty in the cause-effect relations in order to achieve a desired outcome’. Technology usually consists of two components: (1) a hardware aspect consisting of a tool that embodies the technology as a material or physical object, and (2) a software aspect, consisting of the information basis for the tool (Carayannis 1994a, b, c). Although technology is embodied materially in a product, it should nevertheless be viewed as a process, a dynamic and not a static one, a social rather than an intangible knowledge. It is a combination of creative and structured tangible objects, codified knowledge and unsaid know-how embedded in individuals, groups and organizational processes. 1.1.2 Technology Management Technology Management is a set of practices and policies affecting technologies to build, maintain and strengthen the company’s competitive advantage at the level of proprietary knowledge and know-how. In 1987, the American Research Council defined Management of Technology as linking “engineering, science, and management disciplines to plan, develop, and implement technological capabilities to shape and accomplish the strategic and operational objectives of an organization” (Carayannis 1994a, b, c). While technology management techniques are themselves important to an enterprise, they are most effective when they complement the overall strategic posture adopted by the enterprise. The strategic management of technology tries to ‘create advantage at the level of technology’ or ‘to take advantage of possible technological opportunities generated by technology’ (Carayannis 1994a, b, c). 1.1 Basic Concepts and Definitions 3 1.1.3 Invention Understanding the term of invention should take precedence over the definition of innovation. Florida considers invention as breakthrough and innovation as an actualization (Florida and Kenney 1990). In addition, Hindle defines invention as the creative origin of new process and the enabler of innovation (Hindle and Lubar 1986), which has impact on social, economic and financial processes. Therefore, invention is defined as creative process or progress, while innovation is defined as the actualization and impact of all processes–progresses on societies and markets. 1.1.4 Creativity ‘Management is, all things considered, the most creative of all arts.’ It is the art of arts. Because it is the organizer of talent’. [Jean-Jacques Servan-Schreiber] Starting from the individual level, creativity may be defined as the capacity to ‘think out of the box’, think laterally, observe, conceive and construct ideas and models that outweigh or outstrip existing items and ways of thought and perception. Creativity is associated with the capacity to imagine in the sense that it requires the creator to perceive future perspectives, not being obvious under the current circumstances. Therefore, creativity is the capacity to observe new interactions between objects and ideas. Creative types, such as artists, scientists and businessmen usually present features of ‘obsessed maniacs’ and ‘clairvoyant oracles’ (Carayannis 1998–2002, George Washington University Lectures on Entrepreneurship) as well as the capability and propensity for creative destruction, just as Joseph Schumpeter characterizes innovation. Albert Scentzgeorgi, Nobel Prize laureate, defined creativity as follows: ‘seeing what everyone sees and thinking what no one has thought before’. 1.1.4.1 When, Why and How Creativity Arises The problem with ‘creativity’ is that it is indeterminate. While we generally know when something is creative, we usually don’t know why. It seems particularly chal- lenging to give a precise definition on the matter. Aristotle for example argued that inspiration involves a form of insanity giving birth to great ideas as a result of a person’s thoughts, evolving through forms of cooperation (Dacey and Lennon 1998, p. 17). This view that considered the creative individual as insane sustained throughout the nineteenth century. 4 1 Introduction to Technological Innovation Freud believed creative ability was a personality trait that tends to become fixed by experiences in the first five years of life (Dacey and Lennon 1998, p. 36). He added that creative expression constitutes a means to express internal conflicts that would otherwise lead to neuroses. Creativity was some sort of emotional purgative that kept men sane (Kneller 1965, p. 21). During the first half of the twentieth century, B. F. Skinner and other behaviorists considered creative production to be strictly the result of ‘random mutation’ and of appropriate society’s reinforcing factors (Dacey and Lennon 1998). Kneller (1965) argues that ‘an act or idea is creative not only because it is novel but because it achieves something that is appropriate to a given situation’. We create when we discover and express being new to us. The functional phrase ‘it’s new to us’, even if an individual has discovered something, is still creativity if we re- discover it by ourselves. Amabile (1996) seems to be giving the most thorough definition available today. She suggests a dual definition of creativity: (1) a product or response is creative to the extent that appropriate observers independently agree it is creative. Appropriate observers are individuals with large experience in respective fields˙ and (2) a product or response will be judged as creative to the extent that it is both a novel and appropriate task at hand, and the task is heuristic rather than algorithmic. Moreover, Amabile (1996, p. 90) classifies personality traits figuring constantly in the summaries of empirical papers as the traits of creative individuals: High degree of self-discipline in work-related matters. Ability to delay gratification. Perseverance in the face of frustration. Independence of judgment. Tolerance for ambiguity. High degree of autonomy. Freedom from gender role stereotyping. Inner point of control. Willingness for risk taking. A high degree of individual, targeted struggle for excellence. Amongst the aforementioned ten basic traits, it would be particularly useful to add three more: the incentive to freedom, the functional freedom and flexibility. The incentive to freedom (Getzels, Taylor, Torrance, as quoted by Dacey and Lennon 1998) appears when individuals reach the limits of rules to fulfill their needs; when the rules of a situation cause distraction from their creative ideas. Functional freedom refers to the ability to use objects for other creative or unique uses. Dacey and Lennon contend that the more education a person has, the more rigid his or her perception of function and functional freedom is likely to become. Moreover, since education tends to encourage complexity of thoughts, this could lead to a more complicated way of thinking moving against the production of simple ideas- constituting many of the greatest solutions worldwide. Flexibility is the capacity to see the whole of a situation, instead of a set of disparate details. 1.1 Basic Concepts and Definitions 5 1.1.4.2 Creativity in an Organizational Context ‘Culture is the invisible force behind the tangible and observable in an organization, a social energy that moves people into action. Culture is to the organization what personality is to the individual—a hidden yet unifying theme that provides meaning, direction, and mobilization’ [Killman 1985] Many authors consider creativity in the business environment as a key element allowing changes inside the organizations. Kao (1996, p. xvii) defines creativity as: the overall process wherefrom ideas are born, developed and transformed into value. Creativity involves what people usually mean as innovation and entrepreneurship. In our discourse, creativity denotes the art of giving birth to new ideas and the method of formulating and developing such ideas into true value. Kao views creativity as ‘the result of interplay among the person, the task and the organizational context’ (as quoted in Gundry et al. 1994). Drazin et al. (1999) agree with this argu- ment. They conclude that creativity constitutes an individual but also group process. The complex, creative projects observed in large organizations require the involvement of many different individuals and not just a few. In a creative effort, it is usually difficult to give credit to each individual separately (Sutton and Hargadon, as quoted in Drazin et al. 1999). Creativity, they argue, is a repetitive process whereby distinct individuals interact with the group, resolve issues on their own and they return to the group to transform and further enhance their ideas. 1.1.4.3 Environmental Effects on Creativity ‘When I am, as it were, completely myself, entirely alone, and of good cheer... my ideas flow best and most abundantly. Whence and how they come, I know not; nor can I force them. Those ideas that please me I retain in memory.’ [W.A. Mozart Woodman and Schoenfeldt (1990) highlight the importance of social environment and stress the following: ‘it is clear that individual differences in creativity are a function of the rate in which social factors and contextual factors support the development of creative process’. They also add that research in creativity led to the acknowledge- ment of the fact that the kind of environment it is most likely to produce a well- adjusted person is not the same as the kind of environment a creative person is likely to create. Due to lack of research in the field, we shall briefly examine the factor through a continuously broadened circle of social influences-from family to culture. Amabile (1996) reports three significant social factors for creative behavior: Social facilitation (or social inhibition), arising from the presence of others: She mentions that the presence of others may dwindle performance in projects being complex or where there is limited knowledge but could improve performance in projects where knowledge is available or in simple ones. Moreover, abundant evidence shows that individuals present worse performance in ideas production tests when they work in groups compared to individual work. 6 1 Introduction to Technological Innovation Modeling or imitation of observed behavior: The research underscores that a big number of creative models of an entire generation can stimulate a creative production for the following generation (Simonton). At individual level, the type of influence seems more complex. Motivational orientation or intrinsic or extrinsic approach of a person to work: Studies show that the intrinsic orientation leads to a preference for simple, foreseeable projects. Available data suggest that different cultures may boost or obstruct creativity. Arieti (1976) investigates the culture-bound impact on creativity and stresses that the possibility for creativity is set to be more frequent than its actual manifestation. Some cultures promote creativity more than others and named these cultures ‘creative’. He considers that individuals become creative when the following three factors are in place: The culture is right. He gives the example of airplane that could not have been invented, if gasoline had not been invented first. The genes are right. A person’s intellect, considered genetic, should be high. Creativity, possibly genetic or not, should also be high. The interactions are right. He cites the example of Freud, Jung and Adler. If Jung and Adler had not had Freud to compete with, it is questionable whether they would have been able to occupy such a significant place in modern psychology. In a study on culture by Hofstede (1980) of forty independent nations, he found four criteria where the cultures of said nations diverged: power of distance, uncertainty avoidance, individualism–collectivism and masculinity–femininity. Such dimensions have a strong impact on the ‘collective mental planning of people for the environment’. They have also been enshrined in our collective historical culture. For example, the Americans have a tendency towards high individualism, small power of distance and low uncertainty avoidance. Such tendencies do reflect American history which has attached a high value to quality, independence and willingness to take up risks. Such cultural impact is very much different quality wise from the social influences mentioned in previous creativity models. To use a more suitable term, we call it ‘cultural embeddedness’ because it denotes much more than a society’s standards, values and mores. It denotes what constitutes our reality. Taking into account this additional element, we put forward a new creativity model that not only does explain the elements of creativity but the process itself. Under this new model, cognitive and personality factors interplay individually and vice versa. The social environment interacts with the three factors mentioned above and conversely the individual par- ticipates in the creative process. Cultural embeddedness affects not only all creative factors but also all steps of the creative process. 1.1.5 Innovation ‘Discovery consists of looking at the same thing as everyone else and thinking something different.’ [Albert Szent-Gyorgyi-Nobel Prize Winner] 1.1 Basic Concepts and Definitions 7 Innovation is a word deriving from Latin and means the introduction of something new to the existing world and the order of things or the improvement of resources productivity as mentioned by J. B. Say, quoted in Drucker (Drucker 1985). Many definitions of innovation are found in the literature. We report some of them: Chris Freeman and Soete (1982) reports: “The industrial innovation involves technical design, manufacturing, administrative and commercial activities related to the marketing of few (or improved) products or with the first commercial use of a new (or improved) process or equipment”. Paul Gardiner (1985) highlights the following: “…innovation does not only mean commercialization of a significant advantage at the highest technical level (radical innovation), but it also includes taking advantage of small scale changes in the know-how (improvement or incremental innovation)…” Peter Drucker (1985) stresses that: “innovation is the special tool of businessmen to utilize change as an opportunity for a different activity or service. It is possible to appear as a discipline, to be learned, to be practiced”. Paul Michael Porter (1990): “enterprises acquire a competitive advantage through acts of innovation. They approach innovation in its broader sense, including new technologies and the new way to do things”. The term Innovation may refer to the process-conversion of an idea into a merchandised product or service, a new form of business organization, a new or improved functional production method, a new product presentation way (design, marketing) or even to a new service rendering method. It may also refer to the design and construction of new industrial equipment, the implementation of a project with a new management or may refer to a new way of thinking to deal with a situation or a problem. (Green Paper of the E.U. on innovation). Technological evolution and the parallel social and economic changes take place through the realization of innovation. A society’s ability to innovate largely constitutes a mechanism of renewal and development. Innovation regards every aspect of economic or productive process. At the level of an enterprise or an organization, innovation is mainly realized either by developing new products and services or by restructur- ing production–operation processes. The continuous innovative effort for new products-services or new productive processes create a competitive advantage in three critical areas: a. Evaluation of the resources involving research and development activities, application of a new technology, sales productivity, production etc, new productive investments and expansion into new markets or broadening of the cus- tomer base. b. Development and renewal of the entity with investments and growth, profes- sional evolution opportunities for human resources, new recruitments and opti- mism, high morale and spirit. c. Business success building on the reputation and attracting new customers, image of a dynamic business, products that distinguish from the competition, ongoing development and making hard for the competition to gather pace. 8 1 Introduction to Technological Innovation 1.1.6 The Concept of Technological Innovation Innovation is often associated with the creation of a sustainable market around the launching of a new and superior product or process. In particular, in the literature of technology management, technological innovation is characterized by the introduction of a new technological product in the market: ‘Technological innovation is defined here as a situationally new development through which people extend their control over the environment. Essentially, technology is a tool of some kind that allows an individual to do something new. So, technology transfer amounts to communication of information, usually from one organization to another’. (Tornatzky and Fleischer 1990) In particular, technological innovation is defined as: ‘Introduction in the market of a technologically new or significantly improved product or the application of a technologically new or significantly improved productive process, successfully responding to market demand. It is the outcome of the interplay of market conditions on the one hand and of the possibilities to utilize the stock of technological and scientific knowledge’ (Schumpeter 1934) Many authors acknowledge the importance of technological innovation for a company’s high performance today. We report some of them: Technological innovation in various enterprises is one of the key reasons for industrial competitiveness and national development (Freeman and Soete 1982; Porter 1985). Innovation is the only special ability in the 1990s (Peters 1996). The key feature of a modern market is not the price, but innovation (Zaltman et al. 1973). Innovation is the ultimate border in the modern business world helping companies to attain better yield, new products and services at lower cost (Pospiril 1996). Technological innovation is a new technology that creates new products, hence new opportunities for the industry. This is the basic meaning of innovation and the reason it is important for economic growth as it creates business opportunities. Technology was and will be the key incentive to drive changes in our society. Technological innovation has turned into the largest driving force paving the way for society since 1980s. There is a constant flow of products and processes, from power engines in cars, airplanes, telecommunications and pharmaceutical prepara- tions. All enterprises owe their existence and long standing presence to the successful application of technology in the creation of new products and improved manufacturing processes. At present, management executives acknowledge the primordial role of technological innovation in a company’s business success (Hans J. Thamhain). The enterprises that failed to keep up their innovative nature have been outstripped by younger and more active organizations. This failure is due to their weakness to see through the impact of new technology, while competitors seize the opportunity for develop- 1.1 Basic Concepts and Definitions 9 ment offered by technology. Traditionally, innovation has been linked to R&D activities and the use of technological knowledge. This could be explained by the fact that all examples outlined in the literature of businesses are taken from the pharmaceutical industry, the chemical industry or electronics, where basic research has brought about the innovation that changed the world (penicillin, nylon and microprocessors). Any industrial application of scientific knowledge is a technological innovation. It should be stressed at this point that all sectors, of high or low technology, can use technology for innovation. A case in point is EUROPASTRY- FRIPAN, a company set up in Barberà del Vallès, that managed to innovate in an existing bakery industry developing frozen bread. The possibility to have hot bread at any time of the day carrying out a simple task not requiring specialized staff at the sale point seemed impossible to many people. The company almost took a leading position in the Spanish market and set out a revolution in what was seen as a particularly traditional sector. A broader interpretation of the term ‘innovation’ refers to innovation as an ‘idea, practice or material artifact’ (Rogers and Shoemaker 1971) adopted by a person or an organization, where the artifact is ‘considered new by the relevant unit of adoption’ (Zaltman et al. 1973). For this reason, innovation tends to change the perceptions and the relations at organizational level but its influence is not limited at this level. Innovation in the broader socio-technical, economic and political framework could significantly affect, shape and modify the ways and the means people live, businesses are structured, compete, succeed and fail and nations prosper or decay (see Fig. 1.1). In particular, Fig. 1.1 aims to explain the nature and dynamics of an international framework where creativity and innovation could lead to competitiveness improvement and ongoing development. On the other hand, the lack of creativity and innovation is a factor of failed performance and therefore a factor of economic yield failure. In those countries where creativity and innovation are effectively realized, globalization could serve as a drive of beneficial and continuous economic integration. Nevertheless, globalization may become a powerful force leading to loss, inequality, marginalization and economic corruption in non- competitive countries. A government and market success or failure is determined by the way they make use of the four basic elements shaping creativity, innovation and competitiveness worldwide: 1. The coordination and partnership between governments, enterprises, research laboratories and other specialized bodies, universities and support services for small and medium sized enterprises (SMEs), 2. The power of information and communication technology, 3. The efficiency that can be brought about by management and organizational systems in production and trade, and 4. The international agreements, provisions and regulations. All four elements of this framework shall impact on creativity and innovation at micro-level (company level) as well as on innovation and competitiveness at macro-level (industry, national, global). From a company’s perspective, innovation is considered as the fortunate end- ing of an invention’s commercialization journey, when such a journey is indeed 10 1 Introduction to Technological Innovation Fig. 1.1 Creativity, innovation, competitiveness successful and results in a constantly thriving market share or a new market. In other words, a technical discovery or invention (or creation of something new) is not important for a company unless this new technology can be utilized to add value to the company through income increase, cost cutting and similar improvements in economic results. This has two important consequences for the analysis of any innovation in a business organization. Firstly, innovation should be in-built in the organization’s functions and strategy in order to clearly impact on the way said organization creates value or on the type of value offered in the market by this organization. Secondly, innovation is a social process, as it is only through interven- tion and management of persons that an organization can actualize the benefits of innovation. The discourse around innovation leads clearly to the creation of a model for the understanding and the evolutionary nature of innovation. Innovation management deals with the activities undertaken by the enterprise in order to produce solutions for problems related to products, processes and management. Innovation involves uncertainty and dis-equilibrium. Nelson and Winter (1982) suggested that any change-however insignificant-represents an innovation. They also suggest that, 1.2 Innovation Posture, Propensity and Performance 11 considering uncertainty, innovation ends up to the emergence of new technologies and changes in relative weighting of existing technologies (ibid). This results in the disruptive process of dis-equilibrium. Insofar as innovation is adopted and disseminated, existing technologies become less useful (reduction of weight factors) or even useless (weight equal to “0”) and are discarded. The stage of adoption is when uncertainty appears. New technologies are not adopted automatically but rather the markets influence the adoption rate (Carayannis and Alexander 1997; Carayannis and Alexander 1998a, b; Carayannis and Jorge 1998c). It is obvious that innovative technologies put forward solutions for market problems, such as reduced cost, usefulness and productivity. Nevertheless, the markets are social structures and are subject to non-innovative criteria. For example, an invention may be very promising offering a significant reduction in product cost something which would reasonably influence the market to accept said innovation; however, asymmetry in information (or lack of knowledge in the market as regards the properties of the invention) is the reason why the invention cannot be immediately embraced by the markets. Therefore, innovation may simply remain an invention. If, though, innovation becomes accepted by the market, the results shall lead to a change in the relative weight of existing technology. This is the dis-equilibrium in effect. Taking into account the existence of uncertainty and change in the innovative process, the management should develop skills and should understand the process as a method to manage sudden change of events. The problems of managing the resulting change are strategic by nature. They can be classified in three categories, engineering, entrepreneurial and administrative (Drejer 2002). Such classification relates to the respective types of innovation, product, process and administrative innovation: The engineering problem involves selection of the suitable technologies for the correct operational performance. The entrepreneurial problem refers to identification of a product/service and the target markets. The administrative problems focus on mitigating uncertainty and risk during the previous phases. In much of the previous discussion on innovation, a recurrent subject is that of uncertainty, leading to the conclusion that an effective innovation model should include a multi-dimensional approach: ‘Uncertainty is defined as the unknown knowns, while risk is defined as the known unknowns’. A model being helpful for comprehension is the Multidimension Model of Innovation, MMI (Cooper 1998). This model tries to define the understanding of innovation by establishing three-dimensional boundaries. The levels are the following: the product–process, the additional-radical and the administrative–technological. The product–process boundary deals with the final product and its relation to the methods adopted by the companies to produce and distribute the product. The additional-radical boundary determines the degree of relative strategical change accompanying innovation dissemination. This is a measure of disruption or dis- 12 1 Introduction to Technological Innovation equilibrium in the market. The technological–administrative boundaries refer to the relation of the innovative change in the operational nucleus of a company. The technological boundary refers to the influences in basic steady production whereas the administrative boundary would involve innovations that affect the relative policy factors, the resources and the social aspects of the company. 1.2 Innovation Posture, Propensity and Performance Penrose (1959) and Barney (1991) developed the conceptual model of organizational innovation from a perspective based on company resources. In particular, they focused on the concept of knowledge that permeates all organizations as intangible resource to give new daily routines, technologies or structures that impact on future performance (Nelson and Winter 1982). In order to explain the multi-layered influence of organizational innovation, they viewed the framework of innovation routines as a procedural model. They place emphasis on intangible resources contributing as inputs to the process of innovation; they examine the capacity of an enterprise to participate in innovative activities and finally they consider the raft of organizational outputs deriving from innovation that extend from short-term outputs to long term permanent impacts. This compilation of measures is housed within a ‘3P’ framework for the organizational innovation. Innovation results from three critical factors at business level: Posture, Propensity, Performance, 3P (see Fig. 1.2) (Carayannis and Provance 2008). Posture refers to an organization’s position within the largest innovation system of its environment (i.e., region, industry, technological domain). In detail, posture encompasses the situation in a company along three dimensions: the organizational, technological and market life cycles depicting its capacity to participate and benefit from innovation (Damanpour 1996). In this way it determines the conditions affecting an enterprise within a specific technological regime serving a specific market. Every company’s capacity to take part in innovative activities shall be restrained by its posture, being extrinsic to the innovation process measured. In other words, irrespective of whether and which type of innovation process is adopted, a company exists always at some point in its life cycle from its establishment until failure (organizational life cycle). The company selects the technologies to adopt in the application of its strategies and is thus subject to the life cycle of the technology regime wherein technologies exist (technological life cycle). For example, a small number of post carriage businesses kept on operating for a while after the launching of cars, so their position in the technological regime of post carriage sustained and continued being measured. Finally, the company finds itself in a competitive context within significant strategic activities in one or more markets. These markets exist in various points in its life cycle, restricting thus the company’s available innovative actions. Propensity is a company’s capacity to capitalize on its posture based on the innovation’s cultural acceptance. In this way, propensity is an intangible reflection of procedures, routines and capabilities established within a company. A company 1.3 Innovation Measurement 13 Fig. 1.2 The 3P framework: a systems view of the innovation process (Carayannis and Provance, 2008) may have sufficient resources and therefore higher externalization of innovation, while having at the same time an underdeveloped capacity for innovation by virtue of its culture or other restrictions (Carayannis and Provance 2008). Performance is the enduring result of innovation. This part of the framework involves three levels: output, outcome and impact, (Carayannis and Provance 2008). Impact appears as direct, internalized benefits of innovation. New product introduction, patents and technology transfer licenses are some examples of output arising. Outcomes encompass medium results, such as revenues from new products. Finally, impact represents lasting and long-range benefits that are injected to the company by its innovative capacity and are transformed into results for the company’s environment too. All the three factors—posture, propensity and performance—are empirically conceived in the form of a combined indicator defined as Complex Innovation Index, CII (Carayannis and Provance 2008). This comprehensive measure denotes the superior evaluative results of innovation measurement (analyzed further down) in all aspects of the process (Damanpour 1996). 1.3 Innovation Measurement Measurement of innovative performance at enterprise level has been less the focus point compared to project or system level. Studies at project level offer a broader understanding of the mechanisms underlying innovation and their impact on the organization in question. Most of these studies exclude the control held by managers to deal with uncertain and dynamic environments. Differences among the studies have led to a generally accepted innovation performance indicator or to a common set of indicators at organizational level. In general, the following categories of indicators related to innovation can be distinguished: Input indicators measure the available resources in the innovation process. Such inputs include the intellectual, human and technological capital (e.g. Baruk 14 1 Introduction to Technological Innovation 1997; Carayannis et al. 2003; Hagedoorn and Cloodt 2003; Lansiti 1997; Leenders and Wierenga 2002; Parthsarthy and Hammond 2002). Process indicators depict the organizational systems and the management systems of innovation processes. They also integrate a company’s innovation system design as well as its innovativeness (Howells 1995; Kahn 2002; Koen and Kohli 1998). Output indicators determine the results of organizational innovation. Output indicators represent the realized short-term success of innovative activity. Indicators in this group count the numbers and rates of patents, patents reports, the number of new products, innovation-related sales rate etc (Baruk 1997; Michalisin 2001). They also represent the realized, short-term success of innovative activity, e.g. profit margins or the company’s medium-term and long-term market shares, the company’s growth rate, the dominant designs or the technological standards formulated by business innovations, the innovations of second stage and advanced stages deriving from an initial innovation, degree of disruptiveness (Carayannis et al. 2003). Impact measures the continuous advantage enjoyed by a company as a result of innovation. Many studies utilize a single input or output indicator to define a company’s innovative performance (Coombs et al. 1996; Evangelista et al. 1998; Feeny and Rogers 2003). However, it has been ascertained that there are problems in innovation measurement, particularly with input indicators (Coombs et al. 1996). The critical issues are (1) some input measurements that do not conceive the process performance, (2) single measurements not reflecting economic or qualitative value, and (3) lack of indication of technological complexity in the inputs. Similarly, Santarelli and Piergiovanni (1996) have demonstrated that output indicators based on patents may be problematic because the technological level and the economic value of patents are particularly heterogenic; the nature of patents’ content largely varies from country to country. In addition, not all innovations are patented; not all patents turn out being innovation and patenting depends largely on a company’s size. Output indicators present limitations due to primary factors at industry level, when industries or enterprises with variable size are compared. Other studies have criticized the isolated measurement of innovative business operations or parts thereof (e.g. Damanpour 1996). Adding to this criticism, we have identified three limitations of the existing literature. Emphasis is primarily placed on the manufacturing sector and on products’ innovations, disregarding the process variables. Therefore, existing innovations do not take into account some significant indicators for innovative success and present restrictions in the examination of different sizes, objectives and activities of enterprises. Recent studies have presented the advantage of utilizing complex indicators to determine a company’s innovativeness (e.g. Hollenstein 1996; Hagedoorn and Cloodt 2003). However, the concept of a complex indicator has not been studied in depth by the literature. Only three innovation studies use complex indicators to record the diverse determining innovation-based performance factors (Damanpour 1996; Hagedoorn and Cloodt 2003; Hollenstein 1996). Only Damanpour (1996) and Hollenstein (1996) utilize process indicators. It is therefore required to develop 1.4 Competitiveness 15 Table 1.1 Measurable features of novelty Quantitative measures Quality measures Characteristic Measurement Characteristic Measurement R&D Budget R&D Effection Productivity Patents Development New products Low cost Staff R&D Flexibility Publications Offer/Demand Initiatives R&D Enterprise’s size New ideas Market’s effection Inventions Users’ benefits New markets Products extensions Conventions Personal Low prices CRADAs Social Social involvement Cooperations Saving time complex indicators that would integrate the distinct approaches to measurement and would include measures of the overall innovation project (Coriat and Weinstein 2002; Hagedoorn and Cloodt 2003). How then should innovations be measured, provided of course they are measurable? Research & Development (R&D) constitute the first measurement tools utilized (Evangelista et al. 2001). Nevertheless, research and development itself can be measured based on different characteristics. For example, in case of research and development measurement/Intellectual Property Rights, the number of patents constitutes a measurement indicator. Other characteristics are frequently measured though, such as budget for research financing, the number of researchers, the number of significant inventions, the number of new products, the number of researches published, etc. (Tidd 2001). There exist also other characteristics associated in a less apparent way, such as increased productivity and development or reduced cost (Nelson and Winter 1982). Another classification of measurable characteristics is realized on the basis of the social impact of innovations. The relevant examples include the possibility to measure the advantages, the lowest prices and time saving offered to consumers as well as other elements facilitating the members of society (Mansfield et al. 1977). A typology of measurable characteristics could be of help to collect the distinct measurable characteristics (Table 1.1). The basic classification is between ‘quantitative’ and ‘qualitative’ measurable characteristics. Quantitative measurable characteristics are the ones directly associated with innovation process. For example, the number of patents is the direct result of the research process and it is not generally affected by external factors. On the contrary, improvement of productivity could be a direct result of innovation but the relation between the two is less clear due to other characteristics affecting it. Productivity increase could derive from a simple increase of interest in the application of innovation for productivity. This should not make us assume that innovation was 16 1 Introduction to Technological Innovation not a key factor that influenced the increase of productivity but most probably that the measurement process was not accurate enough to reveal the role of different influences. Research and development directly affect the outcome. Studies carried out in the manufacturing sector showed that the utilized financing granted for research and development (R&D) was the main explanation for the differences in productivity development among manufacturing companies compared to the entire financing for research and development in the entire sector (Nelson 1977). This could practically mean that the expenses for research and development are a direct way of measuring a company’s productivity. The adoption of measures for the development and application of innovations could be influenced by a company’s business and technological strategy. A company aiming at high profit may choose to measure the characteristics of innovations geared towards specific targets (Nelson 2000). This type of measurement is more useful for the characteristics being directly linked between them, i.e. for the cases of quantitative measurable characteristics. 1.4 Competitiveness Competitiveness is people’s, organizations’ and nations’ capacity to achieve high outputs and outcomes and in particular to add value using the same or lower input amounts (see Fig. 1.3). Fig. 1.3 The CPI model 1.5 A Historical and Socio-Technical Perspective on Innovation 17 In addition, the entrepreneurial addition of value and the learning from experience and failure are not solely determined by profit and non-profit organizations. The rule for the evaluation of such outcomes as ‘superior’ or ‘better’, or ‘more performing’ could include basic capabilities of a specific organization or nation as well as a comparison with other organizations or nations. Then the basic conclusion drawn for competitiveness is that it is attained through an organizational improvement process whereby institutions of an economy have a clout over people, knowledge and technologies, with the aim to restructure relations and achieve higher production levels. 1.5 A Historical and Socio-Technical Perspective on Innovation ‘But in capitalist reality…, it is not price competition which counts but the competition from the new commodity, the new technology, the new source of supply, the new type of organization.... competition which....strikes not at the margins of the profits and the outputs of the existing firms but at their foundations and their very lives’ [Joseph A. Schumpeter 1942] To understand the history of innovation, one should take a look at Schumpeter’s clas- sical papers. Schumpeter authored the ‘Theory of Economic Development’ in 1934 as a research focusing on profit, capital, credit, interest and cyclical economic fluc- tuations. His main contributions were (a) the expansion of Adam Smith’s economic principles from land-labor-capital to land-labor-capital-technology-entrepreneurship and (b) the introduction of the concept of imbalance in economic discourse. It is interesting to highlight that Schumpeter was a socialist who believed that the capitalist system would eventually collapse and be replaced by a socialist system. At this point he agreed with Marx, but his interpretation on socialism was very much different on many accounts. Marx felt that the economic model he applied could determine the structure of society. The corner stone of his theoretical structure was the ‘Value- Added Theory’ whereby the value of a commodity, taking into account the perfect balance and the ideal competition, is proportional to introduction of labor. Schumpeter disagreed with Marx on this issue reaching the conclusion that the perfect balance and the perfect competition were problematic even in the best of cases. Another point of discord between Schumpeter and Marx was the latter’s allega- tion that the capitalist system shall collapse ‘(Zusammenbruchstheorie)’ as a result of its inherent injustices. According to Schumpeter, the natural evolution of capitalism would destroy the foundations from within. In reality, he considered that the economic crisis of 1930s was an indication of paradigm shift that strengthens his convictions. Schumpeter saw capitalism in almost the same way he saw innovation process. Both were generally considered stable processes (under perfect conditions) from a theoretical model perspective. Schumpeter, however, introduced the conceptual theory of imbalance as the main powerful factor and this could be further expanded in the concept of continuous powerful disequilibrium (Carayannis 1994b) to grasp and articulate the concept of successive Fisher-Pry (S-curves) curves with 18 1 Introduction to Technological Innovation discontinuous or/and disruptive innovations, inducing a change in the curve or/and the change of the ‘rules of the game’, as we shall see below. Michael Tushman and Charles O’Reilly suggest that discontinuous innovation involves breaking with the past to create new technologies, processes and organizational ‘S-curves’, resulting in significant leaps in the value added to customers. Similarly, Clayton, Christensen, Gary Hamel, C.K. Prahalad, James Utterback describe discontinuous innovation as a mixing of ‘radical technologies’, ‘discontinuities’ or ‘radical innovations’ enabling entire industries and markets to set out, be transformed or be vanished (Kaplan 1999). Technological innovations helping companies to estab- lish new rules for the enterprises or to create enterprises anew are usually considered discontinuous. With regard to the concept of ‘discontinuity’, the distinction is rare in the literature; the same applies with the methods of recognizing said radical innovations. For the masterminds of corporate strategies’ planning, a key question remains unanswered and regards the establishment of a method for the identification of opportunities and their utilization through rational processes that lead to reliable steps (in contrast to waiting for a random appearance of opportunities) (Kaplan 1999). Usually capitalism is referred to as ‘laissez-faire’ but after the Second World War capitalism is more closely related to social, political and legal models. Following Schumpeter’s principle on evolutionary capitalism, we could say that capitalism in modern era is a reasonable expansion of Schumpeter’s theory. The concept of innovation as a ‘socio-technical’ system has been fairly consolidated. Rogers (1995) for example defined innovation from the point of view of notions for people or groups adopting an innovation. The efforts to classify innovations on purely technical terms are facing the danger of depicting the outcome of a social process as something that would be totally separated from human influence. This paper advocates an approach for the concept of innovation classification and sub-division in four basic dimensions (Carayannis 2002): i. The process of innovation (the way innovation develops, disseminated and adopted). ii. The content of innovation (the specific technique or social nature of innovation itself). iii. The environment of innovation (the environment in which innovation takes place and the environmental impact on innovation). iv. The impact of innovation (the social and technological change arising from the innovation process completion) (Carayannis 2002). Using all these four dimensions of innovations, we could investigate deeply its social repercussions. The key factors linking creativity and innovation are the following: Environment: The environment where the above dimensions take place. Process: What is the process actualizing all the above. Content: What is the content of the above taking into account the interaction with other factors. Impact: What is the impact of each of the above on the other factors. Level: The properties should be viewed at all levels including the company, industry, national and international levels. 1.6 Common Frameworks and Typologies to Characterize Innovations 19 Fig. 1.4 Competitiveness vs competition trade-offs (Carayannis and Gonzalez 2003) Invention: What is being invented determines the content of innovation. Mechanization: It is a necessary but no satisfactory condition for innovation. Creativity and Competition: They may be extrinsic factors to competitiveness. Competition facilitates or inhibits competitiveness (see Fig. 1.4). Stabilization: It may reproduce satisfaction. Radical technologies: They can renew competitiveness with significant productivity profits. Nevertheless, exaggerated competition may undermine competitiveness leading to the Acceleration Trap (von Braun 1997) and to Differentiation Trap (Christensen 1997) (see Fig. 1.4). This kind of situations lead increasingly to shorter and no continuous cycles of products and spiral cost of R & D with shrinking profit margins and market shares, resulting from exaggerated competition and reduced competitiveness. Under the circumstances, change takes place so quickly that usually companies fail to fully benefit from it and end up using resources insufficiently and declining their position in the market participating in price wars and in trivial innovation races. Companies could thus find themselves ‘trapped’ in a ruthless spiral of increasing competition and reduced competitiveness resulting in even fewer sustainable positions or market niches. 1.6 Common Frameworks and Typologies to Characterize Innovations ‘Comforted by idols, we can lose the urge to question and thus we can willingly arrest our growth as persons: ‘one must invoke tremendous counter-forces in order to cross this natural, all too natural progressus in simile, the continual development of man toward the similar, average, herdlike common!’ [Nietzsche, 58] 20 1 Introduction to Technological Innovation Innovations can be classified in three general categories, in content innovations, process innovations and administrative innovations (Tidd 2001). Some researchers classify innovations based on the influences per geographical regions (Evangelista et al. 2001) or based on decision making criteria (Rogers 1995), while others distinguish innovation in incremental, generational, radical and architectural (Cooper 1998). Another method to classify innovations in types is carried out depending on the decision making systems (Rogers 1995) and is based on the principle establishing that the adoption of some innovation be influenced both by individuals and by social systems in their entirety. Moreover, innovations are distinguished in subversive/non subversive and in (Christensen 1997) continuing/discontinuing innovations (Tushman and Anderson 1990). Process innovations regard the change in the methods adopted by a company to offer products and services. A case in point is the use of the internet to manage the supply chain, whereby ordering, pricing and monitoring are carried out through the internet. Innovations of content reflect the changes in the final products and in a company’s services. Such an example is the addition of a new characteristic, i.e. remote control in TV sets to facilitate users. Administrative innovations refer to the changes in the characteristics of an organization or an institution. Such examples are the changes in policy, structure and distribution of sources. The classification of innovations based on the differences arising per geographical region is a very narrow concept being usually restricted in the comparison between specific technological innovations. One of the disadvantages of said method is the evaluation of an innovation’s regional/geographical nature. For example, in cases of research and development (R & D), evaluated based on the number of patents, it should be clarified that the areas where a patent was discovered may be different from the area where it was registered, particularly in the case of multinational companies. Should an invention take place in an Asian company belonging to a USA multinational, the patent registration application is most probably filed in USA; as a result, if measurements take place per geographical region, it shall be considered that the patent belongs to the USA. Bringing together various previous studies on technological innovations (particularly studies carried out by Abernathy, Anderson, Clark, Henderson, Tushman and Utterback) a common framework emerges that distinguishes four general types of technological innovations: incremental, generational, radical and architectural innovations. Incremental innovations exploit the potential of established designs and usually reinforce the dominance of already existing enterprises. They also enhance current operational capabilities of a technology through small scale improvements on the value of technology, adding attributes such as performance, safety, quality and cost. Generational innovations are incremental innovations resulting in the creation of a new system that does not present radical changes. Radical innovations introduce new concepts that diverge significantly from the practices of the past and contribute to the creation of products and services based 1.7 Innovation Process 21 on different engineering or scientific principles and usually pave the way for new markets and possible applications. They also offer a ‘new operational capacity that constitutes a discontinuity in the current technological capabilities in effect’. Architectural innovations serve to broaden the classification of radical and incremental innovations introducing the concept of changes in the way the constituent parts of a product or system are linked together. Another common classification is evolutionary innovations whereby changes seem to follow the process of ‘natural selection’ (technical improvements are the result of the ‘survival of the fittest’) and revolutionary innovations, whereby changes appear as disruption or non-continuing change in the course of technology. These two approaches to innovation, however, are not mutually exclusive. Based on the aforementioned types of innovation, we could show the way these concepts relate to each other in a more integrated framework for the analyses of innovations. Process Content Evolutionary innovation Incremental innovation or Next generation innovation Revolutionary innovation Radical innovation or Architectural innovation The integrated framework of our four dimensions enables us to correlate discontinuous and disruptive technologies with the following concepts. Process Content Environment Impact Evolutionary Incremental innovation Continuous innovation Non-disruptive or innovation Next generation innovation Continuous innovation Disruptive innovation Revolutionary Radical Innovation Discontinuous Non-disruptive or Innovation innovation Disruptive innovation Not all innovations are discontinuous and not all discontinuous innovations are they disruptive; moreover, not all disruptive innovations are discontinuous. This is determined by Lethe innovation’s field of application, the time and its impact, while diverse strategies exist to deal with the challenges and the opportunities emerging from scheduled or random technological discontinuities and disruptions. 1.7 Innovation Process ‘The lowest form of thought is the stripped recognition of the object. The highest form is the full intuition of a man who sees everything as part of a system’ [Plato] Defining innovation process is by nature problematic. This research field is still at its creation stage and every researcher in the field has given his own definition on innovation process. However, there is significant information available in order to have a common understanding of several points. The innovative process is deter- 22 1 Introduction to Technological Innovation mined through the correlation of its research constituent parts (Nelson 1977). Inventions can be measured, while the process of research and development can also be determined or constitute an object of research. Science and inventions can be linked between them; the sources of innovations can be further developed, the organization-bound factors can be investigated, technological evolution can be studied, diffusion of innovation can be assessed and learning phenomena can be disclosed. ‘Inventions are viewed as complementary, cumulative, and leapfrog’ [Rosenberg 1982] Complementary invention is the invention of a new process or of a new product that regards an already existing technology, such as the computer’s mouse that supports the interactive relation between user and PC. Cumulative invention is the invention added to an already existing invention. For example, the improvement of a product by adding a pour spout on juice cartons is a case in point. Leap-frog inventions bring about radical changes that differ from the existing technologies and cause discontinuity in the markets. To understand the process, one should conceive the concept of innovation urgency as a basic and guiding element (Cooper 1998). In a competitive context, managers are led to success both at individual and at organizational level. For organizations to be successful, managers should take a step further beyond development, application and approval of innovation. They need to be constantly innovative in order to reach success, driving organizations to higher levels of innovations’ diffusion. Most of innovation models are based on three basic ideas (Drejer 2002): Firstly, the organization can act in a suitable way in order to create or choose its environment Secondly, the strategic options of managers shape the structure and the processes of organizations and Thirdly, the selected structures and processes highlight a strategy. It is a very interesting way to view the models of innovations. If an organization can choose its context and if this option is rational, it should be able to choose the best possible context for a successful strategy. However, there are numerous examples of strategies adopted by enterprises that did not yield the anticipated results. Is this principle belied by the bad performance of a strategy? Most probably, the selection of a context is affected by external factors. This question is indeed very interesting and it is worth being investigated; however, it does not fall under the scope of this book. There are several recurrent basic principles pertaining to innovations. These principles are summarized as follows: The integrated organizational approach The incentives of innovations The systematic process to convert an invention into innovation Team skills References 23 Communications Learning and Project management. The above principles are fundamental for the elaboration of innovation process. It is worth to underline the interdependence relati

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