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Henry Chesbrough on open innovation

  • Open innovation = paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market
  • Alternatively "innovating with partners by sharing risk and sharing reward
  • boundaries between a firm and its environment have become more permeable; innovations can easily transfer inward and outward

Phases in the Innovation Process

  • Invention → the phase of idea generation
  • Innovation → the first successful commercialization of a new idea
  • Diffusion → the dissemination of a new technology throughout the economy
  • Imitation → the dissemination of a new technology by others copying this technology

The linear model of innovation

  • also called pipeline model or sequential model
  • Humans tend to think in linear ways, e.g. first basic sciences than applied sciences
  • Simple cause-effect relationships
  • Independent Variable X -> Dependent Variable Y

Overview linear model of invention

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network model of innovation (complexity)

  • Knowledge creation and exchange is complex
  • At different stages (science, technology and consumption) new ideas and hints where to search for new knowledge can be found
  • New knowledge in one phase of the process impacts on the whole learning process
  • no deterministic relationships. Failure is possible and generates knowledge on innovation paths which are not promising

more interconnections in model of innovation

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Innovation becomes a non-linear (complex) process:

  • Feedbacks between all phases of the innovation process (e.g. innovation and invention -> scientific instruments imitation and innovation -> incremental improvements diffusion and innovation -> user innovations etc.)
  • Creativity (new ideas are no longer exogenous)

chain-linked model of Kline and Rosenberg

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Diffusion Theory (Rogers 1962)

  • In the diffusion process the Knightian uncertainty is already surmounted
  • The innovation (or an early form of the innovation) is already there and spreads out in the economy
  • Empirically a specific pattern characteristic for most diffusion patterns has been identified: The sshaped (sigmoid or logistic curve)

Diffusion Theory: Sailing Ship Effect

  • describes a strategic reaction of incumbent companies when they become aware of a potential innovation which is has the potential to replace them (strong substitution between two technologies)
  • To avoid market entry of new technology, incumbent companies increase strongly their innovation efforts ->  introduce attractive new versions for their customer base and avoid adoption of new rival
  • successful in the short run
  • in the long run supports the dominance of the new technology (might use parts of the new knowledge generated by incumbents, gains time to fully develop and not to run the risk of an too early market entry with many teething problems)