Data Bases • Custom Term Papers • Free Term Papers • Free Research Papers • Free Essays • Free Book Reports • Plagiarism? Links • Top 100 Term Paper Sites • Top 25 Essay Sites • Top 50 Essay Sites • Search 97,000 Papers @ DirectEssays.com • Search 101,000 Papers @ ExampleEssays.com • Search 90,000 Papers @ MegaEssays.com Free Essays • Term Paper Sites • Chuck III's Free Essays • Free College Essays • TermPaperSites.com • My Term Papers • Get Free Essays • Essay World • Planet Papers	Search Lots of Essays Back to Subjects - Miscellaneous Innovation A case for multi level research Innovation A case for multi level research It is now generally recognised that we are in the midst of major economic upheaval, with the kind of ramifications not seen since the industrial revolution of the early nineteenth century. Products of the human mind, such as software, pharmaceuticals and microprocessors, are replacing those of the earth and the blast furnace as our primary measure of economic power, and information technology is set to become the world's biggest industry within the next decade, displacing the automobile as the primary barometer of economic activity (Mandel 1997). As a recent editorial in Forbes has pointed out, in an international economy built on new technologies that are free from many physical restraints change "goes into overdrive" (Forbes 1997, p.130). It is no surprise, then, that innovation is fast becoming the central preoccupation in management and related studies. "Innovate or fall behind: the competitive imperative for virtually all businesses today is that simple", is how Leonard and Straus (1997, p.111) see it, and their view is widely shared (Peters 1990, Beck 1992). Yet, in spite of this increasing attention, we still have much to learn about the process of innovation in organisational and institutional settings. Questions such as why some firms are more innovative than others in the same industry, why some regions or countries are more innovative in certain industry sectors than others, and why innovation of the more radical kind most often tends to come from outside of existing industries are still being pursued with little resolution in sight. To date, most studies of innovation and its link with competitiveness have tended to focus on a single level of analysis. Industrial economists, evolutionary economists and institutional theorists have all tended to focus on the nature of innovation at sectoral, regional/national or even global levels (Nelson 1992, Jacobson 1994, Niosi and Bellon 1996), while management theorists have tended to focus on factors governing innovation at the level of the firm (Quinn 1985, Sinetar 1985, Drucker 1986, Kanter 1988, Cohen and Levinthal 1990, Leavy 1997). This paper argues that the time is now ripe for a move towards more multi-level, interdisciplinary research. The early part of the paper reviews the literature on innovation and finds thematic and conceptual convergence across levels and disciplines around the relationship between innovative activity and institutional context and the nature of the innovation process itself. This convergence, the paper concludes, indicates the opportunity for multi-level, interdisciplinary research and points the way towards the kind of framework based on systems thinking, learning theory and dynamic analysis, through which such research might be pursued. The institutional context for innovation Among the most prominent themes linking the literature on innovation across levels and disciplines is the growing interest in the relationship between institutional context and innovative activity. There is a strong tradition associating innovation primarily with rare entrepreneurial or inventive talent. This tradition has its roots in the early literature on economic development, particularly with the Schumpeterian (1912) characterisation of the process as one of 'creative destruction'. As Baumol (1958, p.64) pointed out nearly forty years ago, the entrepreneur is "at the same time one of the most intriguing and one of the most elusive characters in the cast that constitutes economic analysis". Attempts over the years since to pin down the definitive attributes of this elusive character have continued to meet with little success (see Burch 1986 for a typical example). There is no doubt that rare talent plays its part in innovation activity, often in the most dramatic ways. History continues to demonstrate the impact that scientific and commercial genius can have on the growth of firms and the transformation of industries. Chester Carlson of Xerox, Edwin Land of Polaroid and Bill Gates of Microsoft, are well-known cases in point. Throughout the scientific community itself there are those like Howard Schneiderman (1991, p.55), the former vice-president of research and development at Monsanto, who remain convinced that "outstanding researchers are a rare breed" and that "most seminal discoveries are made by a handful of outstanding researchers". However, many are sceptical about the critical role of rare talent in innovation, and about the existence of a distinct entrepreneurial personality. According to Drucker (1986) innovation is essentially "organised, systematic, rational work" (p.40) in which "everyone who can face up to decision making can learn to be an entrepreneur and to behave entrepreneurially" (p.65). Furthermore, Collins and Porras (1996), in their recent study of companies that have survived and thrived for more than 40 years, have found that neither great ideas nor great and charismatic individual entrepreneurs were necessary in the building and sustaining of great enterprises. While we can never discount the often dramatic role of rare talent in innovation, the indications from the literature, and from everyday empirical experience, are that such talent is not the definitive factor in any attempts to understand why some firms are consistently more innovative than others in the same sector, why some sectors are more innovative than others, or why innovative activity can vary so much across regions and countries. The literature across levels and disciplines is increasingly interested in understanding the characteristics of the institutional context that affect innovative activity and can help to explain these firm, sectoral and regional variations. One of the central issues relating institutional context with innovative activity is the question of institutional form. For example, is innovative capability related to the size of firms? There is evidence that the upward trend in the average size of firms that had been an enduring feature of economic development since the industrial revolution (Galbraith 1956, Chandler 1977) has slowed down or even reversed itself since the 1970s (Peters 1992, Acs 1996), calling into question the view that there are increasing returns to scale - internal to firms - that drive successful firms to increase in size. Focusing on technology and innovation in particular, Acs and Preston (1997 p.2.) posit the question: "Is the apparent resurgence of smaller firms due to the emergence of a dynamic, vital innovative entrepreneurial sector, or is it due to the inability of large incumbent MNEs [multinational enterprises] to prevail in a technologically dynamic global environment?" There is some evidence that small and medium enterprises (SMEs) are better innovators than their larger counterparts. This is suggested, for example, by the US data associated with Federal research funding which indicates that SMEs spend less on R&D than large firms, yet generate more new knowledge (Acs and Preston 1997). How can this be explained? The research to date clearly indicates that the internal institutional context is an important variable. Researchers trying to understand why, often tend to start with a closer look at the more salient characteristics of the innovation process itself (Quinn 1979, Quinn 1985, Kanter 1988, Peters 1990). Most now agree that the process, in whatever organisational context, large or small, is essentially a probabilistic one, that even when well managed can best be described as one of "controlled chaos" (Quinn 1985). As Peters (1990, p.17) put it, "innovation, in the end and no matter how well thought out is a numbers game". It requires variety in idea generation, and multiple independent approaches help to improve substantially the odds for success. It further requires a high degree of personal or group obsession to see the innovation safely through the initial period of high risk, high frustration and modest reward, since few begin as obvious commercial winners, even such classics as xerography. Successful innovation also seems to require a fair degree of personal and financial slack, the closest possible link between marketplace and technology, and a context that can tolerate and learn from failure (Quinn 1985, Kanter 1988, Peters 1990). Finally, it requires a context that values diversity, generates a marketplace for ideas and harnesses 'creative conflict' (Eisenhardt et al 1997, Leonard and Straus 1997). Few large firms have found it easy to institutionalise such a process within traditional organisational contexts, and many entrepreneurial firms seem to lose their capacity for innovation as they grow and develop into more formal organisations over time. Quinn (1985) identified a number of very significant barriers including top management conservatism and isolation from the innovation process, intolerance for fanatics and 'non-conformist' talent, short time horizons for expected payback, excessive rationalisation and routinization of the process, excessive bureaucracy and inappropriate rewards. More generally, the traditional organisation has found it difficult to accommodate the more creative and non-conformist types who like to immerse themselves in technical challenges, often for the sheer intellectual pleasure of the chase, and whose preferred working habits tend to "contradict organizational expectations and mores" (Sinetar 1985, p58). Larger organisations are often poorer protectors of the property rights of innovators, where the gains from innovation are more diffusely distributed (Acs et al 1997), and the reward and control systems in the larger organisation are too often designed to minimise surprise, yet in the innovation process "surprises are the name of the game" (Schneiderman 1991, p.54). However, some large firms have been able to rise to the challenge better than most, and have earned well-deserved reputations for innovativeness that have been enhanced over time. They have done this mainly by trying to recreate many of the salient characteristics of the SME within a larger organisation context. Take the example of 3M, which is increasingly being used as the benchmark by many established firms hoping to revitalise their capacity for corporate entrepreneurship. Among the most prominent features of the 3M approach is the explicit strategic commitment to competing on innovation, institutionalised in the company's ongoing formal aim that at least 25% of its sales should come from products introduced within the most recent five-year period. Furthermore, 3M has developed a corporate culture that celebrates as heroes those enterprising individuals whose persistence and commitment have triumphed over management indifference or bureaucratic rejection. The company's '11th Commandment' is 'Thou shalt not kill a new product idea'. Its internal institutional context encourages experimentation and accepts failure as a productive stage on the road to success. It also creates structures (like the Technical Senate and the Annual Technology Fair) that facilitate grass roots scientific communication across horizontal and vertical organisational boundaries (Bartlett 1995). Differences in internal institutional context alone will only go part of the way towards explaining why SMEs are often better innovators than their larger counterparts. There is also evidence to suggest that SMEs tend to be more actively and extensively networked into their locality/region, with implications for innovative capability. Evidence for this is provided by Almeida and Kogut (1997). Focusing on patents in the semiconductor industry in the US, they show that small-firm start-ups "are unusually oriented toward the exploration of diversity by targeting less crowded technological fields", and that the exploration of small firms "has a strong local character: they are more sensitive to, and contribute more to, the innovations of spatially-contiguous firms" (p.24.). This greater diversity among small, start-up firms is related to their 'embeddedness' (Grabher 1993) in localities. Proximity facilitates contacts between individuals that evolve into social and professional networks; these networks develop the common stock of knowledge in the locality that becomes the foundation for further innovation by starts; this is more beneficial to SMEs because the people in these firms are more likely to have had recent experience in other firms and therefore better links to other firms than personnel in large firms, which tend to be more vertically integrated and self-sufficient (Almeida and Kogut 1997). This seems to be reflected in the findings of Saxenian's (1994) ethnographic study in which she notes that there is more inter-firm knowledge exchange in Silicon Valley than in the Route 128 region around Boston; the former has a higher share of starts while the latter is dominated by larger firms that inter-relate much less either with surrounding institutions or other firms in the region. This difference is believed to be part of the reason why Silicon Valley remains vibrant while the Route 128 region has experienced a recent decline. There is counter-argument and counter-evidence, to the effect that MNEs continue to dominate the global economy (e.g. Strange 1991, Amin 1993, Harrison 1994). Much of the research showing the advantages of SMEs is location and/or sector specific. Rothwell and Dodgson (1994, p.310), editors of the Handbook of Industrial Innovation, argue that "the role played in innovation by... SMEs is strongly sectorally influenced; ...the relative innovatory roles of large and small firms can vary over the industry lifecycle; and... dynamic complementarities frequently exist between the technological change activities of large and small firms." This is a warning against generalising in the debate on the relative advantages of large and small firms. At a level of analysis above this debate, some generalisation is however possible: for both large and small firms the influence of the institutional context on innovative activity is played out on a canvas that stretches well beyond the internal culture, structure and processes of the individual firm. As Andréosso-O'Callaghan and Jacobson (1997, p.6) have recently put it: the decisions, strategies and actions of any firm evolve in a specific, regional or national, technological context, affected by a whole range of private and public institutions, and by the relationship between those institutions and firms, in short by a geographically and historically specific innovation system. While the systems of innovation research is still in its relative infancy, and the literature remains underdeveloped, clear strides have been made in establishing the link between wider contextual and institutional factors and firm-level innovation and in identifying the kinds of variables involved. While the question as to which domain, local, regional, national, global or sectoral, is the most salient may itself vary with context, there is little doubt that such wider systemic influences are important. For example, the financial, technical training and education, and industrial relations sub-systems, seem to be important variables in distinguishing the effectiveness of the national systems of innovation in large countries (Andréosso-O'Callaghan and Jacobson 1997). At the regional level, key variables include socio-cultural links such as common religion, artisanal training, party political membership, and strong sense of local community (Malerba 1993). Furthermore, in industrial districts like Silicon Valley, regional and sectoral influences have been found to interact to produce new structural arrangements within and between firms that affect the system of innovation not only within individual firms but more reflexively throughout the region and sector (Saxenian 1991, Bahrami 1992). The innovation process - invention, absorption and integration A second major theme linking the literature across different levels and disciplines is the growing recognition that invention is only one aspect of innovation, and often not the most significant aspect. Innovation also involves processes of absorption and integration. The tradition in western management and economics has been to associate innovation primarily with technological development, and in particular with frame-breaking technological change. When such breakthroughs happen they are often spectacular in their effects at firm, industry and national levels, as the histories of inventions like xerography, polymers and solid state electronics can attest. However, such discontinuities are relatively rare, the main benefits that flow from them do not always go to the inventing firms and their economic regions, and technological change is not the only or even the most significant form of innovation in many cases. To date, the pattern of technological development in most industries has been one of long periods of evolution punctuated by rare episodes of radical change. Tushman and Anderson (1986), for example, found a total of just eight discontinuous changes over the combined 190-year histories of the US cement, airline and minicomputer industries up to the early 1980s. There was just one such change in the 200-year history of the Irish distilling industry (Leavy and Wilson 1994). When such radical changes have occurred, the major economic rewards have not always gone to the inventors. EMI in scanners, De Havilland in jet aircraft, and Xerox in personal computers are among the classic examples of inventive firms that failed to reap the lion's share of the economic rewards flowing from their technological breakthroughs. In many industries the technological protection regime is often quite weak, and many patents can be invented around quite easily (Teece 1986). Studies by economists like Mansfield (1984) have shown that nearly two thirds of all patented innovations are imitated legally within four years of their introduction. Resourceful imitators can often have their own versions of the technology on the market before an industry standard or dominant design has emerged. Such imitators are often better at commercialising technologies than the originators, because they have complementary assets, like an established brand name or distribution system, that prove crucial to bringing the technology to the widest possible market, and they are also better at turning the new technology into products with much greater market-appeal. Even in industries where the technological protection regime is quite strong, patient second movers, with better applications skills and a greater commitment to developing the technology, can eventually match or even outperform the originator in reaping the commercial rewards. Canon's success in the copier industry pioneered by Xerox and Microsoft’s in GUI (graphic user interface) software pioneered by Apple are just two of many such examples. Once a new technology appears on the market the dynamics of technological development and the commercial rules of the game change at industry level (Utterback and Abernathy 1975, Utterback 1994). Speed to the market with product enhancement and process innovations to make the manufacturing system more flexible and efficient become the competitive imperatives. Proficiency in these areas depends more on development engineering capability and organisational factors than on rare scientific or technical insights. The success of many Japanese companies in securing market leadership and the technological initiative in industries like video recorders, photocopiers, quartz timepieces and dynamic random access memory (DRAM) microchips, that were originally founded on western invention, was based on what we are now coming to recognise as a capacity for 'creative imitation' (Drucker 1985; Rosenberg and Steinmueller 1988; Bolton 1993; Kim 1997). The success of creative imitators such as Matsu*censored*a has helped to direct renewed attention in the West towards long neglected elements of the innovative process, and their links with competitiveness (see Berger et al 1989). As Rosenberg and Steinmueller (1988) have pointed out, western thinking about the innovation process has tended to focus excessively on the activities of the upstream inventor at the expense of the downstream engineer. This tendency has been underpinned by a commercial culture that has "historically cast entrepreneurs and mavericks as virtual folk heroes" (Bolton 1993, p30), and undervalued the role played by teamwork and the cumulative power of numerous ideas for incremental improvement which have so often proved the decisive advantage of the successful imitator (Reich 1987, Kanter 1988). Creative imitation is an active learning process, backed up by well developed systems and processes for exploiting externally-developed knowledge (Bolton 1993). Cohen and Levinthal (1990, p131) refer to an organisation's ability to innovate through the acquisition and exploitation of new knowledge as its 'absorptive capacity'. The deeper and more diverse a firm's pre-existing knowledge structure, the greater is its absorptive capacity. In addition, superior absorptive capacity is a potentially difficult to imitate source of competitiveness because of its firm-specific and cumulative nature, and it can be continually enhanced as a by-product of the firm's research and development and other knowledge-gathering activities. Creative imitation and absorptive capacity are inherently connected with an emphasis on development rather than invention, and "a central theme in the study of the development process has been its integrated, interactive, and iterative nature" (Rosenberg and Steinmueller 1988, p231). As Hamel and Prahalad (1994) have recently stressed, absorption and integration are just as central to successful innovation as invention and often the more decisive processes in industries with fairly stable underlying technological orders. The growing recognition that innovation involves absorption and integration as well as invention has implications for our understanding of systems of innovation at all levels. We have seen earlier how prevailing mindsets and ideologies in different cultures lead to different levels of emphasis on inventive versus absorptive capacity at all levels from national economy to the individual firm (Kaplan 1987, Reich 1987, Rosenberg and Steinmueller 1988, Bolton 1993). Innovation patterns are also affected by the underlying technology regimes governing industry evolution, with implications for whether technological changes are more likely to appear from existing players or from new entrants. Malerba and Orsenigo (1997, p.84) have distinguished among two main patterns of innovation, 'creative destruction' and 'creative accumulation'. The first is a 'widening' pattern of innovation at sector level that is related to an innovation base which is "continuously growing through the entry of new innovators and to the erosion of the competitive and technological advantages of the established firms" (p.86). The second is a 'deepening' pattern that is related to "the dominance of a few firms which are continuously innovative through the accumulation over time of technological and innovative capabilities" (p.86). Others have referred to these two patterns of innovation as 'competency destroying' and 'competency enhancing' (Abernathy and Clark 1985, Tushman and Anderson 1990). Competency enhancing innovations are embedded in the technologies that they replace, like the turbofan advance in jet engines. They tend to emanate from the existing technological regime, and can propel industry evolution onto a new plane of development without any major disturbance to its existing structure. According to Malerba and Orsenigo (1997), the competency-enhancing pattern of innovation is more likely to be found in the newer sectors of the economy like chemicals and electronics. The history of Raychem, one of the most consistently innovative companies in the chemical sector supports this view. As Paul Cook, the company's founder and long-time chief executive explained to William Taylor of the Harvard Business Review some years ago (Taylor 1990, pp.98-9): Too many people still think innovation is about one brilliant technologist coming up with one breakthrough idea. It's not. When we started Raychem, we began to learn what radiation chemistry could do. Within three or four years, we had generated virtually every idea behind the products that we are selling today (over thirty years on), and we are still working on that original inventory of ideas. Likewise, the leading companies in the semiconductor sector, like Intel, continue to see the technological trajectory over the next decade and beyond as very predictable, and the search for ever wider applications as the primary imperative in sustaining industry growth (Kirkpatrick 1997). Such findings and examples lend credence to belief of commentators like Reich (1987) that the collective capacity of organisations to push a basic technology in new directions, continuously refining it into a stream of new products, which can in turn spawn further competency-enhancing technological trajectories, is becoming more and more the primary engine of wealth creation in the modern economy. The emphasis on systems and processes associated with the interest in creative imitation, absorptive capacity and cumulative change has highlighted the need to see innovation in much wider terms than that involving physical technology alone. As the recent study by Markides (1997) has shown, many other aspects of business management, including novel approaches to marketing and logistics, have been just as radical in their effects on industry evolution as technological discontinuities. In this, he provides ample support for the conclusion drawn by Abernathy and Clark (1985, p7) from their analysis of Timex's entry into the watch industry that "novelty and scientific advance may have little to do with an innovation's competitive significance". Innovations in organisation and management can be just as significant, as the MIT study of the world automobile industry has demonstrated (Womack et al 1990). In fact the rise of the new industrial powers like Japan, contrasts with the earlier experience of countries like Great Britain, Germany and the United States in being based primarily on management innovation rather than technological innovation in the more traditional sense (Drucker 1988, Stata 1989). The emphasis on absorptive capacity and collective entrepreneurship has also focused attention directly onto the importance of institutional learning processes in competing on innovation. Stata (1989, p.64) is not alone in his view that "the rate at which individuals and organisations learn may become the only source of sustainable competitive advantage". Absorptive capacity, with its emphasis on the importance of externally-generated knowledge also broadens our perspective on innovation from the traditional focus on intra-organisational processes to inter-organisational relationships. As such it raises interesting questions about institutional learning processes not only at organisational level, but also at sector and regional levels as well, and how such learning processes are stimulated or inhibited by competitive and collaborative relationships among firms. Traditionally, in the economics field, research on the diffusion of innovation and learning throughout industries and sectors has tended to focus on measuring rates of adoption of innovation and how they change over time (Mansfield et al, 1977). However, new approaches have emerged in more recent years, with evolutionary, path-dependency and industrial districts theorists all emphasising different factors in the diffusion process (see Lissoni and Metcalfe 1994, for a review of these developments). Many economists are coming to recognise that any single theoretical approach will only explain part of the picture. As Jacobson and Andréosso-O’Callaghan (1996, p.176) have recently argued, "human, social and even cultural factors are increasingly being accepted as important in technology, innovation and diffusion", and innovation economists are being drawn beyond the traditional boundaries of their own discipline in the search for fresh insight. Towards a framework for multi-level, interdisciplinary research The thematic convergence across levels and disciplines reflected in the foregoing review points us towards the kind of framework within which multi-level, interdisciplinary research on innovation might be usefully developed, based on systems thinking, learning theory and dynamic analysis. The first conclusion that we can draw from the foregoing review is that the innovation process can no longer be fully understood at any single level of analysis. This is perhaps most dramatically illustrated in the developing literature on systems of innovation, where very clearly the nature of innovative activity at firm level is seen to be inextricably linked to institutional influences operating at national and sectoral levels. Increasingly, we consider firms in less discrete and atomistic terms in the context of industrial agglomerations like clusters, districts and filieres, with innovation emerging through supplier partnerships, strategic alliances and other forms of inter-organisation relationships (Jacobson and Andréosso-O’Callaghan 1996, pp.116-122). In short, the study of innovation increasingly requires a systems perspective. What kind of systems perspective? Much of our traditional thinking about social systems at all levels of analysis is heavily influenced by mechanistic models. As Morgan (1986, p.22) has observed "the mechanistic mode of thought has sha Bibliography: Word Count: 4423
Copyright © 2005 College Term Papers, INC All Rights Reserved.