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Modern innovation characterised by:

- professional R&D departments within the firm,

20^th century - main source of inventive activity shifts from the individual inventor to

professional R&D laboratory

US example

Thomas Edison large-scale research labs in Menlo Park

1900s focus of inventive effort shifts from the contract lab to industrial industrial labs Kodak (1895), General Electric (1900) and Du Pont (1902).

1914 corporate R&D was clearly established as the centre of American inventive activities

Post: WWI embryonic military-industrial complex - US Navy sponsoring industrial research.

Consequently most of the major inventions of the 20^th C were the result of professional R&D activity.

Even when individual inventor-entrepreneurs played key roles in the innovative process such individuals had access to substantial facilities and resources to conduct sustained R&D work

E.g. University scientists or inventors worked closely as consultants with corporate R&D departments of innovating firms.

E.g. Special wartime programmes led to the recruitment of outstanding university scientists to work on government sponsored innovations (The Manhattan Project)

Intimate links with basic research were normal for R&D in these industries. Resulting technology is science based in he sense that it could not have been developed without a foundation in theoretical physics.

I.e. This body of knowledge could never have emerged from casual observation, from craft skills or trial and error as was the case in many earlier technologies.

The rise of such science-based technologies also changes production engineering, sales methods, industrial training and management techniques.

Frequently the bulk of employees in science-based industries were employed in generating, processing and distributing information knowledge

E.g. Ericsson - employs less than 10% of its workforce in production.

WWII drove the intense R&D efforts of IG Farben

The strength of military-aerospace demand in post WWII US drove the flow of innovations in semiconductors and the early generations of

British WWII needs spurred the successful development of RADAR

German government sponsored the development of FM networks

Toyota - wartime Japanese government that needed trucks.

Regardless of source of market demand, in its absence inventions they cannot be converted into innovations.

Innovation is essentially a two-sided activity requiring:

1. recognition of a need or to use economic terms a market for a new product

2. technical knowledge

Experimental development and design, trial production and marketing entail a process of matching the technical possibilities and the market.

Professionalisation of R&D represents an institutional attempt to cope with the complex problems thrown up by the need to match need and know-how.

Far from perfect solution - Freeman characterises the matching process as uncertain and involving a certain amount of groping around in the dark.

Innovation studies have tended to build theory around one of these two aspects -

the science/technology push theories

the demand-pull theories of innovation

Note these theories may be complementary, i.e. not mutually exclusive.

Empirical examples supporting both theories: Nuclear energy research & Eli Whitney's

Freeman - any complete theory must take both perspectives into account.

Recall - economists define technical innovation as the first commercial application or a new process or product.

Entrepreneur links novel ideas with the market.

Bulk of innovations demand some imaginative combination of new technical possibilities and market possibilities.

"Necessity may be the mother of invention, but procreation still requires a partner."

E.g.: Marconi, IBM.

"I think there is a world market for maybe five computers." Thomas Watson, Chairman, IBM, 1949

Given this one-sided innovations are unlikely to succeed.

The intriguing problem faced by possible innovators lies in the fact that both the market and technology are continually changing.

Freeman's three tentative conclusions:

1. Firms able to keep up and stayed informed about scientific advance may be first to realize a new market possibility.

2. A firm with good intelligence about its customers may be first to recognize potential markets for such novel ideas

3. The test of successful entrepreneurship and good management is the capacity to link together these technical and market possibilities

Innovation is this coupling process - first occurs in the minds of imaginative people.

Most theories of creativity stress the combination of ideas previously regarded as separate

In innovation the coupling process requires on ongoing dialogue between different sections, departments and individuals within the innovating firm during the experimental development work and the introduction of the new product or process.

In sum the quality of entrepreneurship and good communications can be regarded as critical factors in successful innovation.

Summing up this discussion innovation theorists (like Freeman and Soete) have put forward the following factors as characteristic of successfully innovating firms:

1. Strong in-house professional R&D

2. Performance of basic research or close connections with those conducting such research

3. The use of patents to gain protection and bargain with competitors

4. Large enough size to finance heavy R&D expenditure over long periods

5. Shorter lead times than competitors

6. Readiness to take high risks

7. Early and imaginative identification of a potential market.

8. Careful attention to the potential market and substantial efforts to involve educate and assist users

9. Entrepreneurship strong enough to effectively co-ordinate R&D, production and marketing

10. Good communications with the outside scientific world as well as with customers.

However these assertions based on either:

- scattered case histories lacking comparability of coverage

- theoretical analysis lacking systematic empirical foundations

SPRU &, the SAPPHO Project. Basic idea - test generalisations about technical innovation by systematically comparing pairs of successful and unsuccessful attempts to innovate in each branch of industry in turn.

Focus of the study - identifying a set of characteristics that were consistently different between the success and failure halves of the pairs.

Analysis of similarity was a complementary part of the analysis and also promised to provide some useful data:

Important to stress SAPPHO project sought to identify success factors for innovation not invention.

Methodological implications: marketing aspects of the process assumed greater importance/the role of the inventor recedes.

Criterion of success was a commercial one

Results:

1. Resemblances common to virtually every attempt to innovate whether successful or not.

2. Variations between firms unrelated to success or failure

Size of Firm

3. Success characteristics