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    Innovation

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    Tony Peterz Kurewa
    tutorial

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    Innovation

    Uploaded by

    Tony Peterz Kurewa
    27 views2 pages
    tutorial

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    © © All Rights Reserved

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    tutorial

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    © All Rights Reserved
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    Download as docx, pdf, or txt
    27 views2 pages

    Innovation

    Uploaded by

    Tony Peterz Kurewa
    tutorial

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    Two schools of thought exist on the drivers of innovation: the

    market-based view and resource-based view of innovation. The


    market-based view of innovation is founded on the premise that
    innovative organisations attempt to exploit changing market
    conditions. Market conditions are said to provide the initial
    conditions that govern the direction and quantity of an organisations
    innovative activities. Tidd et al (2001) assert that innovative
    organisations are those that scan their environment to absorb and
    process information regarding potential innovation. The ability of the
    organisation to align its strategies with identified enablers and
    constraints in their environment are found to highly influence its
    competitive advantage (Barrett et al. 2001).

    The resource-based view of innovation, on the other hand, argues


    that the market-based view of innovation offers a weak foundation
    for innovative strategies, particularly in dynamic and volatile
    markets. Instead, it is believed that the organisations own
    resources, such as its assets, capabilities, routines and knowledge
    base, may offer a more concrete basis for innovative strategies
    (Davies and Brady, 2000). Innovative organisations are those that
    utilise their internal resources to develop unique configurations of
    resources, thereby building the foundations for successful
    innovation (Davies and Brady, 2000).

    Indeed, general innovation theory stresses the importance of a


    firm’s technological capabilities for its innovative capacity (Baumol,
    2002; Rosenberg, 1974). A firm’s technological capabilities are
    ultimately defined by its physical and knowledge capital, with
    investments in R&D and education of employees as necessary
    ingredients to increase and intensify such a capital (Baumol, 2002).
    Baumol (2002) emphasise that the higher the technological
    capabilities of a firm, the more likely it will develop further innovation
    in the future. Baumol (2002) also argues that “innovation breeds
    innovation” (p. 284), pointing to the path dependency characteristic
    of innovation.

    Innovating firms are incentivised to pursue novel products and


    processes provided they are able to reap first-mover benefits
    (Porter and van der Linde, 1995b). However, the ability of the
    innovator to capture the returns of his innovation is often
    problematic. Jaffe et al. (2002) assert that“… the creator of an asset
    will typically fail to appropriate all or perhaps most of the social
    returns it generates”. Therefore, the ability of the firm to minimize
    these so-called spill-over effect are particularly important, and
    dependent on technological characteristics of the innovation such
    as technical complexity, patentability, and lead time as well as the
    market structure (Rödiger-Schluga, 2005). Monopolistic market
    structures dominated by large firms are the least affected by
    appropriation problems due to the limited risk of imitation and the
    benefits gained from scale economies related to innovation
    (Smolny, 2003).

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