INNOVATION

MANAGEMENT

§1. Lecture 1: Introduction 13/11/2017
§ What is an innovation?
Invention: an idea, a sketch or model for a new or improved device, product,
process or system.
Innovation: the process and outcome of creation and commercialization of
something new.
Innovation = Invention + Exploitation

§ Normal economics is about existing structures, equilibriums…
BUT innovation is about creation (and destruction), change, novelty…

§ Why is it so difficult?
ü Innovation funnel: Most innovative ideas do not become successful new
products à 70-90% of failure
ü Carefully crafted strategies required
ü Barriers, Competitors, Innovation patterns, Environment, etc.









Innovation funnel

§ Innovations emerging from failure
ü Jeff Bezos founding Amazon after his businesses failed several times before.
ü Walt Disney was fired because “he lacked imagination and had not ideas”. 

ü Henry Ford’s first entrepreneurial attempts failed several times before being
successful with Ford Motor Company. 

ü Bill Gates started a company called Traf-O-Data which failed... just to go on
founding Microsoft.

§ Sources of innovation >>> firms, universities, individuals, private non-profit,
government funded research.

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 § Research refers to both basic and applied research.
ü Basic research aims at increasing understanding of a topic or field without an
immediate commercial application in mind.
ü Applied research aims at increasing understanding of a topic or field meet a
specific need.

§ Development refers to activities that apply knowledge to produce useful devices,
materials, or processes.

§ R&D thus refers to a range of activities that extend from early exploration of a
domain to specific commercial implementations.

§ Demand pull technology push
ü Technology/Science push >>> Linear model emphasizes “supply side”
ü Need/Demand pull >>> Linear model emphasizes “demand side”
ü Innovation process likely to be non-linear.
ü Innovation originates from a variety of sources and follow a variety of paths.
ü Risks TP >>> develop solution for which there is no problem
DP >>> missing ability to invent technology to solve problem

§ Supply and demand determinants
ü Supply Technological opportunity >>> relevant scientific knowledge
Cost and availability of inputs >>> workers, scientifics, equipment
Appropriability >>> ability to capture profit from innovation
ü Demand Cost reduction potential from innovation
Consumer or producer benefit from novel products
Consumer or producer benefit from improvement

Progress in conceptualizing innovation:

Rothwell’s five generations of innovation
model

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 § External sources and combinations of external and internal sources
ü External sources >>> licensing, purchasing, externalities (technological,
pecuniary)
ü Combinations >>> strategic partnership, cross licensing

§ Technology clusters are regional clusters of firms that have a collection of
common technology (ex: Silicon Valley, lower Manhattan multimedia cluster).

§ Externalities are the costs or benefits that are borne (transmis) or reaped (récolté)
by individuals other than those responsible for creating them.

§ Technological spill overs occur when the benefits from the research activities of
one entity spill over (s’étend) to other entities.

§ Product innovation vs. Process innovation
ü Product innovation >>> embodied (consacré) in firm output (new product)
ü Process innovation >>> techniques of producing output (more efficient
production), marketing goods or services
ü Product innovation can enable process innovation and vice versa
ü Product innovation for one firm may be a process innovation for another firm

§ Radical vs. Incremental innovation
ü Radical >>> high degree of newness/differentness
ü Incremental >>> marginal degree of newness/differentness

§ Competence enhancing vs. Competence destroying innovation
ü An innovation is competence enhancing if the innovation builds on the firm’s
existing knowledge base 

ü An innovation is competence destroying if the innovation renders a firm’s
existing competencies obsolete 


§ Architectural vs. Component innovation
ü A component innovation entails (entraîne) changes to one or more components
of a product system without significantly affecting the overall design
ü An architectural innovation entails changing in the overall design of the
system or the way components interact

§ Technology S-Curve

Technology improves slowly first because it is
poorly understood

Then accelerates as understanding increases

Then tapers off (diminue) as approach limits

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 S-Curves in technology performance and market diffusion are related (better
performance >>> greater adoption >>> further investments in improvements) but they
are fundamentally different processes.
ü Technologies do not always reach their limits
ü Technologies may be displaced by new, discontinuous technologies

Disruptive technology has an S-
Disruptive technology has a steeper Curve that increases to a higher
(accentuée) S-Curve performance limit


Innovation may require acquiring complex knowledge or experience and
complementary resources to make it valuable (Ex: Smartphone & Wireless internet
access).

Backward compatibility >>> when products of a technological generation can work
with products of a previous generation.

Freemium >>> a pricing model where a base product or service is offered for free, but
a premium is charged for additional features or services.

§ S-Curves as a tool for managers
ü Managers can use data on investment and performance of their own
technologies or data on overall industry investment and technology
performance to map s-curve.
ü Useful for gaining a deeper understanding of its rate of improvement or limits
(however, is limited as a prescriptive tool).
ü True limits of technology may be unknown.
ü Shape of S-Curve can be influenced by changes in the market, component
technologies, or complementary technologies.

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 § Switching to a new technology depends on new technology’s
ü Advantages
ü Fit with the company’s current abilities
ü Fit with the firm’s position in complementary resources – lacks them or may
make compatible products
ü Expected rate of diffusion
Firms that follow S-Curve model too closely could end up switching technologies
too soon or too late.

§ Segment Zero
ü Technologies often improve faster than customer requirements demand
and/or customers can learn and adapt them to their work.
ü This enables low-end (bas de gamme) technologies to eventually meet the
needs of the mass market.
ü If the low-end market is neglected (abandonné), it can become a breeding
ground for powerful competitors.

§ Creativity >>> the ability to produce work that is useful and novel
ü Individual >>> intellectual abilities, knowledge, personality, motivation,
environment and persistence
ü Organizational >>> individual creativity, social processes and contextual
factors

§ R&D
ü Basic research >>> aims at increasing understanding of a topic or field without
an immediate commercial application in mind.
ü Applied research >>> aims at increasing understanding of a topic or field to
meet a specific need.

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 § Innovation in collaborative networks (agglomeration economies) benefits
firms reap (récolte) by locating in close geographical proximity to each other.
Depends on nature of technology, industry characteristics and cultural context.
ü Proximity facilitates knowledge exchange (willingness to exchange through
building trust via interaction and develop common ways to understand and
articulate the knowledge)
ü Cluster of firms can attract other firms to area
ü Supplier and distributor markets grow to service the cluster
ü Cluster of firms may make local labour pool more valuable by giving them
experience.
ü Cluster can lead to infrastructure improvements (e.g., better roads, utilities,
schools, etc.)

§ Downside of agglomeration economies
ü Proximity of many competitors serving a local market can lead to competition
that reduces their pricing power via buyers and sellers
ü Increase in the likelihood of a firm’s competitors gaining access to the firm’s
proprietary knowledge
ü Can lead to traffic congestion, excessively high housing costs and increased
pollution

Technology transfer offices >>> offices designed to facilitate the transfer of
technology developed in a research environment to an environment where it can be
commercially applied.

Science parks >>> regional districts typically set up by government to foster R&D
collaboration between government, university and private firms.

Incubators >>> institutions designed to nurture (entretenir) the development of new
businesses that might otherwise lack access to adequate funding or advice.

Tacit knowledge >>> knowledge that can’t be documented in written form.

Knowledge brokers >>> individuals/organizations that transfer information from
one domain to another in which it can be usefully applied.

Socially complex knowledge >>> knowledge that arises from the interaction of
multiple individuals.

§ Phases of turning ideas into successful innovations (Bessant 2003)
1. Scan and search their environments (internal and external) to pick up and
process signals about potential innovation
2. Strategically select things which the organization will commit resources to
doing
3. Resource it and exploit it
4. Implement the innovation, growing it from an idea through various stages of
development to final launch

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 § What makes innovation so difficult? (Schilling 2013, Bessant 2003)

ü Why change >>> the innovation puzzle which organizations are trying to solve
is constantly changing and mutating

ü What to change >>> firms should be aware of the extensive (vaste) space
within which innovation possibilities exist and to try and develop a strategic
portfolio which covers this territory effectively, balancing risks and resources

ü Understanding innovation >>> whilst (alors que) the term innovation is in
common usage, the meaning people attach to it (and the way in which they
behave) can vary widely

ü Building an innovation culture >>> the approach a particular organization
takes to dealing with the innovation challenge

ü Continuous learning >>> developing a good practice, so you don’t have to start
from scratch each time a new innovation project starts

ü High involvement >>> extend participation in the innovation process to a much
wider population

ü Dealing with discontinuity >>> develop “the ambidextrous organization”. That
is, to manage under one roof to operate routines for “doing what we do better”
innovation and simultaneously to allow space for another set of routines for
“doing differently” (moving beyond the envelope into new and uncharted
territory)

ü Managing connections >>> the facilitation of information processing capacity


§2. Lecture 2: 20/11/2017
§ Industrial dynamics >>> the study of the means and processes through which
industries change over time
ü Forces driving industry evolution
ü Important implications for innovative activity and strategy of firms

§ Statics industry >>> fixed industries, not dynamics. E.g. pharmaceutical (Pfizer),
utilities (provides services, telecommunications)…

§ Strategy is not static
ü What type of innovation relevant at a certain point of time?
ü When should a firm enter a specific market?
ü What kind of (competitors) behaviour can we expect (in the future)?

§ Dominant design >>> the most popular (not necessarily the most technologically
advanced) solution.

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 ü New industry: initially high levels of uncertainty about user preferences,
technology, etc.
— Competition focuses on product innovations 

ü Users and producers learn through experimentation 

— De facto product standard emerges as the dominant design (reduces
uncertainty)
— Competition focuses on process innovations

Dominant design: Expected appearance

Cell phone dominant design

§ To successfully overthrow an existing dominant technology, new technology often

must either offer:
ü Dramatic technological improvement (Ex: in videogame consoles, it has taken
3x performance of incumbent)
ü Greater stand-alone value is not enough, needs greater overall value
ü Compatibility with existing installed base and complements

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 § Technological trajectories >>> Once a paradigm (modèle) is chosen, the
technological artifacts developed within this paradigm are improved. Such an
improvement pattern is a technological trajectory.

§ DD and Non-Technical Innovations >>> Why DD may be present: Increasing
returns to adoption: technological innovation (but also non-technical innovation)
becomes more valuable the more it is adopted.
ü Network externalities: benefit from using a good increase with the number of
users
ü Prior learning (learning curve): when using a technology, producers learn to
make it more efficient
ü Complementary assets
Social factors: habits, behavioural patterns
Producer-user linkages, alliances, etc.

§ Why DDs are selected?
ü Network externalities
— Value to any one user rises with the total number of users
— Common in industries with physical networks (telecommunications,
railroads...)
— More common when compatibility or complementary goods are important
ü Learning curve / Experience effects
— Cost of production decreases with increasing output
ü Complementary assets
— Additional complementary products only offered when a technology is
widely adopted

Pre-Dominant Design Post-Dominant Design

Innovation type Product Innovation Process Innovation

Performance vs. Price Performance decisive Price/performance ratio

Market size Size of market uncertain Size of market predictable

Entry barriers Low entry barriers High entry barriers

Market dynamics Fast and radical Slow and stagnant

Expected appearance of Producer and buyer Producer and buyer have clear
product experiment with the product conception of the product

Customer growth / care

Growth in customer base Service and image of the firm
nexus

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 § Results of DDs >>> Winner take all market: natural monopolies (huge reward for
firms supporting winning technologies, market entry barriers for other firms). But
technologically superior does not always win.

§ Innovator vs. Imitator >>> Pros and cons of pioneering strategy
Pros >>> (1) Early market knowledge, (2) Early development of market
position/establishment in the market (including brand loyalty...), (3) Little price
competition, (4) (Pioneer) Learning
Cons >>> (1) High costs of market development, (2) Benefit of market
development may spill to followers (negative externality), (3) High likelihood of
mis-investment, (4) Estimation of future demand more difficult in early stages, (5)
Half-baked innovation à damage to firm’s image

§ Industry life cycle (ILC) à uses the metaphor of a biological organism (birth,
growth, maturity, decline) to understand general patterns of structural change
across different industries.
ü Idealized pattern of industrial change
ü Emphasizes interactions between consumer demand and technology

Industry life cycle

Phases of the ILC

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 § Spinoffs (retombées) and ILC
ü Better performing firms have a higher spinoff rate
ü Better performing firms spawn (produisent) better performing spinoffs
ü Spinoffs perform better than the average firm
ü Spinoffs locate in proximity to their parent firms (Detroit as centre of
automobile production)

§ Technological regimes >>> nature of knowledge base impacts the way
innovation takes place depending on selection environment and underlying
development: opportunity conditions (scarce (rare) or pervasive (répandu)),
appropriability conditions (high or low), cumulativeness (dependence on previous
technological achievements), knowledge base (degree of complexity).

ü Routinized regime
— Lower probability of innovation (for the same amount of R&D spending)
— Cumulativeness of knowledge (external and internal sources important)
— Innovative advantage of large incumbents

ü Entrepreneurial regime
— High probability of innovation
— Low levels of cumulativeness
— Advantage of innovative entrepreneurs and small firms over large
incumbent firms

ILC and technological regimes

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Technological battles: multiple dimensions value

§ Stand-alone value
ü Function the technology enables customers to perform
ü Aesthetic qualities
ü Ease of use…
ü Stand-alone value mainly based on firm level factors
Stand-alone value is also a “relative” concept >>> relative to offers by competitors
(Ex: Appropriability can influence stand-alone value in relative terms)
Even if Xbox would offer higher stand-alone value, the smaller installed base or
poor availability of complementary goods may cause that the PS4 has a higher
overall.

Multiple dimensions value: components of value

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 § Weighting value

Actual perceived and expected component of value


When comparing the value of a new technology to an existing one, users are
weighting combination of:
ü Objective information (actual benefits, base and complementary goods)
ü Subjective information (perceived benefits, base and complementary goods)
ü Expectations (anticipated benefits, base and complementary goods)
Ex: Sega introduced 32-bit video game console.

§ Multiple dominant designs >>> More than one DD if customer requirements for
network externality satisfied at relative lower level of market share (Ex: video
game console industry).
Benefits of network externality can be achieved without attaining a majority of the
market (Ex: Sony has a majority share of the US video game market and neither
Nintendo nor Microsoft has greater than a 30% market share).
A network effect (also called network externality or demand-side economies of
scale) is the positive effect described in economics and business that an additional
user of a good or service has on the value of that product to others.

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§3. Lecture 3: 27/11/2017
§ Industrial organization and industrial dynamics
ü Industrial dynamics >>> change in structure of (and boundaries between)
firms and markets (Ex: evolution of industries, changing role on innovation
over the industry life cycle).
ü Industrial organizations >>> structure of (and boundaries between) firms and
market (Ex: market structure and innovation, strategic firm interaction).

Entrepreneurial vs. routinized regimes


§ At a given market size the number and size distribution of firms (in terms of
market share) determines the market structure in terms of concentration.
Schumpeter derived two hypotheses:
ü Innovation increases more than proportionately with firm size
— Large firms are better able to master high fixed costs of R&D projects
— Economies of scale and scope
— Large diversified firms are in better able to exploit unforeseen innovations
(market access...)
— Large companies balance risk involved in R&D by spreading their
activities across several projects at the same time (risk diversification)
— Better access to finance 

ü Innovation increases with market concentration
— Financing R&D through own profits easier for firms with greater market
power
— Better possibilities to capture value from innovations for firms with
greater market power >>> incentive to innovate

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 § Empirical findings
ü Larger firms have a higher likelihood to perform R&D
ü R&D increases proportionately with firm size among R&D performers within
the same industry
ü Number of innovations tends to increase less than proportionately with firm
size
ü R&D productivity (= Innovative output / R&D expenditures) declines with firm
size
ü Non-linear inverted-U shaped relationship between concentration and
innovation
But: Effect of concentration on innovation rather weak.

§ R&D and firm size
The negative relation between firm size and R&D productivity is not per se a
disadvantage of large firms, larger firms may earn higher returns per unit of R&D.
ü Firms with larger market shares can apply a (process) innovation to a larger
output
ü R&D is a fixed cost – as output is larger, the cost of R&D per unit output is
smaller
ü Implication: The gain from a process innovation, although innovating is
relatively costlier for larger firms, is higher for firms with greater market share
as it is able to reduce costs for a larger output >>> an innovation that does not
pay off for a small firm may pay off for a larger firm.

§ Any drawbacks of size?
ü R&D efficiency may decrease due to loss of managerial control
ü Large firms are more bureaucratic
ü More strategic commitments to current technologies

Centralized vs. decentralized

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 Centralization/decentralization: Centralization is the degree to which decision-
making authority is kept at top levels of management. Decentralization is the degree to
which decision-making authority is pushed down to lower levels of the firm.

Agyres & Silverman (2004)
Innovations developed by firms with fully centralized R&D structures display greater
technological impact than those developed by firms with fully decentralized R&D
structures.

§ Firm size and type of innovation
ü Firms of different size may have different advantages according to the type of
innovation.
ü When uncertainty is high, new firms are often found to be innovators.
ü When technological change takes a specific trajectory (emergence of dominant
design) scale economies, learning processes and financial resources become
relevant: large firms have an advantage at innovation, industry concentrates.

§ Competition and Innovation
The effect of increasing competition on firms innovative output may differ across firms.
Two contrasting effects of how competition impacts innovation (Ex: Aghion et al.,
2005):
ü Schumpeterian effect: competition decreases the (monopoly) rents of
innovators – negative relationship between competition and R&D.
ü Escape-competition effect (see also replacement effect): competition
increases the profits deriving from innovative activities – positive relationship
between competition and R&D.
The two effects may differ in their importance according to the distance to the
technological frontier and the “levelness” of competition.

Oligopoly: intermediate market structure between monopoly and perfect competition.
More firms do not automatically mean more competition.

§ Henderson & Cockburn: Scale, scope, and spillovers
ü Economies of scale: the cost advantages that firms obtain due to size, output,
ü Economies of scope: costs of conducting two or more activities jointly are lower
than if they are conducted separately
— Public goods aspect of knowledge means that knowledge capital
accumulated in one program may be utilized as a productive input to other
related programs, at little or no additional cost to the firm
ü Knowledge spillover: stimulating technological improvements in a neighbour
ü Technology spillover: positive externality from R&D resulting from the spread
of knowledge across organizational or regional boundaries.

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 § Main findings of the paper
ü Size matters for R&D performance in the pharmaceutical industry, two types
of size effects: scale and scope
ü Research programs located within larger firms are more productive (all other
things equal)
ü Economies of scope & economies of scale equally relevant

§ Standardization
ü Standardization yields outcomes in a smooth and efficient way
ü Standardization may hinder innovation activity
ü Can innovation activity be standardized? – Heuristics

Formalization: the degree to which the firm utilizes rules, procedures, and written
documentation to structure the behaviour of individuals/groups in the organization.

Mechanistic: An organizations structure characterized by a high degree of
formalization and standardization, causing operations to be almost
automatic/mechanical.

Organic: An organizations structure characterized by a low degree of formalization
and standardization. Employees may not have well-defined job responsibilities and
operations may be characterized by a high degree of variation.

Ambidextrous organization: The ability of an organization to behave almost a two-
different kind of companies at once. Different divisions with different structures.

Skunk works: Product development team that operate nearly autonomously form the
parent organization.

Modularity (component): refers to the degree to which a system’s components may
be separated and recombined (module). It is achieved in product design through the
specification of standard interfaces.

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§4. Lecture 4: New Technologies and Innovation 04/12/2017
§ IT-enabled intangibles
ü Digital knowledge assets
ü Digitally-enabled customer orientation
ü Digitally enabled synergy

§ Example: Case 7-Eleven
ü IT infrastructure >>> connects 70,000 computers in stores, at headquarters
and at supplier sites to facilitate internal and external communication and
coordination.
ü Human IT resources >>> immersive training of 200,000 employees in point of
sale data analysis, including analysis of information on products, weather
conditions, regional demographics and customer purchasing patterns to
improve sales, customer satisfaction and ordering.
ü IT-enable intangibles
— Digital transactions enable tracking and analysis of point of sales data to
inform daily ordering decisions. Each day’s data is analyzed for decisions
made the next morning.
— Customer satisfaction goal drives IT-enabled business transactions like
“item control” and “product supply management” designed to directly
address customer needs and increase customer convenience.
— The internet shopping site is integrated with physical stores to offer
payment acceptance and pick-up and/or delivery services for products
purchased online.


§ IT’s role in internal R&D activity

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 § IT-enabled new product development

§ Specific IT tools for product design
ü Computer-aided design (CAD)
ü Computer-aided manufacturing (CAM)

§ Collaboration for innovations

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 § IT-enabled absorptive capacity

§ Open innovation strategies
ü Inside-out: bringing ideas to the market
ü Outside-in: integrating external knowledge, customers and suppliers
ü Coupled: combination of the first two strategies

§ Development cycle time: the time elapsed from project initiation to product
launch, usually measured in months or years.

§ Crowdsourcing: combination of open innovation and social media.

§ Go/kill decision points: Gates in the development process where managers must
evaluate whether or not to kill the project or allow it to proceed.

§ How to crowdsource?

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 § When to do crowdsourcing

























Information system capability (Saraf et al. 2007)
The information system capability of an organization is its ability to combine IS
components (resources) and direct e orts toward achieving business objectives or
capitalizing on business opportunities

§ Types of collaborative agreements:
ü Strategic alliance
ü Joint venture
ü Outsourcing
ü Collective research organizations

§ Strategies to protect innovations
ü Copyright: property right protecting works of authorship
ü Trademark/service mark: indicator used to distinguish the source of a good
ü Patent: property right protecting a process, machine, manufactured item (or
design template)

How does centralization/decentralization influence innovation performance?
(Schilling 2013, Siggelkow and Levinthal 2003)
If interactions among a firm’s activities are pervasive, neither the centralized nor the
permanently decentralized organizational structure leads to high performance.
Temporary decentralization—an organizational structure that has not found much
attention in the literature—yields the highest long-term performance.

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 In the short run, the decentralized firm has a performance advantage over the
centralized firm, while in the long run both firms converge on the same performance.

What is the role of modularity in designing organizational structure? (Schilling
2013, Siggelkow and Levinthal 2003)
Firms have been exhorted to decompose decision problems (Ex: to “modularize” them),
in particular in the context of product design because decision problems that have been
divided into independent sub-problems reduce the amount of required coordination
(Ex: decentralized organizational structure).

Why is information technology important for innovation? (Tambe et al. 2012)
We found that external focus, decentralized organization, and IT investment are
correlated. Then, we found that these practices lead to higher product innovation rates.
IT has the strongest effect on productivity in firms that simultaneously have the right
organizational structures in place, whether through wise management or luck.
The combination of IT, decentralization and external focus is positively associated with
firm productivity. However, firms derive the most bene t from implementing the
system of technological and organizational resources, and not IT alone.


§5. Lecture 5: Innovation Process and Collaboration 11/12/2017
§ Objectives of innovation process
ü Maximizing products’ fit with customer requirements
ü Minimizing the development cycle time
ü Controlling development costs

§ Overview of innovation process
ü Phase 0 >>> product concept and initiation
ü Phase 1 >>> product development and proposal
ü Phase 2 >>> research and development (R&D)
ü Phase 3 >>> product development and manufacturing design
ü Phase 4 >>> product design verification and manufacturing development
ü Phase 5 >>> pilot production and product introduction

§ Time and costs
ü First-mover advantages
— Technological leadership (learning curves, R&D and patents (brevets))
— Pre-emption of scarce assets (input factors, geographic locations,
product space)
— Switching costs (lock-in, choice of uncertainty)
ü Fist-mover disadvantages
— Free-rider effect
— Resolution of technological or market uncertainty
— Shifts in technology or customer needs
— Incumbent inertia

The free-rider effect occurs when those who benefit from resources, goods, or
services do not pay for them, which results in an under-provision of those goods or
services.

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 Fixed price engineering development project estimates

§ Sequential vs partly parallel
ü Partly parallel development process >>> When multiple stages of the new
product development process occur simultaneously.
ü Sequential development process >>> When stages of the new product
development occur one after the other.

§ Benefits from senior managers championing a NPD project 

ü Facilitating the allocation of human and capital resources 

ü Encouraging development efforts 

ü Ensuring cycle time is under controlled
ü Stimulating communication and cooperation across functional groups 


§ Drawbacks of senior managers championing a NPD project 

ü Clouding judgment about the true value of the project 

ü Unwillingness to challenge the project champion 


§ Measure performance
ü NPD process performance
— Average cycle time of projects
— Percentage of projects met deadlines
— Percentage of projects stayed within budget
— Percentage of projects resulted in completed products

ü Overall innovation performance
— Number of patents applied/granted
— Number of new products introduced
— Return on innovation (ROI)
— Percentage of sales from new products
— Ratio of successful projects

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 § NPD teams
ü Team size
— Large teams are often more capable but with more administrative costs
and communication problems
— Social loafing >>> when size increases, individuals feel they will not
receive full credit for contribution and so their efforts decrease

ü Team composition
— Cross-functional teams >>> teams whose members are drawn from
multiple functional areas in the firm such as R&D, marketing,
manufacturing etc.
— Homophily >>> The tendency form individuals to like other people
whom they perceive as being similar to themselves

ü Team leadership
— Different teams have different leadership need
— Leadership affects team learning and innovation

ü Team administration
— Project charter >>> missions and goals
— Contract book >>> basic plan to achieve goals

§ Managing multiple objectives

Conceptual model of innovation speed

§ Commercialization
ü Market launch (BCG matrix)
ü Compatibility and licensing
ü Pricing and distribution
ü Marketing

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 § The faster the better? >>> Strategic use launch timing
ü Business cycle or seasonal effect?
ü Production capacity?
ü Complementary goods or services


§6. Lecture 6: Global Innovation 18/12/2017
§ Multinational organizations

Multinational organizations

§ A framework
ü MNC management >>> large, mature firms
ü Strategic alliance >>> between start-up and mature and small and large firm
ü International entrepreneurship >>> small start-up
ü Market entries >>> large start-up

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 § MNC management
ü Subsidiary capability development
— Transaction Cost Economics (TCE) >>> MNCs’ capabilities to transfer
and exploit knowledge more effectively in the intrafirm context than
through external markets.
— Role of subsidiaries >>> top down process, feedback loop
— Drivers of subsidiary growth >>> parent management, distinctive
capabilities, entrepreneurial efforts
ü Human resource management
— International Strategic Human Resource Management (ISHRM) >>> HRM
issues and problems arising from the international of business and HRM
strategies, policies and practices which firms pursue in response to the
internationalization process (Scyllion, 1995).
— Key aspects of ISHRM >>> (1) tacit knowledge embedded in
internationally experienced managers, (2) staff subsidiaries with
entrepreneurial managers, (3) provide sufficient incentive to subsidiary
managers, (4) seek a fit between HR practices and local culture.

§ Strategic alliances
ü Learning tacit knowledge from local partners
ü Access to scarce resources
ü Success factors
— Trust
— Senior management support
— Ability to meet performance expectations
— Clear goals
— Partner compatibility
— Commitment to long-term win-win relationship

§ International entrepreneurship
ü Some SMEs (PME) are able to internationalize rapidly without going through
different stages of firm growth
ü Firms that internationalize faster need to overcome (surmonter) fewer
barriers from inertia

§ Market entries
ü MNCs
— Fist mover advantages
— Merger and acquisition (M&A)
— Local partnership >>> local firms want to acquire advantages over
domestic rivals
ü Start-ups
— Compared to larger competitors, start-ups cannot compete on tangible
resources
— Intangible resourcefulness >>> the ability of doing more with less
— When formal institutional environment is weak, social capital is salient
in economic exchange. Entrepreneurs translate interpersonal ties (liens)
with managers at other firms and with government officials into
organizational performance.

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§ Hofstede’s cultural dimensions theory
ü Power distance
The extent to which the less powerful members of organizations and
institutions accept and expect that power is distributed unequally.
A society with high power distance accepts hierarchies in which everyone
has a place without the need for justification. A society with low power
distance seeks to have equal distribution of power.

ü Individualism
The degree to which individuals are integrated into groups.
A society with high individualism emphasizes personal achievements and
individual rights. A society with low individualism emphasizes individuals as
members of a lifelong and cohesive group or organization.

ü Uncertainty avoidance
The extent to which members of a society attempt to cope with anxiety by
minimizing uncertainty.
A society with high uncertainty avoidance minimizes the occurrence of
unknown and unusual circumstances and to proceed with careful changes.
A society with low uncertainty avoidance accepts unstructured situations or
changeable environments.
“Uncertainty-accepting societies may be more innovative than uncertainty-
avoiding societies because of the greater legitimacy of these roles.” (Shane S.)

ü Masculinity
The distribution of emotional roles between genders.
A society with high masculinity emphasizes competitiveness, materialism,
ambition and power. A society with low masculinity emphasizes
relationships, support and quality of life.

ü Long-term orientation
A society with high long-term orientation attaches more importance to the
future. A society with low long-term orientation values more the past and the
present.

§ GLOBE culture model
ü Global Leadership and Organizational Behavior Effectiveness (GLOBE)
ü Nine cultural dimensions
— Performance orientation
— Assertiveness orientation
— Human orientation
— Collectivism/Institutional
— Collectivism/In-group
— Gender egalitarianism
— Power distance
— Uncertainty avoidance

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