Cheng-Hua Tzeng (Fudan university, 2009)A Review of Contemporary Innovation : A Schumpeterian Perspective

Prepared by: Mahdi Khobreh

Who is Shumpeter?Joseph Alois Schumpeter (German; 8 February 1883 – 8 January 1950)was an Austrian-born American economist and political scientist. He briefly served as Finance Minister of Austria in 1919. In 1932 he became a professor at Harvard University where he remained until the end of his career. One of the most influential economists of the 20th century, Schumpeter popularized the term "creative destruction" in economics.

Who Is Shumpeter❖ Drucker:❖ Shumpeter and Keins are two greatest

economist of the century❖ Shumpeter who will shape the thinking on

economic theory and economic policy for the rest of this century

❖ American economy review: could the third quarter of this century justly be called age of Keyns and fourth quarter has a fair chance to become Shumpeter.

What do I decide to present?

Three Schools :

- Capability Schools- Corporate Entrepreneurship School

- Cultural School

- Nature of innovation- Inherent logic of Innovation

- relationship among members- Focal Concerns

- Apprehension of Time

The capability school:

an economic perspective on innovation.

Innovation as institutionalized capability characterizes technological change.

whether ‘to innovate or not to innovate’ is based on evaluation.

Within firms, which are composed of routines,

relationships among members are instruction based;

outside the firms, affiliated institutions serve as the engines of innovation.

The corporate entrepreneurial school:

a social perspective on innovation.

Grassroots impetuses present the pattern of corporate innovation.

The cultural school:

a cultural perspective on innovation. High-tech innovation, deep craft.

innovation, as deep craft, is a product of a deep sense of temporality.

The Capability SchoolAn Economy Perspective

By this definition, there are three classes of routines relevant to innovation:

(1)the operating routine,

(2)the investment routine

(3) the search routine

Innovation, as an institutionalized capability, characterizes technological change.

Routines are ‘most of what is regular and predictable about business behavior’

The most important of these is the search routine, which carries out innovation and resides in

the research and development (R&D) department where innovations occur. The purpose of institutionalizing innovation is to render a previously ad hoc innovation into a routine, which is a repeatable economic event.because the systems capture knowledge about the task

Inherent Logic : To Evaluate

Research has highlighted the importance of a long- time commitment to financing the development of new

technology of an enterprise

the expected revenue of the invention exceeds the expected cost

This commitment is manifested by how the enterprise decides whether ‘to innovate or not to innovate,’ which,

more often than not, is based on evaluation and calculating the cost and benefits of each R&D project.

In answering the question of how to capture the most profit from innovation when market failure occurs

Relationship among members

Within firms, which are subject to routines, relationships among members are instruction-based.

First, activities are transformed from being ad hoc to repetitive

Second, activities are transformed from being playful to serious

Focal Concern: Affiliated Institutions

affiliated institutions, including university and government R&D laboratories, serve as the engines of

innovation which provide firms with technological

Apprehension of Time : Path dependency

the role of affiliated institutions is ‘to stimulate and enhance the power of R&D done in industry’

rather than ‘provide a substitute for it’

Example:QWERTY TypeWriter

Technological change evolves in a path-dependent way

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THE CORPORATE ENTREPRENEURIAL SCHOOL:

A SOCIAL PERSPECTIVE

Nature of Innovation: Innovation as Grassroots Impetuses

After conducting numerous interviews in 1979 and 1980 and a 25-year literature review, Peters and

Waterman found that ‘autonomy and entrepreneurship’ were crucial to innovation.

Grassroots impetuses feature the pattern of corporate innovation

In addition, excellent companies carried out innovation in a ‘championship process’ rather than in ‘formal

product planning Inherent logic: to engage

Grassroots impetuses engage many actors. As Van de Ven argued during the Academy of

Management’s distinguished lecture, ‘Innovators who run in packs’ will be more successful than those who

go at it aloneRalph Gomory (1992), former Senior Vice-President of IBM,

described IBM’s innovation process as an engaging one, in which

design and manufacturing teams cooperated closely. At Intel, co-founder Gordon Moore once said, ‘We don’t

have a separate R&D laboratory...the development work

is done right on the manufacturing floor

Relation Among Members :

Identity-Based Relationship

Focal Concern :Authentic Voices

In this way, a firm is more of a community than a corporation – it ‘provide[s] a sense of community

Loyalty characterizes such identity. Kanter said that being loyal is ‘challenging tradition and

questioning explicit orders in pursuit of new value for the company

When Intel’s market share of memory dropped from 83% in the 1970s to 1.3% in the 1980s, middle-level

managers were quite vocal in challenging Intel’s official top-down strategy. This process involved open

debate and constructive confrontation. As then-CEO Andy Grove maintained, at Intel ‘No one was ever

told to shut up’

manifest identity-based relationships. The most authentic and effective voices come from the grassroots

including: (1) young people, (2) people at an organization’s geo- graphic periphery, (3) newcomers, and (4)

middle managers

Apprehension of Time:

Improvisation

To improvise, one must learn to forget. Weick explained that the reason for this is because

improvisation ‘focus on coordination here and now and [is] not distracted by memories

Innovation, as grassroots impetuses, emphasizes improvisation in action. According to

Kanter (2002), innovation is improvisational theatre, wherein the stages are the

skunkworks and the actors are the grassroots corporate entrepreneurs

The Culture School

❖ A Cultural Perspective

Nature of Innovation:Deep Craft

Inherent Logic: To envision

High-tech innovation is deep craft per se. As Arthur maintained, ‘Advanced technology... resides, in

essence, in deep craft’

True technical innovation ‘cannot be created by digging information out of books or journal articles,Instead,

it actually takes craftsmanship

Tellis and Golder’s work (2001) also emphasized the role of the vision of latecomer firms in

generating breakthroughs in the market. This implies that innovative firms should ‘ignore your

customers’ or ‘don’t listen to your customers’ while pursuing breakthrough innovations

Vision is at the core of deep craft, in the sense that first, innovative firms envision to transcend the path dependencies of technology

Relationship among members: intergenerational relationships

Focal Concern:Affective Identification

The fabric of deep craft is intergenerational relationships. Deep craft in high-tech innovation has ‘already been rooted for some considerable time there are three ways to encourage the development of intergenerational relationships:

- Apprenticeship

- Documentary films

- Innovation conferences

Innovation does not come ‘from intrinsic properties of the knowledge itself’ but ‘from the personal

commitment required of a revolutionary’

Affective identification is the precondition of innovation

Chairman James Houghton once said, ‘It was something you did on faith, in good times and in bad, whether

you could see the immediate fruits of it or whether you couldn’t’

Apprehension of time: a deep sense of temporality

In addition, innovation itself is emergent rather than deliberate

Innovation, as deep craft, is a product of a deep sense of temporality.

craftsmen comprehend the past, the present, and the future at the same time.

Mintzberg said it concisely: in the craftsmen’s mind, there is ‘a natural synthesis of the future, present and the

past’

Issues:

ConclusionAlthough the three schools have different

perspectives on innovation, all of these perspectives

seem to originate from the works of radical

economist Schumpeter. Schumpeter was radical

(Rosenberg 1994: 47-61) because he broke

conventional economic theories in three ways,

which later inspired the development of the three

schools

Thanks To Your kind Consideration