Lecture 2Innovation Management

GM0401Johan Brink

Wednesday 8 sep

This lecture

The external context of innovation

• Techno-economic paradigm

• Increased R&D spending

• Innovation system

• Handout case 1

Techno-economic growth

• GDP= F (Land, Capital, labor, TFP)

Economy Share of national output

GDP growth Share contributed by

Capital Labor TFP

Germany 1960-90

0,4 3,2 59 -8 49

US 1960-90 0,41 3,1 45 42 13

Argentina 1940-80

0,54 3,6 43 26 31

Singapore 1966-90

0,37 7,3 42 28 30

Techno-economic growth

• Total Factor Productivity– Advances in knowledge – Catch-up effect (adoption of existing

technologies) – Structural/improved allocation of resources

(from low productivity to high) – Economies of scale – Foreign trade effect – Unexplained

20-50%

20-40%

10-20%

Techno-economic paradigm

• Revolution & Improvement – Opportunities

• Application & Prosperity– Saturation of markets

• Stagnation, Recession & Depression– Low rates & Speculation

Techno-economic paradigm

• Kondratiev: Techno-economic ~50 year

• Kuznets: Infrastructural investment ~20

• Juglar: Fixed investment ~10• Kitchin: Inventory ~3 - 5

Joseph Schumpeter proposed

cluster of innovations as an explanation

Increased R&D spending

• In 1676, Isaac Newton wrote famously to Robert Hooke, “If I have seen further it is by standing on the shoulders of giants.”

• (Forever) Increasing returns?– Fishing out ideas –increase

R&D cost– Takes increasingly long

time to learn accumulated knowledge

– Specialization –”Death of renaissance man” – Teamwork & management

Increased R&D spending

Global R&D spending by top 25 corporations: 2006 R&D rank

R&D expense($million

s)

Sales($million

s)R&D/sales

ratio (%)

Company (country) 2006 2005 2006 2006 2006

Toyota Motor (Japan) 1 4 7,486 201,254 3.7

Pfizer (United States) 2 2 7,423 48,201 15.4

Ford Motor (United States) 3 1 7,200 160,123 4.5

Johnson & Johnson (United States) 4 8 7,125 53,194 13.4

Microsoft (United States) 5 7 7,121 51,122 13.9

DaimlerChrysler (Germany) 6 3 7,007 199,246 3.5

GlaxoSmithKline (United Kingdom) 7 9 6,611 45,263 14.6

Siemens (Germany) 8 5 6,604 114,779 5.8

General Motors (United States) 9 6 6,600 207,349 3.2

Volkswagen (Germany) 10 12 6,030 137,846 4.4

Samsung Electronics (South Korea) 11 10 5,943 91,038 6.5

Intel (United States) 12 14 5,873 35,382 16.6

Sanofi-Aventis (France) 13 13 5,823 37,293 15.6

International Business Machines (US) 14 11 5,682 91,424 6.2

Roche Holding (Switzerland) 15 17 5,359 34,192 15.7

Novartis (Switzerland) 16 18 5,349 36,031 14.8

Nokia (Finland) 17 15 5,122 54,049 9.5

Matsushita Electric (Japan) 18 16 4,858 76,543 6.3

Honda Motor (Japan) 19 20 4,638 93,174 5.0

Sony (Japan) 20 19 4,571 69,715 6.6

Robert Bosch GmbH (Germany) 21 21 4,401 57,418 7.7

Motorola (United States) 22 24 4,106 42,879 9.6

Cisco Systems (United States) 23 30 4,067 28,484 14.3

Merck (United States) 24 22 4,020 22,636 17.8

Telefonaktiebolaget LM Ericsson (Sweden) 25 25 3,990 25,403 15.7

Innovation systems

What is a system?

Innovation systems

What is a system? Macroeconomic and regulatory context

Education and training system

Communication and infrastructure

Product markets Factor markets

Firms and innovations

Cluster of industries

International networks

Sciencesystem

Supporting institutions

Innovation systems

Stemcells

2001

Laws

History

Macroeconomic and regulatory context

Education and training system

Communication and infrastructure

Product markets Factor markets

Firms and innovations

Cluster of industries

International networks

Sciencesystem

Supporting institutions

Innovation systems• Regional

Marshall,1890

...and again

in the 70ties– Industrial

districts

Innovation systems

Diamond model; M. Porter

(The competitive advantage of nations)

Clusters

• Traded

• Non-traded

Innovation systems

• Technological– Generation– Diffusion– Utilization

CASE 1

What to do?

• Answer the questions: 3 pages, New Times Roman 12

• Prepare slides/presentations (~20 min)• Send text and slides no later than 18.00

Tuesday 14/9 • There are two groups per company

– Only one group will present, the other will lead the discussion (ask questions, and complement with their ideas)

• Use all sources of info such as the web, papers..

Questions

• Describe the development and the potential future of the firm in terms of PLC

• Describe the development and the potential future of the firm in terms of TLC

• How does the Innovation system look like? • Are there any barriers limiting the diffusion of

this product? What do they look like?• What would you advice the firm to do in order to

increase sales (product diffusion) in; – The short run?– The long run?

Case firm Groups

Neonode: neonode.com (Mobile industry)

Group One

Group A

Tesla: Teslamotors.com (Automotive industry)

Group B

Group gg

Ocean Harvesting: oceanharvesting.com (Environmental technologies)

The 6 Stooges

The Swedes & the Mexican

Some additional materialWave energy• http://www.oceanharvesting.com• http://www.iea-oceans.org/_fich/6/Annual_Report_2009_v2.pdf• http://ec.europa.eu/environment/etap/

Electric Car• http://www.Teslamotors.com• http://www.acea.be/ - Printed• http://www.innovateuk.org/ourstrategy/innovationplatforms/

lowcarbonvehicles.ashx Telecom• http://www.neonode.com/• http://www.gsmarena.com/neonode-phones-22.php -Neonode old products• Ericsson Trends - Printed