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Introduction to Innovation and Economic Organization
Rögnvaldur J. Sæmundsson
ABMS
January 16
2007
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Overview
• Who am I?
• Defining the problem/topic
• The innovation process
• Economic organization
• Basic structure of the current model
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Rögnvaldur J. Sæmundsson
• Electrical Engineering from UI.• Sleep Research Unit at Landspitalinn.• MS in Engineering from UI.• Director of Software Dev at Flaga.• PhD in Technology Man. from CTH.• Associate prof. RU School of Business.• Research on New Technology-Based
Firms (NTBFs) and the growth of knowledge.
• Teaching entrepreneurship, strategy&innovation, and ABMS.
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Defining the problem/topic
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Technological innovation
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Network of specialized activity
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Changes in specialization
Source: Soubbotina (2004)
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Changes in taste/preferences
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Summary of the problem/topic
Innovation
∆Resources ∆Knowledge
∆Organization ∆Wants
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The innovation process
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Definition of innovation
• New products or services
• New ways of developing, producing, distributing, marketing or selling products or services
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The linear model
Science Technology Products
Research
Development
Production
Marketing
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The chain-linked model
Source: Kline and Rosenberg 1986
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Characteristics of innovation processes
• Interaction of markets and technology
• Complex costs and benefits
• Different degrees of novelty
• Uncertain outcomes
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Diffusion
Time
Market penetrationProductivity of R&D $
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Innovation in an industry
Source: Utterback 1994
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Economic organization
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Basic objective of organization
Coordinate economic activity
- Production and distribution
- Exchange
Enable specialization
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Basic governance structures
• Markets
• Hierarchy (firms)
• Hybrids (long-term contracting)
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Distinguishing attributes
Governance structure Attributes Market Hybrid Hierarchy Incentive intensity ++ + 0 Administrative controls 0 + ++ Autonomous adaptation ++ + 0 Cooperative adaptation 0 + ++ Contract law ++ + 0 ++ = strong; + = semi-strong; 0 = weak.
Adapted from Williamson (1991)
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Suitability of governance structure
0
Govern
ance
Cost
s
Asset Specificity
Market
Hybrid
Hierarchy
Adapted from Williamson (1991)
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Basic structure of the model
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Basic modules
Individuals
IndividualsIndividuals
Firm
Individuals
IndividualsIndividuals
Firm
IndustryProductmarket
Factormarket
Externalknowledgegeneration
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Point to remember
“This is the course in advanced physics. That means the instructor finds the subject confusing. If he didn’t, the course would be called elementary physics.”
Luis Alvarez, Nobel laureate, 1964