1. International Business Environment
Lecture 9
The Role of Technology, R & D.
Introduction to Innovation
R. Woodfield

2. Learning Outcomes
Understand role of technology and innovation essential to global competitiveness
Analyse importance of technological environment, both domestic and foreign, to business decisions and performance
Apply knowledge and understanding to case study material (see examples) and government and consultant research see and prepare - Learning Activity

3. Elements of innovation
Innovation covers all activities which yield new or improved products or ways of doing things.
Radical innovation is driven by technology – the systematic application of scientific knowledge to practical purposes.
New products or processes = inventions, for which patent application can be made.
Incremental innovation is associated with continuous improvement.
Innovation is now seen as central to corporate culture, not just R&D departments OR!

4. The innovation process

5. What is Technology?: Concepts & Processes
The application of knowledge to practical purposes.
Invention and innovation
R & D – systematic search for new knowledge
Basic
Applied
Innovation & Intellectual Property & Patents
Technological diffusion

6. Theories of technological innovation
Schumpeter’s theory of industrial waves -
Historical waves based on technical innovation, which affects organizations and societies
Viewed changes taking place within capitalism as ‘creative destruction’ – new products, new methods and new organizations emerge, as old ones die
Product life cycle theory and innovation -
Holds that the early success of a new product depends on a large home market which bears the cost of the necessary R&D
When the product becomes more standardized, production moves to less advanced, cheaper locations
Linked to globalization of production

7. Long waves of technical change
Kondratieff; Schumpeter
Cycles of tech. innovation
‘Entrepreneurs’ /firms bring about
1st wave – Industrial Revolution; factory production
2nd – Age of steam power and railways
3rd – Age of electricity and steel
4th: Age of mass production ‘Fordism’ 1940s–1990s
5th wave -1990s computers & microelectronics; the internet ; biotechnology ( earlier & continuing electronics, petrochemicals, aerospace, synthetics, pharmaceuticals) summarise as ‘ICT revolution’.

8. Innovation and economic development
Capitalist economic development relies on radical changes which break with the past (Schumpeter):
New products
New methods of production
New markets
New forms of industrial organization
Economic development can be depicted in stages, from low innovation-intensive to high innovation-intensive, but...
No two countries present exactly the same pattern.
For modern interpretation Morrison (2009) p. 441………..

9. Stages of development (change)

10. Diffusion of Technology
A country/its industries level of technology important to participate in global economy
Concept: Externalities (Spillovers) from Technology transfer
Issue: in developing countries will local business be able to compete with foreign investor?
Diffusion may depend on:-
Use of Joint ventures
Education and relevant skills provision by government
Entrepreneurial qualities
R & D and Innovation networks

11. Information & communications technology
Technology revolution – diffusion of computer technology and falling prices
Internet and e-commerce
Knowledge economy or new economy – ‘informational, global and networked’
(Castells, 2000)
Growth in business-to-business e-commerce
Dot.com boom (and bust) Schumpeter
Who innovates? :Moore (1999) Silicon Valley consultant updated Schumpeter, Freeman et al. and Rogers(1995) diffusion of innovations:
Innovators c. 3% of firms risk takers and tech enthusiasts
Early adopters – 15% of co.s enthusiastic about new ideas because they want to gain competitive advantage
Early majority 1/3rd of co. s pragmatists taking up new techs
Late majority 1/3rd v. cautious benfits proven before go ahead
Laggards c. 16% only adopt new ideas tech. when failure to do so major damage to org.

12. Innovation is a core competency and source of competitive advantage.
Catalysts of innovation (Porter, 1998):
New technology (as above) +
New or shifting buyer needs
New industry segment
Shifting input costs or availability
Changes in government regulation

13. National innovation system
Abilities in, and/or government policy towards:-
Education and training
Science and technology capabilities
Science and technology strengths and weaknesses
Industry structure
Interactions, e.g. government-business links
What others may be important?

15. Managing Technology Factors influencing technological progress
R & D invested (but see web sources below)
The state of related and supporting technologies
Scientific breakthrough that opens up new territories for process and product development
Motivation For Business to Innovate
Intensity of Competition
Pressure from Customers or Suppliers
Government policy

16. The world’s 20 largest companies by R&D spending, 2006
Source: UK Department of Trade and Industry (2007) The R&D Scoreboard 2006,

17. t World’s Largest 15 Companies by R & D Spending 2010
Source:

18. International technology transfer- how?
Definition – acquiring technology from other countries
Via:
- Foreign direct investment (FDI)
- Joint venture and strategic alliances
- Technology licensing – allows a manufacturer to produce another’s patented product, in return for royalties
- Capital goods transfer

19. Technology transfer is the process of acquiring technology from another country
Key to industrial growth, where technology is transferred from more advanced economies to developing ones
Four main channels:
FDI – spillover effects for host economy
Joint ventures and strategic alliances – collaborative innovation
Technology licensing – often in outsourcing operations, but there is a risk of leakage of IP
Trade – ‘embodied’ technology in machinery and equipment can lead to ‘reverse engineering’ in the recipient country

20. Channels of technology transfer

21. Technology and globalization
Globalization of production has led to diffusion of technology, but absorption differs between countries
Countries that concentrate on low-cost, labour-intensive activities risk missing out on developing high-value industries
Governments can offer incentives and build supportive infrastructure (e.g. internet) to aid firms in moving to high technology sectors
Poor developing countries risk falling behind, in a digital divide between rich & poor countries

22. Conclusions
Technological innovation is linked to industrialization & economic development.
Every country has a national innovation system, reflecting its scientific & technological strengths.
Level of patent activity in a country tends to reflect depth of its scientific research activities.
In many industries, innovation & growth are linked to new products & processes which are patentable.
Historically, tech. transfer has aided developing economies in acquiring technology from advanced economies.
Globalization of production has helped to diffuse technology, but poor developing countries risk losing out.

23. Online Sources www.worldchanging.com
This site is a discussion & news site to profile both the dangers & possible benefits that technology can play in promoting human development.
Profiles work of UK government’s Foresight programme which tries to coordinate science & technology projects.
Up-to-date news about technological developments.

24. Learning Activity: Does R & D expenditure deliver better company performance?
Access
Latest available 2010 see also UK Dept of Business Innovation and Skills
How is this measured?
What about relative performance of research intensive
companies? OR
Consider the evidence by consultants Booz Allen:
UK Dept of Business Innovation and Skills

25. Workshop 9 case studies Learning Activity
Reflection on Review Questions
*for a British viewpoint see
“British lose faith in their powers of invention.”
OBSERVER newspaper 5th December 2010, reference below:

26. Review Questions What is Schumpeter’s view of technological innovation
Review Questions What is Schumpeter’s view of technological innovation? How has this been adapted by more modern research? Outline the elements of a national system of innovation (see Morrison 2009 p.442/3) Why are patents crucial to a technological lead? In what ways has the revolution in IT transformed business?

27. APPENDIX: Co-operative innovation strategies
Some reasons for growth of co-operative strategies:
Need to reduce costs generally, and curb rising R&D costs in particular
Shorter product life cycles, and shorter technology life cycles
Increasing complexity of some products
Increasing integration of formerly independent sectors
Collaboration can be to seek complementarities, or to pool skills to speed up the research process

28. Potential benefits & risks of co-operative R&D agreements
Source Morrison (2009) Figure 12.7: p.459

29. Appendix 2 :Managing IP rights
Intellectual property rights (IPR) – a source of ownership advantage.
Every product represents a bundle of rights, which must be legally protected and defended, in differing national environments.
The rise in outsourcing, licensing and collaboration in R&D leads to the need for greater attentiveness to who owns what IP rights.
Where IP rights are managed to deliver maximum value to the firm, innovation is at the heart of corporate strategy.

30. The Main Intellectual Property Rights
Source Morrison(2009) Figure 12.10: