1. Introduction to Innovation and Economic Organization Rögnvaldur J. Sæmundsson ABMS January 16 2007

2. Overview Who am I? Defining the problem/topic The innovation process Economic organization Basic structure of the current model

3. 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.

4. Defining the problem/topic

5. Technological innovation

6. Network of specialized activity

7. Changes in specialization Source: Soubbotina (2004)

8. Changes in taste/preferences

9. Summary of the problem/topic Innovation ∆Resources ∆Knowledge ∆Organization∆Wants

10. The innovation process

11. Definition of innovation New products or services New ways of developing, producing, distributing, marketing or selling products or services

12. The linear model ScienceTechnologyProducts Research Development Production Marketing

13. The chain-linked model Source: Kline and Rosenberg 1986

14. Characteristics of innovation processes Interaction of markets and technology Complex costs and benefits Different degrees of novelty Uncertain outcomes

15. Diffusion Time Market penetration Productivity of R&D $

16. Innovation in an industry Source: Utterback 1994

17. Economic organization

18. Basic objective of organization Coordinate economic activity - Production and distribution - Exchange Enable specialization

19. Basic governance structures Markets Hierarchy (firms) Hybrids (long-term contracting)

20. Distinguishing attributes Adapted from Williamson (1991)

21. Suitability of governance structure 0 Governance Costs Asset Specificity Market Hybrid Hierarchy Adapted from Williamson (1991)

22. Basic structure of the model

23. Basic modules Individuals Firm Individuals Firm Industry Product market Factor market External knowledge generation

24. 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