Group 1
Growth through Innovation
Weekly vocabulary
Keys to innovation
what drives a firm's ability to appropriate value?
Real Option Analysis
Members
104212033 Jason
104212044 Pauline
104212018 Martin
104212080 Amy
104212014 Diane
105245914 Ace
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Basic Question
Complementary assets
TMT (Top Management Team)
Intellectual Property
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WHY ❓
Drives much of economic growth
Schumpeterian Rent
Dynamic capability view
Innovation Matters
Value _ Price_Cost
Opportunity
Given the ever-unfolding process of creative destruction
"no strategic position is sustainable"
WHO ❓
Demand Pull VS Technology Push
Users VS Producers
Entrepreneur VS Large incumbents
Explorers VS Exploiters
Breadth VS Depth of expertise
WHAT ❓
the development of new ways to create value
WHEN❓
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Control of important complementary assets
Some examples
Integrate diverse knowledge
Components or supporting technology.
Definition
Role of complementary assets depend on
Create cross functional teams
Create broad vision and shared values
Establish effective line of communication
Manage expectation
Those assets necessary to translate an innovation into commercial returns.
Support services
How tightly held is it?
How important is it?
Motivation
Establish high powered upside incentives
Give greater ownership to managers
Invest in creative search
Encourage risk taking by sharing responsibility
If the dependence of the assets on the innovation is high while dependence of the innovation on the asset is low...
Freely available
Tightly held
VRIN
May be purchased on factor market
Easy to build or develop
Increases knowledge flow between those teams
Multiple projects
ways to build this absorptive capacity
Keep the firm in the loop
Reward and to allow publication
Encourage diversitty
Invest in basic or leading edge research
Intellectual Property
⭐ Protection
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HOW❓
WHAT ❓
When is ability to protect IP strong
There's value in having optionality
✅Legal protection is strong
✅First-mover advantages are substantial
✅Diffusion among customers is fast
Capital budgeting decision
Decision Tree
✅Imitation by competitors is difficult
Strategies & Capability of Innovation
Why is IP often difficult to protect
⚠ Legal protection can be difficult to acquire and enforce
Asset unilaterally depends on the innovation
⚠ Secrecy is hard to maintain
⚠Value maybe created by a collection of advances
⚠ Even tacit knowledge gets diffused eventually
Organizing for innovation
Sequential
Concurrent
Chaotic
Overlapping
If they both high...
bilaterally dependence
generate idea then act
project passed from one function to the next
all functions work together for the entire project
allow interaction between functions by overlapping
❓ could be faster or slower
✅ for startups, it may be the easiest
✅more creative solutions
✅ best for "breakthrough" products
❌ difficult to control
❌ too much conflict can be bad
✅ ensures that each step will be executed
✅ good when high uncertainty about project
✅ good when lots of time is available
✅ good when market environment is stable
❌bad for speed and responsiveness
❌ bad for accumulated learning
Innovation Strategies
Innovation Capability
Innovative capability
✅ motivate team
✅ limits hand-off problems
❌ large amount of effort to implement
✅ learning improves within team and firm
✅ much faster than sequential processes
✅ best for evolving "incremental" products
❌ big time commitment from team
❌ front-loaded resource intensity
❌ not a "home run" strategy
the ability to appropriate the gains from innovation
Effective development processes
Create an environment to generate and pursue novel ideas
Encourage free flows of information within the organization
💥Tolerance & incentives to accept failure
Selecting ideas for development
Explain clear product ideas
An era of open innovation
Coordinate with other partners outside our organization
Network outside your organization
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Absorptive capacity
Expertise in other fields
Bring back into your organization
Two ways
Which strategy is better?
Innovator or first-mover strategy
Follower or second-mover strategy
Capture market position and defend the position from rivals with your capabilities
Continually innovate to capture temporary economic profits
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All- in investment
Staged
Avoid costs and risks of being the innovator
Leverage complimentary capabilities to out-compete rivals
Whether a firm has innovative capabilities
Whether a firm adapts to the gains from innovation
Combination of innovation and appropriability