MANAGING INNOVATION

QUESTION 1( WEEK 6 VIDEO –Small is beautiful by E.F. Schumacher on appropriate Technology – 1 – you tube). Watch the video and comment on it.
100 WORDS PLUS REFERENCES.

QUESTION 2. (W6TDQ1)
What are the key innovation networks and why is this important in the innovation process? Provide examples.
150 WORDS PLUS REFERENCES

QUESTION 3. (W6TDQ2 )
What are some of the key challenges of managing innovation networks?
150 WORDS PLUS REFERENCES

QUESTION 4. ( Review the case under Week 6 Assignments. Your assignment is to do the following):

1) Provide a summary of the case.
2) Discuss the key issues in the case.
3) Evaluate how issues are resolved.
4) Provide a conclusion to the case.

Each of the four sections should be one detailed paragraph. You should use essay format in your analysis with a title page and double spacing. The total length of the paper should be 300- 400 words.
WEEK 6 CASE REVIEW
EXECUTIVE BRIEFING
Written by:
Dr. Luke Pittaway
Dr. Maxine Robertson
Dr. David Denyer
Dr. Kamal Munir
Professor Andy Neely2
Written by:
Dr. Luke Pittaway, Dr. Maxine Robertson, Dr. David Denyer, Dr. Kamal Munir, Professor Andy Neely
AIM – the UK’s research initiative on management
The Advanced Institute of Management Research
(AIM) develops UK-based world-class management
research. AIM seeks to identify ways to enhance
the competitiveness of the UK economy and its
infrastructure through research into management
and organisational performance in both the private
and public sectors.
about AIM
AIM consists of:
¦ Over 100 AIM Fellows and Scholars – all leading academics in their fields…
¦ Working in cooperation with leading international academics and specialists
as well as UK policymakers and business leaders…
¦ Undertaking a wide range of collaborative research projects on management…
¦ Disseminating ideas and shared learning through publications, reports,
workshops and events…
¦ Fostering new ways of working more effectively with managers and policy makers…
¦ To enhance UK competitiveness and productivity.
AIM’s Objectives
Our mission is to significantly increase the contribution of and future capacity
for world class UK management research.
Our more specific objectives are to:
¦ Conduct research that will identify actions to enhance the UK’s international
competitiveness
¦ Raise the quality and international standing of UK research on management
¦ Expand the size and capacity of the active UK research base on management
¦ Engage with practitioners and other users of research within and beyond the
UK as co-producers of knowledge about managementforeword
contents
As I join AIM, as the initiative’s new director, I am delighted
to see the early work of our AIM Scholars come to fruition.
The AIM Scholars scheme takes some of the UK’s best and
brightest young academics and sets them the challenge of
summarising what is known about specific topics.
This report, the first in a series, deals with the issue of networks and how these
help firms become more innovative. The report is underpinned by a systematic
review, which involved the AIM Scholars looking at over 600 publications dealing
with the issues of networks and innovation.
The best of these papers were summarised and the core themes from this vast
body of knowledge synthesised. It is this background material that was used
to develop the i-works concept and associated report.
I trust that you find the report of interest and value and invite you to contact
my colleagues and I at AIM if you would like to discuss this, or our other related
work, more fully.
Professor Robin Wensley
Director, AIM Research
3
AIM – the UK’s research initiative
on management 2
About AIM 2
Foreword 3
Executive review 4
Introduction 6
Characteristics of innovative networks 8
Conclusions 12
Biographies 14executive review
4
Improving the competitiveness of the UK economy
is a national priority. Recent studies – the Porter
Report
1
and the Department of Trade and Industry
(DTI) Innovation Review2
show that the UK
lags behind its major competitors in terms of
productivity. There is a growing consensus that
closing the productivity gap relies on transforming
the UK from a low cost to a high value economy.
Innovation – the successful exploitation of new ideas – is a
prerequisite for a high value economy. Despite an impressive
science base, the UK lags behind other developed economies
in converting new ideas into commercial applications. Both the
Porter Report and the DTI Innovation Review identified networks
as vital to the creation, dissemination and exploitation of ideas.
As part of its ongoing work, the DTI asked AIM to undertake
further research into the state of networking and innovation in
the UK. This report provides an overview of the findings of a team
of management scholars selected by AIM to review existing
research on business-to-business networks and innovation. 5
Key findings
It is clear that networks play a major role in the innovation process. Moreover, a
certain type of high value network is far more effective at sparking innovation. We call
these Innovation Networks or i-works. i-works have the following characteristics:
¦ Highly diverse: network partners from a wide variety of disciplines and
backgrounds who encourage exchange about ideas across systems
¦ Third party gatekeepers: science partners such as universities, but also consultants
and trade associations, who provide access to expertise and act as neutral
knowledge brokers across the network
¦ Financial leverage: access to investors via business angels, venture capital firms
and corporate venturing which spreads the risk of innovation and provides market
intelligence
¦ Proactively managed: participants regard the network as a valuable asset and
actively manage it to reap the innovation benefits
For firms, access to i-works offers a potent source of new ideas and competitive
advantage. Fostering relationships with such networks should be seen by firms as
a critical capability.
The research also points to the need to encourage the formation of and participation
in i-works. More research is required to understand the full implications for firms
and policymakers. 6
The Porter Report and the DTI Innovation Review highlighted weaknesses in the UK’s
competitive position. In particular, they identified low productivity compared to other
major developed economies. At present, for example, the UK trails rivals like the US,
France, and Germany on a number of important measures including:
¦ Output per hour worked in key sectors including financial and business
services and distribution
3
¦ Business R&D expenditure per worker
4
¦ Business investment as a percentage of GDP
5
To close the gap, both reports concluded, the UK must move from being an economy
that competes on low cost to one that competes on high value. Higher levels of
innovation are a prerequisite to making this transition. Innovation allows companies
and countries to benefit from the technological and scientific advances that are
changing the world more rapidly than ever before.
But on two vital indicators of innovation, business R&D and patents, the UK trails
the US and is falling behind other international competitors. Overall, R&D spending
as a percentage of UK GDP declined from 1.5% of GDP in 1981 to 1.16% in 1997.
And by 2003 it had risen only marginally to 1.83%.
6
Where the UK does score highly is with its strong science base. Using a measure of
scientific papers published, adjusted for population, it is well ahead of its international
rivals including the US, Germany, France, Canada and Japan.
7
What is clear, however,
is that the UK is failing to convert its scientific research advantage into products and
services. One way to increase the rate of this conversion of ideas into profitable
products and services is through better networking.
The power of networks
To gain a better understanding of how business networks in particular affect innovation,
AIM asked a team of scholars to examine what research has been carried out in this area.
The findings confirm that networks are an essential part of modern economic life.
As technologies increasingly converge to create new products and entire new markets,
the knowledge required for such innovations is increasingly scattered within and among
organisations. As a result, innovation processes are becoming more extended and more
complex. Harnessing these pockets of knowledge requires firms and individuals to
collaborate in more interactive ways. Networks play a vital role in facilitating this collaboration.
As the diagram opposite shows business-to-business networks are complex.
Networks provide important benefits including:
¦ Access to external knowledge
¦ Risk sharing
¦ Access to new markets and technologies
¦ Faster time to market
¦ Pooling complementary skills
introduction
One way to
increase the rate
of innovation is
through better
networking.7
Yet many questions about how networks support innovation remain unanswered.
For example: How should firms position themselves within networks? What kinds
of networks contribute most to innovation?
While more research is required to explore these issues, the AIM research did
identify that networks with certain characteristics are more likely to foster innovation.
AIM Conceptual Framework: Networking and Innovation
Networking
Consultants
Professional
Associations
Science Partners
Suppliers
THE FIRM
Network Governance
Network Management
Distributors Competition
Co-suppliers
Customers
Science Parks
Incubators
Industry Networks
Trade
Associations
Business Clubs Clusters
Investment
Networks
Centres for
Collaboration
The power of networks – the biotech industry
The biotechnology industry highlights the value of networking. Biotech companies
translate scientific discoveries into commercial technologies and new medical products.
To do this they need, among other things: large amounts of capital to fund costly
research; assistance with management and clinical trials; and later on, experience with
the regulatory approval process, manufacturing, marketing, distribution, and sales.
The technological and scientific knowledge required to stay on top of such a field is
diverse. The industry is complex and changing rapidly. Many new areas of science are
converging or have become inextricably intertwined – from genetics, biochemistry, cell
biology, general medicine, computer science, even to physics and optical sciences.
Modern biotechnology is a set of technologies relevant to a wide range of disciplines
and industries.
As all the necessary skills and organisational capabilities needed to compete in the
industry are not readily available under one roof, biotech firms enter into a wide array
of alliances to gain access to different competencies and knowledge. These alliances
may be with larger pharmaceutical companies, for example, that provide a set of
organisational capabilities that biotech firms are lacking, or they may be with research
institutes and other specialised firms to stay abreast of the latest technological and
market opportunities. Ultimately, however, success in the biotech industry depends
on a firm’s ability to access knowledge and skills located beyond its organisational
boundaries. Without access to the appropriate network partners and the skills to
manage the process of networking a biotech firm would be unable to compete
and survive.
8Research suggests that the following network characteristics are critical
for fostering innovation:
¦ Partner diversity
¦ Third parties, science partners and institutional mechanisms
¦ Networked approaches to investment – through co-investment
¦ Proactive management of networks and networking processes
Partner diversity
Innovation occurs more effectively where there is an exchange of knowledge between
systems. This may be between different industries, regions or countries, even
between science and industry. In this context the diversity of relationships in networks
has a significant impact on innovativeness and is a critical focus of research.
9
Innovation processes benefit from the clash of ideas and approaches between
different disciplines and sectors. Diversity provides access to a range of knowledge,
behaviours and ways of thinking. These lead to communication between people with
different information, skills and values, increasing the chance of unforeseen and new
combinations of knowledge, leading to discovery.
The more diverse the network partners, the greater the prospects of groundbreaking
innovation. Business customers are the most common innovation partners, followed
by suppliers. Firms are often reluctant to co-operate on innovation beyond these
boundaries even though this may limit the innovative capacity of firms. Embracing
diversity in networking requires a leap of faith as there are inherent risks involved.
Traditionally, companies have sought to protect their R&D investment through patents
and intellectual property lawyers. This position may be changing as firms embrace a
more collaborative approach to innovation – something known as open innovation.
10
As the name suggests, open innovation may involve many different
organisations and individuals. The benefits associated with it include:
¦ More ideas are generated and a broader base of expertise accessed
leading to improvements in the cost, quality and speed of innovation
¦ Licensing new innovations to third parties may provide a needed stimulus
within the organisation to make more use of internally generated ideas
¦ Exported ideas may receive more intense scrutiny and so a more rigorous
test of the economic viability of the idea
11
The power of open innovation is highlighted by the success of the Linux computer
operating system developed by Linus Torvalds and the Open Source movement.
However, there are also dangers associated with of open innovation – in particular,
knowledge spillover. (Knowledge spillover occurs when R&D undertaken by one firm
benefits another without any benefit to the first firm).
characteristics of innovation networks (i-works)
8
Embracing
diversity in
networking
requires a leap
of faith as there
are inherent
risks involved.One method of extending the innovation boundaries while limiting unwanted
knowledge leaks could be to use gatekeepers. Knowledge spillover can be minimised
by dealing with a special type of actor within the network: the gatekeeper.
12
Gatekeepers are prolific technical contributors who work and communicate with
many people, within and across disciplines and organisational boundaries. These
people are well connected in their particular technical field. As such they are
aware of the competitive risks involved in any networking activity.
Third parties, science partners and institutional mechanisms
Other networking partners can play an important role in promoting innovation particularly
for smaller firms. They include consultants and other professional service firms such
as accountants, as well as professional associations and trade associations. They also
include institutional mechanisms – publicly funded bodies designed specifically for
the purpose of facilitating innovation such as technology transfer centres.
The research highlights a number of characteristics of this type of third party
relationship. In particular these types of networking partner are useful when they act
as independent or neutral knowledge brokers. They also build trust and confidence
across networks, and act as a channel for development of informal relationships.
9
Although the research focused on business-to-business networks it is clear that
science partners – universities, research institutes and independent research and
design laboratories – play a crucial role as independent network brokers allowing
different business systems to meet, by acting as a trusted and neutral link. They are
especially useful when radical innovation is required, as they enable firms to develop
thinking outside their specialist field.
In some cases, however, third parties may actually hinder innovation. For example,
where trade associations operate with exclusivity they do not foster the trust,
confidence and openness necessary for the network to prosper.
One method
of extending
the innovation
boundaries
while limiting
unwanted
knowledge
leaks could be to
use gatekeepers.Co-investment
Finance networks – including business angels and venture capital firms – provide
an important element of i-works infrastructure. A critical strength of venture finance
networks is that they provide the opportunity for co-investment. Co-investment is
beneficial for venture capital firms as well as providing firms with better quality and
larger funds.
Finance networks also support innovation in other ways. For example, they act as
knowledge brokers within technology and innovation networks – making introductions
between firms.
In summary, networked approachers to investment:
¦ Spread risk
¦ Engage more people around the venture, assisting learning
¦ Encourage larger funds to be invested in appropriate ventures
¦ Create greater network opportunities
¦ Enable entrepreneurial firms to grow more quickly
…the emotional
support that an
entrepreneur
receives
from their
network can
make the
difference
between
continuing
and giving up.
1011
Start-ups and established firms both benefit from a networked approach to
investment.
13
For example, the emotional support that an entrepreneur receives
from their network can make the difference between continuing and giving up.
14
Investment networks also enable entrepreneurs to tap into talent and market
information. Small businesses and start-ups can also obtain access to R&D that
they would never be able to access alone by engaging in joint R&D ventures.
Proactive management of network capability
A firm’s innovative capacity is linked to its networking competence and capability.
The degree to which firms learn about new opportunities depends on the extent of
their existing participation in networks.
15 16
However not all firms are able to create and
manage their collaborations to maximum advantage. Both experience and the ability
to absorb new technologies and ideas are critical skills a firm requires when exploiting
its relationships.
17
The management of network relationships is inherently difficult. Knowledge of how to
collaborate accumulates over time through experience, reflection, and interpretation.
Striking the right balance involves managing informal and formal agreements, while
at the same time establishing trust.
Firms need to learn network competencies, for example:
¦ Whether agreements need contracts or can be based on good faith
¦ If friendship or reputation plays a role in the identification of partners
¦ Milestones or interventions needed to ensure a project stays on course
Unfortunately many firms do not appreciate the need for network management skills.
One study of owner-managers of printing electronic firms in the UK, for example,
revealed that the need to manage networks was widely ignored. Although there
was plenty of contact in the sector between small and large firms there was a lack
of active management of these relationships.
In particular:
¦ Contact tended to be one-off and intermittent
¦ There was a lack of long-term relationships
¦ Contacts tended to be haphazard rather than via strong local networks
¦ Firms put little effort into promoting and maintaining them networks
¦ Networking was conducted via a few key employees within the firm. When these
employees left or were absent then the firm’s links with the network was broken
Worryingly the owner-managers did not see the value in networks and only 20% saw
any value in introductory services. This is a problem because the general evidence
supports the view that networks are more effective at leading to innovation where
they are both long-term and relatively stable. Fortunately firms can develop network
capability. It is also clear than some networks are intrinsically more dynamic than others.12
conclusions
The research has a number of important implications for business practitioners.
It confirms that networks play a crucial role in innovation through: access to external
knowledge; risk sharing; access to new markets and technologies; accelerated time
to market; and pooling complementary skills.
The findings also suggest that a particular type of networks, i-works, have greater
innovation potential.
i-works display the following characteristics:
¦ Highly diverse: network partners from a wide variety of disciplines and
backgrounds who encourage exchange about ideas across systems
¦ Third party gatekeepers: science partners, such as universities, but also consultants
and trade associations, provide access to expertise and act as neutral knowledge
brokers across the network
¦ Financial leverage: access to investors via business angels, venture capital firms
and corporate venturing which spreads the risk of innovation and provides
market intelligence
¦ Proactively managed: participants regard the network as a valuable asset and
actively manage it to reap the innovation benefits
Companies should therefore:
¦ Proactively manage their networks and networking activities
¦ Actively seek out and participate in i-works
¦ Collaborate with third parties such as trade associations, consultants and science
partners who can act as neutral network brokers
¦ Recognise that venture finance networks offer more than just funding
The first step, however, is for senior managers in the UK to realise that networking is
a critical capability for their organisations – and should be managed as such. Companies
need to manage knowledge spillover, but they also need to recognise that no company
is an island. The failure to develop networking capability is a self-limiting strategy.
The failure
to develop
networking
capability is a
self-limiting
strategy. Implications for policymakers and researchers
The AIM research also has a number of important implications for policymakers
and researchers. In particular, policy makers should consider a range of measures
to stimulate the formation of i-works, including:
¦ Establishing centres for collaboration in priority areas
¦ Fostering the diversity of partners, e.g. actively promoting local SME networking,
pump priming funding for foreign research collaboration
¦ Establishing more network intermediaries in universities and colleges
¦ Strengthening the role of business angel networks on a local (sub-regional) level
¦ Encouraging syndicated investments to improve the quality and the quantity
of investment in entrepreneurial firm
13
However, more research is needed to understand how these issues might impact
on policy. Possible areas of research include:
¦ More research into what makes i-works more dynamic in the innovation process
¦ The large firm-small firm collaborative process, e.g. is it used as a device by large
firms to reduce R&D costs?
¦ The role of third parties such as university researchers, consultants, trade
and professional associations in networks – and their ability to mitigate
knowledge spillover
¦ How and to what extent networking supports entrepreneurial endeavour
¦ The management practices that support effective networking
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