Firm-level Innovation Models: Perspectives on Research in Developed and Developing Countries

Abstract

Abstract This paper provides a critical review of firm-level innovation models based on research in the industrially advanced countries (IACs) and draws implications for firms in industrialising countries such as Korea and Taiwan. The paper summarises different categories of innovation model and identifies their achievements and weaknesses, showing how a few researchers have successfully linked IAC models to innovation processes found within the more advanced developing nations such as Korea. One of the chief contributions of IAC models is that many of them go substantially into the management of innovation and the decision-making processes within the firm. However, in general, there is a lack of empirical evidence to verify existing models, weak theoretical underpinnings and, in some cases, a failure to sufficiently recognise the diversity and unpredictability of innovation processes. The paper suggests how best to use innovation models and how to overcome some of the difficulties in future research. Acknowledgement The author would like to thank the Science and Technology Policy Institute (STEPI), South Korea, for support in the preparation of this paper. A version of the paper is published in Ho et al. Footnote101 Thanks are also due to an anonymous referee for insightful and helpful comments. The normal disclaimers apply. Notes 1. So far, most of these firms have been from a small number of Asian economies, principally South Korea and Taiwan (M. Hobday, Innovation in East Asia: the Challenge to Japan (Aldershot, Edward Elgar, 1995)). Hopefully, other advanced developing nations, such as China and India, may find the issue of firm innovation models of interest as they seek to compete internationally. Because of the substantial differences between the levels of development of different developing countries and firms, the paper is mainly concerned with those firms approaching the innovation frontier. 2. The technology frontier is defined as the point at which R&D becomes central to overall competitive strategy and advantage of the firm. For an assessment of Korean firm 'leadership' innovation in important electronic components such as semiconductor dynamic random access memories (DRAMs), see Y. Choi, Dynamic techno-management capability: the case of Samsung semiconductor sector in Korea, PhD Thesis, Department of Economics and Planning, Roskilde University, 1994, and in thin film transistor/liquid crystal displays (TFT/LCDs), see T. S. Oh, Catching-up and forging ahead of latecomer firms: the catch up of the thin film transistor liquid crystal display industry in Korea, Unpublished MSc Thesis, SPRU, University of Sussex, UK, 2002. 3. N. S. Dorfman, Innovation and Market Structure: Lessons from the Computer and Semiconductor Industries (Cambridge, M: Ballinger, 1987), p. 4; SPRU, Success and Failure in Industrial Innovation, Report on the Project SAPPHO by the Science Policy Research Unit, University of Sussex (London, Centre for the Study of Industrial Innovation, 1972), p.7; M. I. Kamien & N. L. Schwartz, Market Structure and Innovation (Cambridge, Cambridge University Press, 1982), p. 2. 4. R. R. Nelson, The simple economics of basic scientific research, Journal of Political Economy, 67, 1959 pp. 297–306; A. Phillips, Patents, potential competition and technical progress, American Economic Review, 56, 1966, pp. 301–310; F. Malerba, Learning by firms and incremental technical change, The Economic Journal, 102, 1992, pp. 845–859. 5. Following R. R. Nelson and N. Rosenberg, Technical innovations and national systems, in R. R. Nelson (ed.) National Innovation Systems: A Comparative Analysis (New York, Oxford University Press, 1993); L. Kim, Imitation to Innovation: the Dynamics of Korea's Technological Learning (Boston, MA, Harvard Business School Press, 1997); S. Myers and D. G. Marquis, Successful industrial innovations: a study of factors underlying innovation in selected firms, National Science Foundation, NSF 69-17, 1969; J. Schmookler, Invention and Economic Growth (Cambridge, MA, Harvard University Press, 1966); A. Gerstenfeld and L. H. Wortzel, Strategies for innovation in developing countries, Sloan Management Review, Fall 1977, pp. 57–68. 6. The paper focuses mainly on technological innovation. However, organisational innovation, which is closely linked to technological innovation (R. Stata, Organisational learning—the key to management innovation, Sloan Management Review, Spring 1989, pp. 63–74; D. A. Garvin, Building a learning organization, Harvard Business Review, July–August 1993, pp. 78–92), is also touched upon. 7. R. Rothwell, Systems integration and networking: the fifth generation innovation process, Paper Prepared for the Chair Hydro—Quebec Conference en Gestion de al Technologie, Montreal, Canada, 28 May 1993. 8. The Appendix provides definitions of terms such as technology, research and development (R&D) and innovation. 9. R. Rothwell, Successful industrial innovation: critical factors for the 1990s, Extended version of a paper presented at the Science Policy Research Unit's 25th Anniversary Conference: 'SPRU at 25: Perspectives on the Future of Science and Technology Policy', SPRU, University of Sussex England, 3–4 July 1991; R. Rothwell, Developments towards the fifth generation model of innovation, Technology Analysis and Strategic Management, 4(1), 1992, pp. 73–75; Rothwell, Systems integration and networking: the fifth generation innovation process, Paper Prepared for the Chair Hydro—Quebec Conference en Gestion de al Technologie, Montreal, Canada, 28 May 1993. 10. Most post-Rothwell models fall into the category of fourth or fifth generation. 11. Rothwell, Systems integration and networking: the fifth generation innovation process, Paper Prepared for the Chair Hydro—Quebec Conference en Gestion de al Technologie, Montreal, Canada, 28 May 1993, pp. 1–2. 12. The importance of contingency was emphasised later by Drejer in his review of technology management approaches (A. Drejer, Frameworks for the management of technology: towards a contingency approach, Technology Analysis and Strategic Management, 8(1), 1996, pp. 9–20). 13. Rothwell, Systems integration and networking: the fifth generation innovation process, Paper Prepared for the Chair Hydro—Quebec Conference en Gestion de al Technologie, Montreal, Canada, 28 May 1993. 14. Rothwell, Systems integration and networking: the fifth generation innovation process, Paper Prepared for the Chair Hydro—Quebec Conference en Gestion de al Technologie, Montreal, Canada, 28 May 1993. 15. Notably Myers and Marquis (1969). 16. D. C. Mowery and N. Rosenberg, The influence of market demand upon innovation: a critical review of some recent empirical studies, Research Policy, 8, 1978, pp. 102–153. 17. Rothwell, Systems integration and networking: the fifth generation innovation process, Paper Prepared for the Chair Hydro—Quebec Conference en Gestion de al Technologie, Montreal, Canada, 28 May 1993, p. 3. 18. 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As noted in Section 5.9, such models can be useful if they are used as devices for data gathering and benchmarking but not for explanation or prescription. A similar point was made by Gerschenkron in his critique of the 'stages of development model' put forward by Rostow in the 1960s (A. Gerschenkron, Economic Backwardness in Historical Perspective (Cambridge, MA, Harvard University Press, 1962). 68. N. Roll-Hansen, The role of genetic theory in the success of the Sval V Plant Breeding Program, Sveriges Uts desfrenings Tidskrift, 107(4), 1997, pp. 196–207. Famously in C. Lindblom, The science of 'muddling through', Public Administration Review, 19, Spring 1959, pp. 78–88, Lindblom argues that it is in fact 'irrational' to proceed 'rationally' in an uncertain situation because there is, by definition, insufficient knowledge and an iterative, learning approach is needed. Similar arguments were also by Klein and Meckling (B. Klein and W. 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These studies draw on dynamic models of innovation (Utterback and Abernathy, A dynamic model of process and product innovation, Omega, 3(6), 1975, pp. 639–656; W. J. Abernathy, K. B. Clark and A. M. Kantrow, Industrial Renaissance: Producing a Competitive Future for America (New York, Basic Books, 1983); H. W. Chesbrough and D. J. Teece, When is virtual virtuous?, Harvard Business Review, January–February 1996, pp. 65–73; G. Hamel and C. K. Prahalad, Competing for the Future (Boston, MA, Harvard Business School Press, 1994) 79. E.g. Teece et al., Dynamic capabilities and strategic management, CCC Working Paper No. 94-9, Centre for Research in Management, University of California at Berkeley, 1994. 80. E.g. M. E. Porter, Competitive Advantage: Creating and Sustaining Superior Performance (New York, The Free Press, 1985). 81. J. Barney, Firm resources and sustained competitive advantage, Journal of Management, 17(1), 1991, pp. 99–120. 82. G. 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Typical IAC models are included in Utterback and Abernathy, A dynamic model of process and product innovation, Omega, 3(6), 1975, pp. 639–656; J. C. Abernathy and K. B. Clark, Innovation: mapping the winds of creative destruction, Research Policy, 14, 1985, pp. 3–22; K. Clark and T. Fujimoto, Product Development Performance (Boston, MA, Harvard Business School Press); J. M. Utterback and F. F. Suarez, Innovation: competition, and industry structure, Research Policy, 15, 1993, pp. 285–305; Hamel and Prahalad, Competing for the Future (Boston, MA, Harvard Business School Press, 1994); Chesbrough and Teece, , When is virtual virtuous?, Harvard Business Review, January–February 1996, pp. 65–73; Tushman and O'Reilly, Winning Through Innovation: a Practical Guide to Leading Organizational Change and Renewal (Boston, MA, Harvard Business School, 1997); Swann and Gill, Corporate Vision and Rapid Technological Change (London, Routledge, 1993). 92. Kim, Imitation to Innovation: the Dynamics of Korea's Technological Learning (Boston, MA, Harvard Business School Press, 1997). 93. Gerschenkron, Economic Backwardness in Historical Perspective (Cambridge, MA, Harvard University Press, 1962). 94. Hamel, Leading the Revolution (Boston, MA, Harvard Business School Press, 2000). 95. Hobday, Innovation in East Asia: the Challenge to Japan (Aldershot, Edward Elgar, 1995). 96. This argument is derived from the work of Gerschenkron (1968) and elaborated upon in M. Hobday, Innovation in Asian industrialisation: a Gerschenkronian perspective, Oxford Development Studies, 31(3), September 2003, pp. 293–314, which argues the case for innovation at the policy and national levels for development to occur. 97. E.g. Lee et al., Technology development processes: a model for a developing country with a global perspective, RandD Management, 18(3), 1988, pp. 235–250. 98. Cooper, The new product process: an empirically-based classification scheme, R&D Management, 13(1), pp. 1–13. 99. This is a major subject for future research. Also, depending on the purpose of the research, alternative theories might also be appropriate (e.g. political, sociological or strictly economic approaches). Again, there can be no one 'correct' or best approach to understanding or modelling innovation. 100. Ho et al., 2003; Oh, Catching-up and forging ahead of latecomer firms: the catch up of the thin film transistor liquid crystal display industry in Korea, Unpublished MSc Thesis, SPRU, University of Sussex, UK, 2002. 101. M. Hobday, A review of firm-level innovation models in industrially advanced countries: implications for Korea, in Y. H. Ho, S. Song, M. J. Um, D. H. Lee and M. Hobday (Eds), Technological Innovation Of Korean Firms, ch. 2 (Seoul, Korea, STEPI, 2002). 102. Schmookler, Invention and Economic Growth (Cambridge, MA, Harvard University Press, 1966), p. 18. 103. 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