Sources of technological innovation: Radical and incremental innovation problem-driven to support competitive advantage of firms

TLDR

Firms must develop radical and incremental innovations to sustain competitive advantage, yet the general sources of such breakthroughs remain poorly understood, despite firms’ incentive to solve unsolved problems for temporary monopoly profits. The study develops a conceptual framework of problem‑driven innovation that can be generalized to explain a source of innovation supporting technological and industrial change in a Schumpeterian competitive environment. The authors develop a conceptual framework of problem‑driven innovation. An inductive study of ground‑breaking lung‑cancer drugs shows that the co‑evolution of consequential problems and their solutions drives the emergence and development of radical innovations.

Abstract

A fundamental problem in the field of management of technology is how firms develop radical and incremental innovations that sustain the competitive advantage in markets. Current frameworks provide some explanations but the general sources of major and minor technological breakthroughs are hardly known. The study here confronts this problem by developing a conceptual framework of problem-driven innovation. The inductive study of the pharmaceutical industry (focusing on ground-breaking drugs for lung cancer treatment) seems to show that the co-evolution of consequential problems and their solutions induce the emergence and development of radical innovations. In fact, firms have a strong incentive to find innovative solutions to unsolved problems in order to achieve the prospect of a (temporary) profit monopoly and competitive advantage in markets characterised by technological dynamisms. The theoretical framework of this study can be generalised to explain one of the sources of innovation that supports technological and industrial change in a Schumpeterian world of innovation-based competition.