Innovation in the New Economy (Knowledge Economy


The Innovation Imperative

Francis Stevens George

Knowledge Economy
• The knowledge-driven economy brings new challenges for business. Markets are becoming more global with new competitors, product life cycles are shortening, customers are more demanding and the complexity of technology is increasing. • The knowledge-driven economy affects the innovation process and the approach to innovation. • The traditional idea that innovation is based upon research (technology- push theory) and interaction between firms and other actors is now suplemented by the current social network theory of innovation, where knowledge plays a crucial role in fostering innovation.

Francis Stevens George

Competition in the New Economy • Competition in the New Economy is driven by Innovation. • Companies in the developing countries must innovate to be competive in the global economy. • Innovation has changed in the knowledge based economy. The old models-Closed Innovation, US style-are increasingly becoming redundant. • Open Innovation is increasingly embraced by businesses • The New Models offer an opportunity to the developing countries.
Francis Stevens George

The Innovation Imperative • Growth and Development of any modern economy is based on innovation and new technology • Kondratief’s ”Long Wave Theory”. The role of technology in the ”upwave”. • Schumpeter: technology innovation as the engine of economic growth • Mensch: Only innovation can overcome economic depression.
Francis Stevens George

Technology and Development
Economic business cycles First cycle (1780s-1830s) Pol/Eco Influences Technology Innovation Impact on factors of production

French Revolution

Industrial revolution I-iron, textile, steam technology

Land-iron & coal resources Capital-OT,BKn Labour-division of labour/fact. Workers. Enterprise-investment by landowners in new industry Land-pig iron coal Capital-joint stock, issuing of notes, stable banking system Labour-education of workers Enterprise-investment by State and VCs Land-coal, petrol, other metals Capital-int. Finn. Labour-more skilled, demise of child labour, Enterprise-inter war speculation Land-alluminium, silicone, petroleum Capital-sophis. Fin mkts, Labour-highly skilled, universal education,unions Enterprise-international investment Land-recycled/envio fM, Capital-single world market, money Labour-know.workers Enterprise-monopolistic media,IT, private ins. investors

Second cycle (1830s-1880s)


Industrial revolution II-steel industry/railroads

Third cycle (1880s-1930s)


Electrical engineering/electricity/motor

Fouth Cycle (1930s-1990s)

Socialism, Unionism, Consumption

Nuclear/oil/electronics/micro processing

Fifth cycle (1990s-

Globalisation, International, Integration

Information technology/telecoms/biotech/ggenetic eng

Francis Stevens George

Innovation Models
• US style-Closed Innovation Model • European/Early Industrial Revolution Model • Development- Driven Model(technopreneural model) • Technology push • Market Pull • Linkages between actors (chain linked theories) • Systems of Innovation (Technological Networks) • Social Network Theory
Francis Stevens George

Innovation in the New Economy
• Problem solving process • Occurence high with commercial entities • An interactive process involving relationships between firms with different actors • A diversified learning process • A process involving the exchange of codified and tacit knowledge • An interactive process of learning and exchange where interdependence between actors generates an innovative system or an innovation cluster
Francis Stevens George

The Question • Which Innovation models should developing countries go for? What are their options? • If one does not know to which port one is sailing, no wind is favorable. -- Lucius Annaeus Seneca, Roman philosopher
Francis Stevens George

Criterion to Determine Options • In determing the options available to developing countries, I shall consider the following criterion
• • • • • • Knowledge Driven Focus Demand Pool (necessity driven) Practical Usefulness Degree of availability Level of documentation Required resources for implementation

Francis Stevens George

Innovation Management
Innovation Management Options Knowledge Driven Focus

Degree of Availability

Required Resources


Demand Driven

Level of Documentation

Practical Usefulness

Francis Stevens George

Knowledge Driven Focus • Degree to which the technique focuses on knowledge as the most valuable asset to a company, highlighting features like: flexibility, cooperation, networking, internationalization, quick time-to-market, knowledge management, better market information and entrepreneurship encouragement.

Francis Stevens George

Degree of Availability • Techniques and methodologies that are not subject to any copyrights or license restrictions so they can be used freely for any company. Generic methodological approaches and techniques which are not specific commercial tools owned by private players. • Open source!

Francis Stevens George

Practical Usefulness • Focus on specific and key ‘problems’ to be solved by business organizations (problem-solving-orientation, know-how providers) Methodologies and techniques with a «tool» nature.

Francis Stevens George

Level of Documentation • Well documented, standardized and systematized techniques, with a defined structure or method of application (existence of user’s guide or other codified knowledge pieces to replicate the technique) Availability of readily accessible best practice analysis (existence of examples and case studies to learn and diffuse how to use the technique)
Francis Stevens George

Required Resources • Time required to be implemented; Average budget to perform the technique in a firm; Tools which are not too sophisticated, and can be generally applied by averagetrained business professionals; If the implementation would require an external consultancy (required competencies, expertise and other resources for implementation and maintenance) it should be also assessed in terms of budget
Francis Stevens George

Conclusion • “The innovation challenge is not just about catching up with developed countries in established areas of world production it is about developing an internal capacity for independent technological development and business knowledge. • It is about learning to learn which takes time and requires resources. As well as adapting technology to local conditions, there needs to be investment in adapting organizations and institutions”.
Francis Stevens George