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Research Policy 29 Ž2000.

793–804
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Editorial

Innovation in complex products and system q

1. Introduction Drawing from recent research, the purpose of this


special issue is to provide substantial new insights
Over the past 5 to 10 years, empirical study has into the innovation dynamics of CoPS, dealing with
provided a much improved understanding of how firm strategy, capability building, management prac-
innovation occurs in complex, high value capital tices, organisational form, product life cycles, gov-
goods. Research has began to illustrate the specific ernment policy, measurements and conceptual frame-
ways in which so-called complex products and sys- works. In this introduction, we argue not only that
tems ŽCoPS. are produced by firms, often working CoPS underpin the production of modern goods and
together in projects, and how innovation processes in services, but that much conventional innovation wis-
CoPS differ from those commonly found in mass dom derived from studies of mass produced goods
produced goods. This is an important research en- Že.g. the automobile and the semiconductor. either
deavour for at least three reasons. First, CoPS play a does not apply or applies with substantial qualifica-
vital part in the modern economy and wider society. tion to CoPS. The aim of the Issue is to put innova-
As the major capital goods which underpin manufac- tion in CoPS ‘centre stage’ in the analysis of innova-
turing, services, trade and distribution, CoPS play a tion.
critical role in modern industrial and economic Part 1 of the introduction provides a definition of
progress. As Rosenberg Ž1976. has argued, capital CoPS, highlighting the innovation and production
goods are a key point of entry of new technology contrasts with mass produced, commodity goods.
into the economic system. Second, because much Part 2 outlines key innovation issues raised by CoPS,
conventional innovation wisdom is derived from re- showing the importance of systems integration, soft-
search on high volume consumer products, new evi- ware and project management as core capabilities in
dence, models and concepts are needed to properly the production of modern systems. Part 3 briefly
understand innovation processes in CoPS. Third, at summarises some of the key unanswered questions
the practical levels of firm strategy and government posed by CoPS, while Part 4 shows how each of the
policy, a robust understanding of innovation in CoPS papers in this special issue attempt to answer some
is needed to enable firms to improve their perfor- of these questions. Finally, Part 5 maps out future
mance and to guide the policy and regulatory agen- research directions, stressing the importance of build-
cies directly involved in decision-making in CoPS. ing a deeper historical perspective on CoPS as a key
transmission mechanism for new technology within
q the industrial and wider economic system.
The research for several of the papers contained in this edition
was supported by the CoPS Innovation Centre funded by the UK
Economic and Social Research Council ŽESRC.. The editors
would also like to thank the UK Engineering and Physical Sci- 2. Part 1: CoPS as an analytical category
ences Research Council ŽEPSRC. for research support. Further
information on the Centre can be found at http:rrwww. CoPS can be defined as high cost, technology-in-
susx.ac.ukrsprurcopsr. tensive, customised, capital goods, systems, net-

0048-7333r00r$ - see front matter q 2000 Elsevier Science B.V. All rights reserved.
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794 Editorial

works, control units, software packages, constructs Examples of CoPS include telecommunications ex-
and services.1 According to this definition, CoPS are, changes, flight simulators, aircraft engines, avionics
strictly speaking, a subset of capital goods: the high systems, e-commerce networks, train engines, air
technology capital goods which underpin the provi- traffic control units, systems for electricity grids,
sion of services and manufacturing — the ‘techno- offshore oil equipment, baggage handling systems,
logical backbone’ of the modern economy. We use retail networks, R & D equipment, bio-informatics
the term CoPS here, as ‘capital goods’ fails to systems, intelligent buildings and cellular phone net-
adequately capture the product diversity and range of work equipment.
functions of the systems and networks involved. There are many different categories of CoPS,
Because each new product tends to be different ranging from traditional goods Že.g. train engines. to
and because development and production involves new IT networks Že.g. internet super-servers. to tra-
feedback loops from later to early stages and other ditional goods which have been radically trans-
unpredictable, ‘emerging’ properties, innovative formed by software and IT Že.g. integrated mail
non-functional organisational structures are required processing systems and printing press machinery..
to coordinate production, particularly in the case of They can be categorised according to sector Že.g.
uncertain and changing user requirements. The cre- aerospace, military and transportation., function Že.g.
ation of a major CoPS often involves extreme pro- control systems, communications and R & D., and
duction and innovation complexity, not only because degree of complexity Že.g. as measured by the num-
they embody a wide variety of distinctive compo- ber of tailored components and sub-systems, design
nents, skills and knowledge inputs but also because options and amount of new knowledge required..
large numbers of firms Žor different organisational Perhaps the simplest way of illustrating the defin-
units of the same firm. often have to work together ing characteristics of CoPS is to distinguish them
in their production. from mass produced goods. There are at least three
In the past 20 years or so, the physical composi- significant differences. First, they are comprised of
tion of many CoPS has been transformed by soft- many customised, interconnected elements Žinclud-
ware and information technology ŽIT., leading to ing control units, sub-systems and components.; these
new levels of risk and uncertainty in design and are organised in a hierarchical manner and tailored
production. The effect of software has been to shift for specific customers andror markets. Often their
the emphasis of production from a relatively pre- sub-systems Že.g. the fan blade system for aircraft.
dictable ‘engineering’ task to a much more im- are themselves complex, customised and high cost.
precise, tacit, and design-intensive ‘development’ Second, they tend to exhibit emergent properties
process, increasing the degree of uncertainty and during production, as unpredictable and unexpected
learning involved in the production of each system.2 events and interactions often occur during design and
As high technology customised capital goods, systems engineering and integration ŽBoardman,
CoPS tend to be produced in one-off projects or 1990; Shenhar, 1994.. Emerging properties also oc-
small-batches. The key production capabilities are cur from generation to generation, as small changes
systems design, project management, systems engi- in one part of a system’s design can call for large
neering and integration, rather than the volume man- alterations in other parts, requiring new control sys-
ufacturing processes critical to competitiveness in tems and, sometimes, new materials Že.g. in jet
consumer goods, such as camcorders and bicycles. engines.. Third, they tend to be produced in projects
or in small batches which allow for a high degree of
direct user involvement, enabling business users to
engage directly in the innovation process, rather than
through arms-length market transactions, as normally
1 the case in commodity goods.
See Hobday Ž1998. for full discussion of CoPS as an analyti-
cal category.
There are several critical dimensions of product
2
See Hobday and Brady Ž1998. for discussion and case evi- complexity, each of which can confer task complex-
dence. ity and non-routine behaviour in production. These
Editorial 795

dimensions include the numbers of components, the firms, the sequence is quite different: product devel-
degree of customisation of both system and compo- opment came first, then production, and finally mar-
nents, the quantity of possible design routes, the ketingB.
elaborateness of the system architecture, the breadth
and depth of knowledge and skills required, and the
3. Part 2: innovation issues raised by CoPS
variety of material and component inputs. Users
frequently change their requirements during produc- The financial scale and physical complexity of
tion, leading to unclear goals, uncertainty in produc- CoPS raises many interesting innovation issues. We
tion and unpredictable, unquantifiable risks. Man- know for example, that innovation in CoPS differs
agers and engineers often have to proceed from one markedly with much of the conventional innovation
production stage to the next with incomplete infor- wisdom derived from studies of mass produced
mation, relying on inputs from other suppliers who goods. In the paradigm of mass market commodity
may be competitors in other multi-firm projects. goods, firms tend to be clearly defined, recognisable
Project management often involves negotiating be- entities rather than the messy multi-firm project-based
tween the competing interests, goals and cultures of organisations ŽPBOs. which compete in the supply
the various organisations involved in production. of CoPS. According to the ‘conventional model’,
As the main CoPS production process, projects products and technologies undergo life cycles from
often involve some kind of prime contractor and fluid immaturity states to maturity. After a dominant
systems integrators. Users, buyers, other suppliers, design, or standard, is selected in the marketplace,
small and medium sized enterprises and sometimes small non-competitive firms exit or are acquired by
government agencies and regulators are involved in large companies which then compete on the basis of
new designs, especially if public safety or national incremental process improvements by supplying the
security is a consideration Že.g. in energy systems, same basic product in large volumes to many cus-
military, aerospace and telecommunications.. Often, tomers. ŽUtterback and Abernathy, 1975; Abernathy
these agents collaborate together, taking innovation and Clark, 1985; Utterback and Suarez, 1993; Klep-
Že.g. new design. decisions in advance of and during per, 1996.. Some argue that radical technological
production, as in the case of flight simulators ŽMiller innovations can destroy the value of old competen-
et al., 1995.. Project organisation often involves cies leading to industrial exit and extinction for
temporary multi-firm alliances in which highly so- laggards ŽTushman and Anderson, 1986..
phisticated systems integration and project manage- These features of the conventional model contrast
ment capabilities are essential to production. The sharply with the innovation parameters of CoPS
project represents a focusing device which enables ŽHobday, 1998.. For instance, at the level of physical
the problems of design and production to be ad- artifact, CoPS are made up of many customised,
dressed. It is also responsible for realising the mar- interconnected control units, sub-systems and com-
ket, coordinating decisions across firms, enabling ponents, rather than the smaller numbers of mostly
buyer involvement and matching technical and finan- standardised components used in most commodity
cial resources through time. goods. Put in another way, in CoPS the degree of
Because most CoPS are designed to meet the system hierarchy is comparatively high and product
needs of large business users, the project manage- architectures can be extremely elaborate, partly be-
ment task stands in sharp contrast to the mass pro- cause designs are tailored for specific customers.
duction task. As Woodward Ž1958, p. 23. put it in CoPS are never mass produced and their product life
her research into UK project-based companies in the cycles can extend over decades. Decisions to invest
1950s: Athose responsible for marketing had to sell, may take months or years. Rarely, if ever, is there an
not a product, but the idea that their firm was able to instant market transaction for CoPS as in the case of
produce what the customer required. The product consumer goods. In CoPS, innovation often proceeds
was developed after the order had been secured, the long after the delivery of the product, as new fea-
design being, in many cases, modified to suit the tures are added and systems are upgraded and modi-
requirements of the customer. In mass production fied Že.g. in IT networks and intelligent buildings..
796 Editorial

While the extent of system complexity is always a Also, the conventional product vs. process inno-
matter of degree both within CoPS and between vation dichotomy is unhelpful in explaining the life
CoPS and consumer goods, in CoPS complexity may cycle of CoPS where the rate of product innovation
increase markedly from one generation to another can remain consistently high. Drawing upon the
leading to highly elaborate architectures with many example of mobile communications, Davies Ž1998.
thousands of components, as in the case of jet en- suggests that some CoPS evolve through two phases
gines. This is sometimes due to ever-increasing de- of innovation. First, the development of a new sys-
mands on performance and capacity. Firms often tems architecture prior to the commercialisation of
search for simplifying mechanisms and strategies in the product. In this phase, architectural designs are
order to cope with product, technological and organi- powerfully influenced by system suppliers, regula-
sational complexity. For example, the standardisation tors, standard-making bodies and large users. Sec-
of previously customised components is an important ond, the phase of new product generation, where the
strategy which can allow production learning, cost rate of component and systemic innovation increases
reduction and new waves of innovation, as in the and successive new products and components are
case of intelligent buildings ŽGann, 1993. and air- introduced, without fundamentally altering the estab-
craft engines ŽPrencipe, 1998.. Because the span of lished architectural design.
managerial control may be outside the boundaries of While repeatable mass production learning pro-
a single firm, collaboration is an important element cesses are not so important to CoPS, there may well
of CoPS innovation. To develop new systems, inte- be scope for learning economies between product
grators require a deep understanding of both the generations and at the component level, where de-
abilities of partner suppliers and the needs of de- mand may be very high Že.g. in aircraft and high
manding professional users, with whom they collab- technology buildings.. CoPS suppliers often gain
orate during innovation and production. Production strategic advantage by modifying design architec-
strategies must also account for the tacit knowledge tures to increase the scope for using high volume
embodied in key individuals and teams, which can- components.
not be formalised to the same degree as in less At the level of system design, because of small
complex volume produced goods ŽVincenti, 1990; volumes, CoPS producers tend not to have to ac-
Nightingale, 1997.. During the core production pro- count for high volume production as a key design
cess Žthe CoPS project., soft, intangible skills, such constraint. Conversely, they do have to retain certain
as leadership, communications and team building are types of component design knowledge in-house to
key to good performance ŽHobday and Brady, 1998.. outsource effectively. Therefore, CoPS design rules
Because the conventional model does not capture and decision procedures differ substantially from
many of the salient features of CoPS, if applied those followed in mass produced, simpler goods
without modification, it can be misleading both con- where design-for-mass-manufacture is all important
ceptually and in terms of management strategy and ŽUllrich and Eppinger, 1995.. As Prencipe Ž1998.
practice. For example, the conventional productrin- shows, strategies for outsourcing in CoPS have to
novation life cycle model is generally unable to account for the elements of architectural, system and
explain the determinants of the life cycle of CoPS, complement knowledge which must remain within
which tend to remain in the fluid phase of product the boundaries of the systems integrator firm, in
innovation ŽDavies, 1998.. While CoPS do mature, contrast with the ‘modular’ strategies which may be
the high volume process improvement stage is sel- more suitable for volume products ŽSanchez and
dom, if ever, reached. Exit and entry patterns do not Mahoney, 1996; Baldwin and Clark, 1997..
follow from dominant designs and a remarkable deal
of long-term stability is witnessed among systems
4. Part 3: key unanswered questions
integrators, despite radical technical change Že.g. in
telecommunications exchanges, aircraft and flight Much more work needs to be done to develop
simulators.. convincing models of innovation in CoPS, to under-
Editorial 797

stand and explain the great deal of variety observed 5. Part 4: contribution of the special issue
across CoPS sectors and the contrasts between CoPS
and other types of product. This special issue ad-
The special issue brings together 11 papers which
dresses several unanswered questions concerning the
attempt to address above questions and push the
effective management of innovation. It also ad-
boundaries of knowledge further by raising further
dresses difficult issues regarding theory, policy and
research issues. The papers are largely based on new
measurement. Key questions concerning the manage-
empirical research and lessons are drawn from a
ment of innovation include the following:
wide range of CoPS sectors.

1. What are the most suitable organisational forms 5.1. Organisational forms for CoPS
for producing CoPS?
2. How is the shift to services in many CoPS affect-
ing the strategies, processes and organisational Hobday addresses the issue of organisation, exam-
structures of CoPS producers? ining the so-called Project based organization ŽPBO.,
3. How do firms go about building the project capa- an organisational form apparently ideally suited to
bilities needed to produce new CoPS systems? the production of CoPS. Using an in-depth case
4. What do we know about ‘best practices’ in the study of a producer of particle accelerator systems,
management of CoPS? the study compares the effectiveness of a PBO with
5. How can firms progressively improve their design a more traditional functionalrmatrix organisation.
effectiveness, given the one-off nature of CoPS The author introduces a simple model to compare the
projects? PBO with various matrix and functional organisa-
tions, identifying both the strengths and the weak-
nesses of the PBO. On the one hand, the PBO is able
Theoretical, measurement and policy issues in- to create and re-create new organisational structures
clude: around the demands of each CoPS project and each
major customer. It can also cope well with emerging
properties and with integrating different types of
1. How can we measure the depth and breadth of the knowledge and skill. However, the PBO also has
capabilities of systems integrators? inherent weaknesses. For example, it is not suitable
2. Which frameworks can best explain the adapta- for coordinating resources across projects and can
tion of the supply network Žor web. to different fail in the area of technical leadership and organisa-
trajectories of innovation in CoPS? tion-wide learning, working against the wider inter-
3. Which kind of product life cycle models fit the ests of the company as a whole. Hobday outlines
experience of CoPS suppliers, given that the nor- some of the strategies which can be deployed to deal
mal Ashake outB patterns of industrial adjustment with these learning and coordination problems and
do not seem to apply? identifies a new type of form ‘the project-led organi-
4. How do CoPS relate to the wider technological sation’ which can address some of the problems
systems in which they are embedded and vice inherent in the PBO.
versa?
5. How can the notion of complexity be understood
and applied beyond the level of product to the 5.2. The shift to serÕices
levels of process and organisation?
6. How can governments avoid the common prob- Turning to the issue of how CoPS producers are
lem of lock-in to major infrastructual projects responding to the new service dimensions of CoPS,
and, if necessary, extricate themselves from com- Gann and Salter explore how project-based design,
mitments to outdated, expensive and inferior tech- engineering and construction firms combine techni-
nologies? cal expertise from other organisations to build up
798 Editorial

their own capabilities and deliver their products and other CoPS sectors facing discontinuous learning,
services. The key to delivering service-enhanced escalating costs and high risks of failure.
products and systems, they argue, is not solely cen-
tred on the management of projects or the manage- 5.4. Building project capabilities
ment of business processes per se, but rather the
integration of project and wider business processes
Underlying many of the problems facing produc-
within the firm. The paper develops a framework for
ers is the question of how best to build organisa-
examining the dynamics of project-based firms,
tional capabilities to produce new CoPS. Davies and
showing how some firms are able to deal with the
Brady made a theoretical and empirical contribution
problems of company wide coordination raised by
to this area. They show that the large body of
Hobday. Gann and Salter argue that traditional treat-
business theory, which examines how firms move
ments of firm behaviour Že.g. project management
from their core capabilities into new lines of busi-
and single firm analysis. do not offer the method-
ness, suffers from two main limitations. First, the
ological equipment to explore the particular dynam-
emphasis is generally on top–down, strategic man-
ics of innovation in project-based enterprise, because
agement rather than on capabilities at different levels
they generally fail to explore the important link
Že.g. processes and projects. within the firm. Second,
between project and wider business processes.
the focus on capabilities appropriate for high-volume
production and marketing of consumer goods is not
appropriate for the systems integration and project
5.3. Best management practices management capabilities required for CoPS projects.
They draw on the work of Penrose Ž1959., Richard-
son Ž1972., and Chandler Ž1990. and contingency
Pursuing the theme of how best to produce CoPS,
theorists such as Burns and Stalker Ž1961. and Gal-
Barlow presents a case study of a high value
braith Ž1973. to build an alternative analytical frame-
offshore oilfield construction project Žthe ‘Andrew
work for examining capability building in CoPS.
Project’. to analyse how this particular sector is
They distinguish between strategic, functional and
managing the challenge of increasing complexity and
project capabilities and illustrate the dynamics of the
uncertainty. Two of the difficulties confronted in this
capability building process using two company cases
sector are Ža. how to improve the performance and
from the telecommunications industry as examples.
productivity of projects and Žb. how to ensure long-
The proposed organisational capability framework
term learning and innovation at the wider organisa-
embodies a cost capability model which shows how
tional level. A modern ‘best practice’ approach to
CoPS firms migrate from first project to achieve
this problem in construction and other sectors such
‘economies of repetition’ by putting in place organi-
as aerospace is ‘partnering’, defined as a bundle of
sational changes, routines and learning processes to
business processes deployed to achieve non-
provide a growing number of similar projects at
hierarchical communications, the integration of dif-
lower cost and greater effectiveness.
ferent kinds of knowledge, and effective coordina-
tion at the project level. The partnering approach is
particularly useful in CoPS where, because of the 5.5. Design effectiÕeness under uncertainty
project-based nature of activities, organisational and
technological learning is discontinuous. Barlow Ensuring effectiveness and efficiency in design is
shows how in the Andrew Project partnering worked another problem common to many CoPS producers.
to achieve good results in terms of project perfor- However, CoPS are characterised by a large varia-
mance, shared risk taking, communications and tion in the success of development, with larger more
learning. The author points to other sub-sectors within complex capital goods showing very high levels of
construction Že.g. housing. where barriers to use of failure. As Nightingale shows, part of the difficulty
partnering have prevented such gains and suggests confronting systems integrators is that, within pro-
that, with modification, the method could be used in jects, the interactions between knowledge, technol-
Editorial 799

ogy and organisational form are all closely related. technological capabilities, not only in the systems
These three elements must be properly aligned to design, architectural and integration capabilities, but
enable firms to control and reduce the number of also in most of the critical components required. The
redesign cycles in project execution, thereby produc- paper implies that in CoPS systems integrators must
ing quality products which satisfy customer needs be very wary of component and technology outsourc-
within schedule and budget. A simple framework is ing. At the very minimum, firms must retain in-house
developed to illustrate the interactions between both the capability to outsource effectively to spe-
knowledge, technology and organisation and, using a cialist suppliers and to contribute to future compo-
case study from the aeroengine sector, Nightingale nent innovations.
shows how firms can reconfigure organisational
knowledge to reduce uncertainty about the effects of
design changes and enable more informed choices 5.7. The notion of complexity
between different design options. The paper high-
lights key features of the design process in complex The concepts of depth and breadth not only apply
capital goods, focusing on the important function of to technological capability but also to the notion of
systems integration. ‘complexity’ itself. On this issue, Wang and Tun-
zelemann provide useful conceptual insights into the
nature and implications of complexity not only at the
product level, but also at the technology, process and
5.6. Measurement of CoPS capabilities
organisational levels. Their paper examines trends in
the co-evolution of product, technology, process and
Problems of measurement, both for research and organisation, assessing the extent to which the move
practical improvement purposes, are extreme in towards greater complexity in functional areas are
CoPS. For example, because each product and pro- complementary or in conflict with one another.
ject tends to be different, normal performance bench- Adopting a processual view of the firm, they exam-
marking techniques are not applicable. While some ine the dynamics of organisational complexity, argu-
progress has been made in developing CoPS project ing that in an increasingly complex environment a
benchmarking techniques ŽHobday and Brady, 2000., firm will naturally search for strategies, rules and
much remain to be done, especially in the measure- procedures for simplification, in order to render the
ment of the technological capabilities of major CoPS complexity manageable. Like Prencipe, their re-
suppliers. Prencipe offers a combination of qualita- search shows the limitations of vertical disintegration
tive and quantitative indicators to construct measures and outsourcing as a means of reducing intra-
of two key dimensions of technological capability of organisational complexity, arguing that the effective-
systems integrators, namely their breadth and depth. ness of external linkages remains dependent on the
Using the case of the aircraft engine control system, in-house resources and capabilities not only for se-
Prencipe provides a detailed picture of the evolution lecting among suppliers and technologies but also for
of the three major engine makers’ capabilities. The exploiting external collaborations for the purpose of
paper shows that, despite the literature on core com- implementing corporate strategy.
petencies and frequent recommendations that firms
outsource key components, engine makers develop
and maintain a wide and deep range of capabilities in 5.8. The adaptation of CoPS supply networks
house in order to retain their systems integration
capability. Indeed, major firms have extended their The issue of how firms collaborate together to
breadth of capabilities in response to the expansion master complex products and technologies is at the
of technologies underlying control systems, both heart of innovation management in CoPS. On this
through dedicated in house investments and through issue, Cash and Rycroft provide a useful theoretical
links with universities and specialised suppliers. In framework to explore the adaptation of the supply
addition, he shows that engine makers maintain deep chain Žor ‘web of innovators’. in relation to different
800 Editorial

trajectories of innovation in CoPS. Their ‘framework returns to R & D, manufacturing or marketing com-
for adaptive networks’, embodies three major types monly found in CoPS industries.
of innovation trajectory: Ža. the normal pattern; Žb.
the transition pattern; and Žc. the transformational 5.10. A large technical systems (LTS) perspectiÕe
pattern. Using data from six case studies of CoPS,
they illustrate the differences between each pattern,
Another important historical issue concerns the
and show how each pattern relates to each other.
relationship between CoPS and the wider technologi-
They argue that at the levels of firm strategy, CoPS
cal systems in which they are embedded. Adressing
network and national policy, strategic benefits can be
this issue, Davies and Guyer draw upon Hughes’s
gained from being able to identify when and which
concept of a LTS ŽHughes, 1983, 1987, 1992., in
kind of pattern changes are approaching. Successful
order to develop a theoretical framework for
strategies continuously achieve a fit among network
analysing the relationship between the CoPS project
learning, core capabilities and complementary assets
and the evolution of the wider system, focusing on
located in diverse organisations. When a good fit is
large railway projects in the UK and Germany as
achieved, the knowledge and capabilities held by
examples. The framework helps to explain Ža. the
different organisations complement and reinforce
evolution of technical and organisational change in
each other. The trajectories defined by Cash and
LTS and Žb. the way CoPS shape, and are shaped by,
Rycroft offer a company or network a way of identi-
the evolution of the LTS. Applying the framework,
fying where it might wish to be positioned in the
the paper shows how the shift in the 1990s from
next series of innovations. In this way, technology
vertically integrated national rail monopolies to new
strategy can be viewed in terms of a choice of
forms of vertically separated market structures led to
position in relation to a trajectory, with each strategic
the emergence of new patterns of cooperation be-
decision related to a desired change.
tween LTS operators and the railway supply indus-
try. Under the traditional vertically integrated regime,
5.9. Product life cycle theories for CoPS each large project in the UK and Germany was
usually specified ex ante in great technical detail.
The CoPS supplier’s role was often solely that of a
A second paper dealing with broader issues of
manufacturer, with the train operators providing
industrial evolution and structural adjustment asks
much of the design and engineering inputs. The
the specific question: which kind of product life
creation of vertically separated railway markets led
cycle models fit the experience of CoPS suppliers,
to the emergence of new feedback loops that bridged
given that the normal ‘shake out’ patterns of indus-
railway projects and railway operations. CoPS sup-
trial adjustment do not seem to apply? To develop an
pliers were forced to assimilate systems integration,
alternative to the standard productrinnovation life
design and new service capabilities in order to meet
cycle models Že.g. Utterback and Abernathy 1975;
the needs of the LTS.
Klepper, 1996., Bonnacorsi and Giuri use data from
the history of the turboprop engine industry from
1948 to 1997, offering this as an example of a 5.11. GoÕernment policy and lock-in
‘non-shakeout pattern’ of industrial transition. They
show that the persistence of high concentration is not One key area of research into CoPS concerns
associated with the exit of smaller manufacturers, government policy. This has many dimensions. For
confirming and extending the findings of Miller et al. example, is the CoPS analytical category a useful
Ž1995. on the history of the flight simulation indus- one for policy purposes? What is the national com-
try. Bonnacorsi and Giuri go on to operationalise the petitive position in CoPS supply, and can it be
relevant economic and technological variables to enhanced through policy? Government is a major
provide a more general theory of industry life cycles regulator of several complex systems industries and
than currently available. This new model is able to in some cases the final customer for the CoPS in
take into account the lack of significant increasing question Že.g. in the case of military equipment,
Editorial 801

energy, transportation systems, urban developments research would benefit not only from cross-sector
and IT systems for government agencies.. One espe- comparisons but also an assessment of how different
cially vexing issue is dealt with by Walker, who types of CoPS firms Že.g. prime contractors, systems
analyses the question of how governments can un- integrators, users, component suppliers and SMEs.
derstand and avoid the problems of sub-optimal go about building project capabilities for conceptual-
lock-in Žor ‘entrapment’. in major projects. Walker ising, designing and making CoPS. This would help
shows that the timely death Žand effective adapta- show how project capabilities complement the strate-
tion. of large infrastructural projects cannot be taken gic and functional capabilities of CoPS suppliers.
for granted, especially when the systems are being Because the papers here were only able to touch
constructed over long periods and absorbing scarce briefly on modern management and design practices,
public resources which could be deployed more ef- more work is needed to illustrate how suppliers
fectively elsewhere. Walker demonstrates his argu- deploy strategies to work with and learn from partner
ment using an extreme case of entrapment, namely firms with different organisational cultures and ob-
the THORP reprocessing plant and associated infras- jectives, often under conditions of uncertainty. Case
tructural developments. Although brought in to pro- study research needs to be complemented with more
duction in 1994, THORP’s redundancy in conven- systematic measurements wherever possible. As
tional market terms was already apparent in the shown by Prencipe, patents can be a useful measure-
mid-1980s, long before its foundations had been laid. ment tool for analysing the long-term evolution of
Walker provides rich insights into precisely why this the depth and breadth of capability of systems inte-
occurred by focusing on the ways in which commit- grators. However, the limits of patents are well
ments were made, adapted, re-made and unmade. known and need not be repeated here. Other mea-
Not only do lock-in and path-dependency exist, but sures need to be developed to compare and contrast
they are essential Žif dangerous. facets of complex innovation strategies, dynamics and practices at both
infrastructural innovations. The challenge to policy project and firm level ŽTidd et al., 1996; Tidd, 2000..
makers then becomes an issue of how to provide
6.2. Corporate strategy
warning of undesirable entrapment, how to institute
regular and effective reviews and how to ensure, One issue only touched on this issue is that of
wherever possible, that alternatives develop and sur- corporate strategy. Internationalisation, liberalisation
vive so that extrication becomes a real policy option. and privatisation in CoPS industries have led to
acquisitions, mergers and joint ventures of various
kinds. In areas such as aerospace, military, IT and
6. Part 5: future research directions telecommunications, new corporate strategies have
been adopted to deal with the changing innovation
While this special issue has made valuable head-
environment. For example, more firms within the
way in analysing innovation in CoPS, many gaps
European Union have gone beyond their traditionally
exist, several of which are highlighted in the various
protected national markets to compete in other coun-
studies presented here. We conclude with a brief
tries. They, in turn, face more competition in their
discussion of potential new lines of research, build-
home markets from foreign suppliers. At the same
ing on the studies presented here and previous re-
time, trends such as increasing systems development
search into CoPS
cost and risk, rapid technological change and the
6.1. InnoÕation within the firm shift to services are effecting the ways systems inte-
grators think about, and respond to, threats and
In order to develop a more robust understanding opportunities. More needs to be known about how
of how to organise CoPS projects, more research strategies towards new markets, changing technolo-
needs to be done to explore and test suitable organi- gies and capability building Žoften in collaborative
sational forms and to tackle the issue of how major ventures. are proceeding. Increasingly, firms have to
CoPS projects influence the building of wider busi- resolve the tension between protecting their intellec-
ness strategies and capabilities and vice versa. Future tual property and the need to offset risk and cost via
802 Editorial

collaboration ŽTidd and Trewhella, 1997.. This ten- traffic control and nuclear energy. governments may
sion poses strategic difficulties, especially within continue to play a direct role in innovation, in which
traditional systems industries where the cultures and case policy research could be used to help advise on
practices of vertical integration run deep and conflict how to avoid the risks of entrapment and how to
with the need to collaborate in technological and stimulate innovation.
marketing efforts.
6.5. Latecomer issues
6.3. Industrial structure and adjustment
Turning to the international level, we see attempts
At the level of industrial network, the model of by latecomer economies such as South Korea, Tai-
supply chain adaptation proposed by Cash and wan and Malaysia to acquire the technological ca-
Rycroft needs to be further tested to reveal the scope pacity to produce more complex products Že.g. in
for ‘strategic manoeuvre’ at the level of firm, net- nuclear power, aircraft and semiconductor manufac-
work and national policy. Further empirical evidence turing equipment.. This occurs as latecomer firms act
on CoPS product life cycles would also help validate as sub-contractors to major foreign systems integra-
and extend the basic CoPS life cycle model proposed tors, as domestic CoPS industries emerge in their
by Bonaccorsi and Giuri, based on the aerospace own right Že.g. in regional aircraft. and as firms seek
sector. It is clear from existing studies that the scale, to support existing export industries by producing
nature and complexity of the product in question related capital goods Že.g. in electronic consumer
shapes organisational form and technological pro- goods, personal computers, footwear and semicon-
cesses ŽTidd, 1997; Hobday, 1998.. Product charac- ductor production.. It also occurs as governments
teristics may also shape industrial and innovation life seek to support strategic and high technology indus-
cycles. To better understand the links between tries for national purposes Že.g. military aircraft in
product and industrial evolution, more precise Malaysia and India.. At the present time, we know
taxonomies of CoPS are needed which relate the very little about the success or otherwise of these
composition Žor ‘morphology’. of the product Žor attempts at industrial deepening by developing coun-
category of product. in question to product and tries ŽTidd and Brocklehurst, 1999.. Future research
innovation life cycles. could assess patterns of catch up in various industri-
alising economies and examine successes, setbacks
6.4. GoÕernment policy and failures.
Regarding government policy, Walker indicates 6.6. A contemporary historical perspectiÕe on CoPS
why governments must address the risk of lock-in,
present in major infrastructural projects. However, From a historical perspective, the role of CoPS as
more research needs to be done to assess whether major capital goods in diffusing modern technology
CoPS is a useful analytical category for policy pur- throughout the economic system, remains to be anal-
poses. It may be that sectoral differences preclude ysed. As Rosenberg Ž1976. argues in his study of the
policy generalisations at the national level. Similarly, US machine tool industry Ž1840 to 1910. referring to
trends towards privatisation and deregulation might capital goods, ‘technological change enters the econ-
suggest that government should increasingly ques- omy through a particular door’ Žp. 31.. Specialisation
tion their traditional role of direct involvement in in the machine tool industry was generated by new
innovation Že.g. in military, aerospace, rail systems production demands which led to periods of ‘techno-
and telecommunications. and leave as many deci- logical gestation’ centred on the capital goods indus-
sions as possible to the market place. The policy tries. No doubt many such waves of gestation have
issue for these types of sectors then becomes how to occurred during the 20th century and recent new
formulate a regulatory framework which promotes demands Že.g. for personal computing and internet
competition, ensures safety andror addresses na- services. on the software, IT and telecommunications
tional security and environmental concerns. In other industries have created qualitatively different waves
sectors Že.g. government agency IT procurement, air of diffusion. Future research could assess the pro-
Editorial 803

cesses of convergence and specialisation in CoPS complex software: lessons from flight simulation. International
and the role of CoPS suppliers in developing and Journal of Innovation Management 2 Ž1., 1–43.
Hobday, M., Brady, T., 2000. A fast method for analysing and
diffusing within the economy. improving complex software processes. R&D Management 30
Another aspect of the economy-wide, historical Ž1., January Issue.
role of CoPS is their functioning in the evolution of Hughes, T.P., 1983. Networks of Power: Electrification in West-
the LTS discussed by Davies and Guyer in this issue. ern Society. John Hopkins Univ. Press, London, pp. 1880–
CoPS are not only the ‘technological backbone’ of 1930.
Hughes, T.P., 1987. The evolution of large technical systems. In:
modern manufacturing industry but also are key Bijker, W.E., Hughes, T.P., Pinch, T. ŽEds.., The Social
parts of the large infrastructural networks Že.g. elec- Construction of Technological Systems. MIT Press, London.
tricity, rail, air travel and the internet. described by Hughes, T.P., 1992. The dynamics of technological change:
Hughes Ž1983, 1987. and others. CoPS function as salients, critical problems, and industrial revolutions. In: Dosi,
the command, control and communication compo- G., Gianetti, R., Toninelli, P.A. ŽEds.., Technology and Enter-
prise in a Historical Perspective. Clarendon Press, Oxford.
nents of LTS, shaping, facilitating and, in some Klepper, S., 1996. Entry, exit, growth, and innovation over the
periods, constraining the development of LTS. By product life cycle. American Economic Review 86 Ž3., 562–
the same token, LTS place new demands on CoPS 583.
projects, deeply influencing their conceptualisation, Miller, R., Hobday, M., Olleros, X., Leroux-Demers, X., 1995.
design and implementation. Bringing together work Innovation in complex systems industries: the case of flight
simulation. Industrial and Corporate Change 4 Ž2., 363–400.
on LTS and CoPS therefore represents a very Nightingale, P., 1997. Knowledge and Technical Change: Com-
promising line of research for the future. puter Simulations in the Changing Innovation Process. Doc-
In conclusion, this special issue has sought to toral Thesis, SPRU, University of Sussex.
tackle several of the key issues concerning innova- Penrose, E.T., 1959. The Theory of the Growth of the Firm.
tion in CoPS, covering technological, organisational, Wiley, New York.
Prencipe, A., 1998. Modular Design and Complex Product Sys-
methodological, theoretical and policy issues. The tems: Facts, Promises, and Questions. CoPS Working Paper,
new ideas, empirical studies and practical policy SPRU, University of Sussex.
guidance presented here provide a solid foundation Richardson, G.B., 1972. The organisation of industry. Economic
for future research on the role of CoPS within the Journal 82, 883–896.
organisation, the economy and wider society. Rosenberg, N, 1976. Technological change in the machine tool
industry, 1840–1910. Perspectives on Technology. Cambridge
Univ. Press, Cambridge.
Sanchez, R., Mahoney, J.T., 1996. Modularity, flexibility, and
knowledge management in product and organization design.
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E-mail address: h.j.rush@bton.ac.uk

Mike Hobday )
Complex Product Systems (CoPS) InnoÕation Cen- Joe Tidd
Imperial College Management School, 53 Princes
Gate, Exhibition Road,
)
Corresponding author. Tel.: q44-1273-686758; fax: q44- London SW7 2PG, UK
1273-685865. E-mail address: j.tidd@ic.ac.uk