BUSS6049

Managing Innovation

Week 2

Innovation, Globalization, and Development

 Learning Outcome

 Explain the meaning globalization of innovation

 Explain national systems of innovation
 Explain how to building capabilities and creating value
 Understanding how innovation for development
 Outline

1. Globalization of innovation
2. National systems of innovation
3. Building capabilities and creating value
4. Innovation for development
GLOBALIZATION OF INNOVATION
 1

Globalization of Innovation

Innovation and enterprise are central to the development and

growth of emerging economies, and yet their contribution is
usually considered in terms of the most appropriate national
policy and institution, or the regulation of international trade.

Four factors have a major influence on the ability of a firm to

develop and create value through innovation:
a. The national system of innovation in which the firm is embedded, and which in
part defines its range of choice in dealing with opportunities and threats.
b. In power and market position within the international value-chain, which in
part defines the innovation-based opportunities and threat that it faces
c. The capability and processes of the firm, including research, design,
development, production, marketing and distribution
d. The ability to identify and exploit external sources of innovation, especially
international network
NATIONAL SYSTEMS OF INNOVATION
 2

National Systems of Innovation

Two features of the firm’s environment have a major

influence on its innovation strategy:
First, the national system of innovation in which the firm is embedded, and
which in part defines its range of choices in dealing with opportunities and
threats;
Second, its market position compared to competing firms, which in part defines
the innovation-based opportunities and threats that it faces
Incentives and Pressures: National Demand and Competitive
Rivalry
1. Patterns of national demands
Those concerned to explain international patterns of innovative activities have long
recognized the important influence of local demand and price conditions on
patterns of innovation in local firms. Strong local ‘demand pull’ for certain types of
product generates innovation opportunities for local firms, especially when the
demand depends on face-to-face interactions with customers
 2

Cont..

The main factors that influence local demands for innovation,

and give some examples. In addition to the obvious examples
of local buyers’ tastes.
a. Local (private and public) investment activities, which create innovative
opportunities for local suppliers of machinery and production inputs, where
competence is accumulated mainly through experience in designing, building
and operating machinery
b. Local production input prices, where international differences can help generate
very different pressures for innovation. High prices can also generate pressure
for substitute products, like synthetic fertilizers in Germany at the beginning of
the twentieth century.
c. Local natural resources, which create opportunities for innovation in both
upstream extraction and downstream processing
 2

Cont..
 2

Cont..

2. Competitive rivalry
Innovation is always difficult and often upsetting to established interests and
habits, so that local demands by themselves do not create the necessary
conditions for innovation

Figure 3.2. Evolution from natural endowment to national specialization of innovation

BUILDING CAPABILITIES AND
CREATING VALUE
 3

Building Capabilities and

Creating Value

The importance of developing firm-level capabilities. Firm in

emerging economies may pursue different routes to upgrading
through innovation.
a. Process upgrading: incremental process improvements to adapt to local input,
reduce costs or to improve quality
b. Product upgrading: through adaptation, differentiation, design and product
development
c. Capability upgrading: improving the range of functions undertaken, or changing
the mix of function (e.g production versus development or marketing)
d. Inter-sectoral upgrading: moving to different sectors (e.g to those with higher
value-added)
INNOVATION FOR DEVELOPMENT
 4

Innovation for development

 REFERENCE

John Bessant, and Joe Tidd (2015). Managing Innovation: Integrating

Technological, Market and Organizational change 5th Edition. John
Wiley & Sons, the Atrium. South Gate, Chichester, West Susses,
United Kingdom. ISBN: 978
Thank You