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Introduction
Conditions for innovation in biotechnology and telecommunications
Maureen McKelvey
School of Technology Management & Economics, Chalmers University of Technology, Gothenburg, Sweden
Erik Bohlin
Associate Professor, School of Technology Management & Economics, Chalmers University of Technology, Gothenburg, Sweden
Article Text
This special issue of Innovation: Management, Policy & Practice (ISBN 0-9750436-7-6) addresses 'Conditions for Innovation in Biotechnology and Telecommunication'. Each article addresses one or both of these emerging technologies as well as aspects of innovation processes, and each thereby contributes to the growing literature on technologies. The editors have worked extensively on modern biotechnology and telecommunication, and therefore we also have broader ambitions beyond the selection of individual papers to be published. Taken as a whole, this special issue aims to contribute towards specifying the similarities and differences during innovation processes in emerging technologies. This piece provides some background information on the editors, the general problems and three themes to be addressed in this special issue, before introducing each subsequent article.
This special issue is the result of a longer debate about how and why modern biotechnology, ICT, and telecommunication develop and impact on society, among us and among many other researchers. Both of us, Erik Bohlin and Maureen McKelvey, work at the School of Technology Management & Economics, Chalmers University of Technology, Sweden, where we have the great fortune to have many excellent students and colleagues interested in innovation and interested in these particular technologies. Earlier versions of papers for this special issue were presented at a workshop we organized at Chalmers (May 19-20, 2003) entitled 'Innovations and Entrepreneurship in Biotech/ Pharmaceuticals and in IT/ Telecommunication'.1 Hence, as guest editors, we wish to gratefully acknowledge the financial support from Chalmers to stimulate research and teaching related to management & economic issues in telecom and biotech.
One reason for putting together a special issue is that we are convinced that comparing and contrasting conditions for innovation is a crucial issue for researchers, government policy-makers, firm managers and others associated with emerging technologies.
- To what extent can general principles be identified for this type of innovation process?
- To what extent can general principles be identified for innovations as drivers of a particular type of economic dynamics?
- To what extent can each emerging technology be understood as a unique historical case?
Deciding about the range of possible policy interventions requires a re-assessment of the extent to which emerging technologies are influenced by general principles, as opposed to the vagrancies of historical circumstances. Our ambition with devoting a special issue to modern biotechnology and telecommunication is to encourage others - and ourselves - to move beyond the details of innovation in specific technologies to strive for more systematic and comprehensive comparisons.
Problems to be addressed
The social scientific literature has long established that innovations based on emerging technologies are crucial for growth. In spite of this, the specific interactions among science and technology that lead to economic growth remain a black box in many ways. In particular, we still have a limited understanding of the conditions and processes that make it possible for actors to innovate, based on new technologies. For instance, there is an abundance of theories concerning the role of intellectual capital in creating value, but relatively little empirical evidence explaining the nature of the linkage between such capital, innovation and commercial success of a firm. Similarly, the concept of technological discontinuities is often applied to emerging technologies, in order to stress the radical nature of certain innovations. Yet, it is not clear why some actors manage to take advantage of technological discontinuities, while others fail to grasp the opportunities associated with such changes and thereby suffer from them. Thus, even though innovations are now widely accepted to contribute positively to firm and economic growth, the specifics at the micro-economic level often tell a story of diversity, experimentation and selection, and in doing so, open up new puzzles for explaining how and why innovation causes growth.
Micro-economic mechanismsExisting literature on innovation has made many steps toward sorting out general starting conditions for innovation from historical events. Yet, we would argue that in order to understand economic growth on a macro level, it is crucial to understand the micro-economic mechanisms that drive technological development and innovation. The paradox of setting out to consider the general conditions for innovation is that the micro-economic mechanisms tend to express themselves in a variety of ways. As outlined in the subsequent materials, some of the mechanisms driving innovation consist of experimentation, collaboration and knowledge-creation- yet discovery is at most half the story. Other mechanisms involve commercial exploitation, such as adaptation of knowledge to specific industries or adaptation of services to specific groups of users. It appears that aspects such as the maturity of the industry and nature of the technology involved most likely affect how these micro-economic mechanisms are expressed within a particular case.
Empirical diversityEmpirical 'reality' about emerging technologies often provides us with a diverse wealth of empirical details. The difficulty of 'testing' theoretical ideas in a strict sense has to do, we would argue, with the normal course of economic dynamics, where diversity and selection (based on criteria) affect the outcomes. The outcome is not given from the beginning, but instead unfolds through historical processes, driven by individuals as they interpret societal structures. Indeed, empirical reality provides us a great diversity of success, failures and experience -and these results may sometimes support (or reject) predictions from one theory. Yet the empirical diversity surrounding emerging technologies more often provides partial support to several existing, sometimes competing, theories - or they may help develop new ways of conceptualizing the modern economy. Theory-driven empirical studies have been common for research on both modern biotechnology and telecommunication, and lead to new concepts and theories about innovation, including examples of 'knowledge spill-overs', 'network externalities', and 'competition among standards'. The apparent vagueness of human factors affecting innovation should not discourage study of the conditions for innovation, but rather provide motivation for more systematic research efforts.
Human versus structural capitalThe broader perspective on modern biotechnology and telecommunication provides many interesting points of comparison. On the one hand, modern biotechnology is a knowledge-based industry that depends on complex, and to some extent ambiguous, research activities. The knowledge underlying innovations in biotechnology is often located within specific individuals and organizations, thereby making difficult to separate those who produce it from those who possess it for commercial gains. Many companies are striving to turn this human capital into structural capital, but, so far, individuals interacting in teams and through social links are responsible for most of the innovative activity resulting in new products and services. As a result, the biotechnology industry provides an excellent opportunity to investigate the relationship between individuals, innovation and commercial success. Telecommunications, on the other hand, is interesting not primarily because of the role of individuals, but as a technological system of many interacting forces and actors. The human capital held by individuals has to a greater extent value within the larger technological system. The ability to innovate thereby often relies on a whole series of services, hardware, development teams, existing computer programs, user behaviour, etc. Even so, both are highly dynamic and complex technologies affecting industries, which are characterized by interaction between technological change, markets, demand, and regulation.
Within this broader perspective, this special issue considers three themes related to modern biotechnology and telecommunication.
Theme 1: Evolutionary, long term processesOne theme is that innovation processes are largely characterized as an evolutionary, long term process. This process involves exploration and exploitation of new knowledge and of new commercial opportunities by a variety of actors. Another way of stating this theme is that the characteristics include diversity, much experimentation, failures and successes, organizational heterogeneity, and the like. While these characteristics apply to many technologies and industrial sectors, they are highly visible within these two highly dynamic and complex technologies. This first theme implies that stimulating innovation characteristics - rather than trying to rationally design outcomes - should be the aim when designing regulation and control mechanisms. For example, deciding upon a centralized, tight control of inputs into innovation processes in order to achieve one pre-defined outcome may not work terribly well. Instead, one must consider how delineating the characteristics can be used to design policies stimulating such processes. In some instances, government and firm policy needs to differentiate the roles of organizations/actors, in order to specify which parts of the exploration and exploitation process each is/should be involved in. Different roles are possible. Therefore, we do not suggest a romantic looking-back to the telecoms era with government sponsored telcos and nationally favored equipment suppliers. Even so, in the present increasingly competitive market place, there is room for government policies with industrial ambitions and goals to stimulate the development of technologies.
Theme 2: Role of infrastructureThe second theme is that despite diversity and experimentation, both modern biotechnology and telecommunication can be characterized as dependent upon infrastructures. Especially telecommunication - but also biotech - involves many technological, social and organizational components, which together create broader infrastructures, or technological systems. For example, successfully applying biotechnology techniques to identify new molecules useful for human disease treatments requires that this bit of information is assessed relative to a large variety of knowledge, regulation, and industries to become a pharmaceutical product taken by patients. Similarly, in telecommunication, the physical infrastructural investment in communication equipments requires many complex components, but also relies upon consumers' preferences and behavior as well as available services and software. This second theme thereby implies that infrastructural characteristics often help determine the degree of freedom in innovation which is open to the individual actor. For example, the development of a standard may open a series of low-risk business opportunities for small firms. This may stimulate experimentation by a great variety and number of actors - but a standard can lead to dominance by one main actor as well. Another aspect of an infrastructure dependency is that it is difficult to separate competition from cooperation. Instead, the common infrastructure forces market players to cooperate while at the same time competing.
Theme 3: Industries, firms or products?The third theme is that analytical tensions exist between seeing modern biotechnology and telecommunication as industries - as opposed to technologies composed of knowledge, equipment, techniques, etc. On the one hand, much existing literature describes each in terms of industries and industrial sectors, whereby competition is explained in terms of competing products or competing firms. The traditional case is to analyze products and firms as competing on price. On the other hand, both technologies are applicable to a wide range of industries, and they must be further developed in terms of knowledge and the infrastructure to be really applicable there. This case is more relevant when considering competition based not only on price but also on innovation. Some areas of technology will give higher economic return than other areas, leading to rather skewed results in terms of search activities and resulting innovations.
The articles and editors
The articles selected for the special issue 'Conditions for Innovation in Biotechnology and Telecommunications' of Innovation: Management, Policy & Practice (ISBN 0-9750436-7-6) have different foci, but each makes an important contribution toward a deeper understanding of innovation phenomena as outlined above.
The first article is by Daniele Mascia, Mats Magnusson, and Americo Cicchetti, and entitled 'Network prominence and innovation: An empirical analysis of corporate-backed biotech spin-offs'. This article examines the importance of corporate venturing within biotech, given that the starting up of new companies is one means for pharmaceutical companies to get access to academic R&D. By examining the position and form of R&D networks, this article adds to our understanding of the importance of certain ways of structuring relationships and activities within biotech-pharmaceuticals, as having a positive effect on innovativeness. The empirical material consists of 97 corporate-backed biotech firms, located in Europe, Japan, USA and Canada. These networks run across exploration and exploitation activities, thereby linking together academic science with industrial exploitation within the pharmaceutical sector.
The second article is by Ashveeen Peerbaye and Vincent Mangematin, entitled 'Sharing research facilities: Towards a new mode of technology transfer?' This article explores the concept of unique and complementary competencies in academic research, by exploring shared research facilities. Instrumentation are increasingly expensive and thereby a type of barrier to entry within biotechnology, but such research facilities also increasingly important to the carrying out of both academic and industrial R&D. This article mainly concentrates on the conceptual understanding of how technological platforms are useful, relative to technology transfer and industry life cycles, drawing upon examples mainly from European biotechnology. In doing so, this article considers the effectiveness and mechanisms involved in this type of technology transfer between public sector research organizations and industry.
The third article is by Sven Lindmark, entitled 'Coordinating the early commercialization of general purpose technologies: The case of mobile data communications'. This article considers the case of mobile data communication. The empirical material compares and contrasts several cases of mobile data communications, including the Swedish Mobitex, European experience with WAP and Japanese mobile Internet development. This article applies the ideas of general purpose technologies to discuss coordination of innovation activities and diffusion through use. The article argues that the differing cases of development can be seen as trade-offs between the firm's internal coordination and market mechanism, where innovation may occur through coordination in standardized interfaces as well as in decentralized networks
The fourth article is written by Christopher Palmberg and Olli Martikainen, entitled 'The GSM standard and Nokia as an incubating entrant'. Nokia is now widely known to have succeeded in cellular (mobile) telephony, despite many odds, including being located in a relatively small economy, with little domestic demand as compared to the world market. In this article, the authors analyze the conditions and processes that contributed to telecommunications giant Nokia's ability to overcome - and profit from - the discontinuity caused by the introduction of the GSM standard. They argue that even though GSM represented a rather radical technological discontinuity, Nokia had latent competencies in a variety of technologies fields of relevance for cellular systems. As such, their careful exposé of a successful innovator in telecommunication calls into question a number of existing assumptions in theories about technological competition and industrial dynamics.
The fifth article is written by Maureen McKelvey, entitled 'What drives innovation processes in modern biotechnology and open source software?' This article compares and contrasts when and why some parts of these technological knowledge areas are - or are becoming - useful to create value in different business and economic contexts. The comparison focuses on the specific actors involved in these innovation processes as well as the rate, direction and outcome. In doing so, the paper considers technical, market and use aspects of innovation - given their importance for societal and firm learning.
The Conclusion by Bohlin and McKelvey considers the implications for policy-makers and managers as well as future research areas. Some of the lessons from the papers are found to challenge 'accepted truths', giving rise to a number of questions to explore further in future research.
Summary
In summary, the themes and articles chosen for this special issue reflect our conviction that more theory-driven empirical evidence on innovation processes is needed to answer a number of urgent questions concerning innovation:
- How can we create conditions that create incentives for innovation in key industries?
- In what circumstances is collaboration a pre-condition for innovation?
- What is the relationship between the knowledge-creation of individuals and growth based on emerging technologies?
- Which methodologies can be used to conduct further research on innovation in emerging industries?
- And what is the role of policymakers and regulators in creating conditions for innovation and growth?
Many such questions need to be addressed more systematically.
The articles in this special issue strive to shed light on these issues, and pave the way for further research, by presenting empirical evidence and new perspectives on innovation from two emerging technologies - or two dynamic industries. Our ambition here is to fuel debates through some current findings, but also encourage others to assess a number of problem areas associated with the larger question of theoretical abstraction versus historical specificities. Certain aspects of innovation may be difficult to deconstruct - especially in areas where technological change is rapid - but this does not mean that these structures and conditions that do affect innovation and growth should be ignored. Indeed, the existence of complex and difficult issues suggests the need for systematic analysis as well as suggestions for intervention by public and private actors.
Guest Editors
Prof. Maureen McKelvey and Assoc. Prof. Erik Bohlin
School of Technology Management & Economics
Chalmers University of Technology, Sweden
Footnote
1We acknowledge the financial support from Chalmers University of Technology for strategic research in this area. Thanks to all the workshop participants, particularly the discussants. We would also like to extend a special thanks to Linus Dahlander and Henrik Berglund, PhD students, for helping to organize this workshop.
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