Book Reviews

Exploring Innovation

By David Smith

ISBN: 978-0-07710861-8; 2006; xvi+315 pages; McGraw Hill Education, Berkshire UK;

Reviewed by Kayhan Tajeddini
Department of Business Administration, School of Economics and Management, Lund University, Lund, Sweden

Reviewed by Myfanwy Trueman
Bradford University School of Management, Bradford, West Yorkshire, United Kingdom

Fierce competition in the global market has made innovation and differentiation a necessity for every company. Innovation is considered to be a source of competitive advantage and economic growth, and worthy of study under the conditions of increased global competition, technological change, fast-changing market situations and continuous customer/client demand for quality services (Damanpour & Schneider 2006). Despite the importance of innovation, Professor Smith points out, 'there are not many texts on innovation' (p. IX). While there has been much work on strategic management, technology strategy, new product development or marketing which mostly aim at the postgraduate market, most notably by Smith, this book is aimed at the undergraduate market with an emphasis on those who take degrees in Business Studies. The author has rightly concluded that available books provide a lack of familiarity with most aspects of technology. Thus, according to Smith, this book, designed specifically for those who have only a limited familiarity with the subject and is an attempt to respond to a long-standing need for a textbook. David Smith's Exploring Innovation presents richly detailed examples, case studies and processes that will help undergraduate students to follow his logic to understand and explore innovation.

Structure and Contents

This book contains of fourteen chapters, organized into four parts. The first part consists of three chapters and begins with a conceptual discussion of the nature of innovation including of type and forms and it is followed by a contextual discussion in relation to the wider subject of technological change. The emphasis on the words of 'exploit' and 'apply' is used to distinguish invention from innovation in the first chapter. The author states 'Innovation involves exploiting inventions so that they can be traded in a market place' (p. 6). In fact, he differentiates these terms from the point of commercialization. Finally, when innovation becomes widely used and in time spread to other fields, the stage of diffusion appears. This chapter continues discussing briefly about the innovators including individuals and organizations. Finally, the author exemplifies some failures of some companies deliberately and comes to this conclusion that the essential key of the success in innovation is 'to get the technology and the business function correct' (p. 13).

The second chapter deals with different categorizations, forms and types of innovation. 'Form' refers to the application of innovation which consists of product, service and process innovations. Similar to the type of innovation suggested by Gopalakrishnan and Damanpour (1997) which composed of product vs. process; radical vs. incremental; and technical vs. administrative innovation, the author classifies the type of innovation based on the degree of novelty associated with innovations including incremental, radical, modular and architectural. While incremental innovation improves an existing design through improvement in the components, radical innovation deals with a fundamental designs, using new configured components. Modular innovation uses the architecture and configuration associated with the existing systems of an established product, employing new components with different design concepts, whereas for architectural innovation, the components and associated design concepts remain unchanged, but the systems configuration is changed.

Chapter 3 is devoted to technological change. It attempts to explain the nature of technology, its difference from science and its link to innovation. This is followed by a discussion of the long wave cycle (recovery, prosperity, regression and depression), and the connection with and implications of technological change.

Part two focuses on the theories, sources, and processes of innovation as well as intellectual property organized into four different chapters. Chapter 4 deals with four main theories associated with technological innovation. These four theories include technology S-curve, punctuated equilibrium, dominant design, and absorptive capacity. The author identifies some influential factors relating to inertia such as traditions, sunk cost, internal political constrains and commitment to outmoded technology. Finally, this chapter attempts to describe the contributions of the three innovation theories.

Chapter 5 deals with the sources of innovation. Similar to Kurzman (2004, p. 94), who believes that 'innovation is a very messy process that thrives in what can only be called the gaps', the author has rightly pointed out that 'innovation is generally less structured and idea generation is more likely to take the form of a sudden insight' (p. 86), following a lot of painstaking research. This chapter identifies some patterns that form the basis of insight (central to the inspiration at the heart of an innovation), such as association, adoption, analogy and serendipity (chance). The author outlines a diverse range of possible sources of innovation and narrows them down to mainly people and organizations including corporate undertakings, users, outliers, spillovers, and process needs.

Chapter 6 focuses on the innovation process. It explores the nature of various activities that have to be undertaken in order to turn and exploit an invention into a commercial product or service. This chapter also provides several different models showing the fact that there are distinct and different approaches to carry out innovation in each organization. A generic model of innovation points to seven stages within two main parts; research and development (R&D) and commercialization. Commercialization embraces design, production engineering, pilot testing, full-scale manufacture and market lunch. Five other innovation models of innovation process also are presented. They include, 'Technology Push and Demand Pull', 'Coupling', 'Integrated' and 'Network' model process. Smith notes, 'Armed with models of the innovation process, it is possible through careful analysis to unpick the process, identify the stages and get a clear and detailed picture of the nature of the process of innovation' (p. 131). The last chapter of part two deals with intellectual property in general and intellectual propriety rights (IPR) in particular. IPR are outlined in 'Patents', 'Trademarks', 'Passing off' and 'Copyright'.

Part 3 of the book consists of four chapters about innovation management: namely technology strategy; technology entrepreneurs; funding innovation; and organizing for innovation. In Chapter 8 the author discusses the nature of strategy that underpins the success of a company, and points out that there is little agreement on what a strategy really is (Markides 1999). Smith simplifies the concept of business strategy by answering the question: 'how does the business compete?' (p. 157), and is inspired by the concepts of Ansoff's product-market matrix and Porter's generic strategies. He observes that a strategic business is inevitably concerned with the long-term future (p. 158). Next the technology strategy and its determinants (selection, acquisition, development and exploitation) are discussed in some detail. The last section of this chapter is devoted to product/innovation strategy. Strategic innovation is 'a fundamental reconceptualization of what the business is all about that, in turn, leads to a dramatically different way of playing the game in an existing business' (Markides 1998, p. 32). Similarly, he points out that 'innovation is all about commercialization of new inventions and technologies' (p. 172). He simply recognizes two distinct innovation strategies: the first mover and the follower/imitator. The difference between these two strategies is all about being 'first to the market' or taking a 'wait-and-see' approach (p. 173). Many scholars (e.g., Deshpandé et al. 1993; Capon et al. 1998; Deshpandé & Farley 2002, 2004) describe the first strategy as innovativeness. Unlike Meybodi (2003) who suggests that to stay ahead of competition firms must develop competencies to innovate, and introduce new products to the market quickly. To this end Smith states that a surprising number of successful innovations have resulted from a wait-and-see approach (p. 173). He argues that the there are four circumstance when the follower/imitator strategy has attractions. There circumstances are: free rider effects, imitation costs, scope economies and learning effects.

Chapter 9 is concerned with the nature of entrepreneurs and their role in contribution to innovation process. Firstly, the author attempts to identify a large number of entrepreneurs and their common features, concluding that all of them are technical entrepreneurs. However, he rightly states that not all businesses created by technical entrepreneurs grow and many of them remain small businesses. Interestingly, he also discusses the role of size as an effective factor in innovation in large corporations and small firms. This chapter provides some valuable insights into the role of the entrepreneurs and views entrepreneurship as stemming from three main sources:

1. An economic approach that stresses the role of entrepreneurs in economic development. This distinguishes entrepreneurs from others in terms of risk taking and bearing uncertainty. Such people identify and exploit opportunities for profit.
2. A psychological approach that focuses on the personality traits of entrepreneurs (e.g., a need for achievement; a high internal locus of control; a willingness to take risk and a need for autonomy and independence). It explains that certain individuals have 'a particular aptitude for entrepreneurship by virtue of certain distinctive personality traits' (p. 188).
3. A behavioral/process approach that stresses the influence of the social and cultural environment on entrepreneurs.

This chapter has a special emphasis on the technical entrepreneurs who are associated with technology-based 'spin-off' businesses, by applying technology to innovations. Based on the typology of Jones-Evans (1995), technical entrepreneurs are identified into four categories (research, producers, users and opportunities) and each is described in detail. Based on Autio's (1995) work, technological novelty (the degree of technological intensity, ranging from established to breakthrough) and market novelty (finding or creating a new market for exploiting commercially the outcomes of technology-development processes) have been identified as two crucial aspects of the entrepreneurial context. Finally, the author synthesizes a composite picture of the three main influential factors on technical entrepreneurship. These include 'antecedents factors' (personality, home context and background); 'paternal experience' (work and institutional support) and 'environmental factors' (technology and market).

Chapter 10 deals with resources and innovation funding. During the process of innovation, firms encounter various obstacles. For example, Galia and Legros (2004) find that if firms postpone projects they are more likely to face obstacles such as economic risk, lack of skilled personnel, innovation costs, lack of customer responsiveness, lack of information on technologies and organizational rigidities. From a financial perspective, this chapter examines the general perception of funding barriers and highlights the most important sources of capital available for innovation. Among the usual innovation funding sources, venture capital is a controversial issue in cross-cultural businesses. For example, Krasna (2003) notes that it is easier to launch a business in the English-speaking world, where there is a strong tradition of entrepreneurship and willingness to take a risk. She argues that the English phrase 'venture capital' is linked with ideas of adventure and exploration, while this phrase in Switzerland means 'risk capital' with regard to money invested in new businesses. Interestingly, the author has rightly exemplified venture capital as a significant source of funding in both the UK and the US. One of the notable perspectives of this book is to devote a chapter (11), for organizing and funding of innovation. This discusses organizational 'perceptions' designed to facilitate and foster successful innovation (p. 245). It covers three interrelated, yet different aspects: corporate culture, architecture/structure and roles. The first two aspects refer to 'macro level' arrangement or 'organizational arrangement designed' (p. 242), and the third one points out the 'micro level' or 'people-related arrangements' that facilitate innovation.

Many scholars (e.g., Deshpandé et al., 1993; Hurley & Hult, 1998; Calantone et al. 2002, 2003), view innovation from a cultural perspective that encourages the introduction of new processes, products, and ideas. For example Avlonitis et al. (1994, p. 12) suggest that the behavioral dimension of the firm should reflect the 'sustained behavioral change' of the organization towards innovations, i.e., behavioral commitment. Because of the impact and importance of corporate culture on the internal context of an organization, it describes different perspectives of corporate culture suggested by Handy (1993) which consists of power, role, task and personal cultures as well as Miles and Snow's (1978) types of culture including prospector, defender and analyzer. Smith notes 'organizations do not select a particular culture-typically it just emerges over time' (p. 232). He outlines the main influential corporate culture in 'history', 'size', 'technology' and 'leadership'. This chapter also claims that the architecture/structure of an organization can assist and facilitate innovation. While three main type of organizational structure entailing 'functional' (e.g., mechanistic), 'M-form' and 'matrix structures' (e.g., organic organization) are illustrated, network structure and strategic alliances structure as well as corporate venturing are discussed. In this sense, corporate venturing refers to 'attempts by large organizations to establish conditions conductive to innovation' (p. 239). Finally the roles of people both formal and informal on innovation are discussed. The roles include: 'project leader' (i.e., as a figurehead person), 'product champion' (i.e., as a man willing to act an advocate), 'gatekeeper' (i.e., a man acting as a conduit to facilitate knowledge transfer) and 'godfather' (i.e., a top level man who provides support for innovation).

Part 4 deals with how the organizations foster innovation. It consists of three chapters entitled 'innovation policy'; 'innovation clusters' and 'national innovation system'. Chapter 12 is devoted to innovation policy that most governments employ to foster innovation. Since innovation is closely associated with economic growth through the creation of new ventures and new jobs, most governments are favorably support innovation. This chapter provides some details of policy measures relevant to innovation and a summary on the wide range of different supportive agencies available. The author has outlined the rationality of the government intervention to facilitate innovation. In order to appreciate this sort of policy, the UK government policy initiatives are reviewed together with 'technology forecasting', knowledge transfer', 'location', 'research and development', 'exploitation/licensing', and 'lead user'.

Apart from intellectual curiosity, the renewed interest in the relationship between innovation and regional development has also arisen due to the performance of a few key industrial clusters, so called new industrial districts (Scott 1988). In this regard, chapter 13 is devoted to 'innovation clusters' to describe clusters of high-technology firms or 'innovative milieux' and the link between innovation and such clusters. Clusters are defined as geographically proximate groups of interconnected companies and associated institutions in a particular field, linked by commonalities and complementarities (Porter 1998, p. 78). Clusters are important, because on the one hand they allow companies to be more productive and innovative than they could be in isolation and on the other hand they reduce the barriers to entry for new business creation relative to other locations. Consequently, the author analyzes the nature of these clusters and identifies the factors to contribute to innovation.

A number of important ideal types have been identified by Markusen (1996), each of which manifests a certain type of economic logic. Here Markusen's typology differentiates clusters according to: (1) Firm size, reflecting available economies of scale and scope; (2) The extent to which firms, suppliers and customers are connected within the cluster; (3) The extent to which the cluster's orientation is internal or external; and (4) The extent to which economies of agglomeration (reductions in cost that arise from the geographic concentration of economic activity) are present. Four distinct types of clusters differentiated by Markusen (1996) are explained in this chapter. These four types consist of:

1. 'Neo-Marshallian industrial district (NID) cluster' (i.e., access to a pool of skilled staff and a knowledge community comprising inter-firm link that facilitates knowledge generation and diffusion leading to a high rate of innovation).
2. 'Hub-and-spoke cluster' (i.e., regional structure revolves around one or several major corporations in one or a few industries. The presence of large firms reflects available economies of scale and scope).
3. 'Satellite platform cluster' (i.e., a congregation of branch facilities of externally-based multi-plant firms often attracted to the location by government inducements on tax and rents. This type is less important cluster in terms of performance and sustainability).
4. 'State-anchored cluster' (i.e., a major government tenant anchors the regional economy).

Lastly, four main features of the clusters conductive to innovation are outlined: networking (a panacea for innovation), specialization, easy of entry and exit, and resource mobility. Although the author notes that specialization helps to stimulate innovation, it should be noted that hyper-specialization might also stand in the way of breakthrough innovation. First, most breakthrough innovations increasingly happen at the confluence of multiple disciplines, not at one level of specialization. Second, focusing attention on a very little scope of information niche and neglecting to understand what happens in adjacent spaces can lead the organization into stuck to the old behavior. Innovations have constantly moved forward the technological frontier and have generated opportunities for new firms to enter and challenge the existing leadership. In this sense, due to the lack of involvement with old technology, providing rapid decision making (less paperwork procedure) and having easy circulation of knowledge, the author argues and concludes that small firms are able to provide an innovative environment.

Chapter 14 dwells upon national innovation systems. The innovative performance of a country depends to a large extent on how different actors interact to each other as elements of a collective system of both the creation of new knowledge and existing knowledge as well as the technologies they use. These actors are primarily governance mechanisms (e.g., corporate, political and network); institutions (e.g., industrial, science and technology, financial; educational) and the people within them.

Pedagogy

Each chapter begins with learning objectives that set the agenda, what to look for in chapter and also an expectation of what needs to be achieved after going through the chapter. A number of figures and tables is provides in each chapter to help students to visualize the various models, and to illustrate, compare, and summarize important concept. This provides an integrative productive thinking approach throughout which encourages critical thinking and analysis helps students develop the ability to problem solve. The inclusion of a large case study and assignments at end of every chapter together with related questions for discussion provides an opportunity to students to examine how various chapters concepts are presented in the chapters are interrelated and linked with each other in real life. In addition, the inclusion of mini cases within each chapter provides the students with the opportunity to understand and apply innovation concepts and processes in real world. At the end of each chapter, descriptive resources provide students opportunities for further investigation. In some chapters, these resources include printed resources, websites and also videos as well as films. Last, but not the least, two types of questions: concept review questions and critical thinking questions for discussions are given in each chapter to facilitate review of students' learning and integration of the same with their past learning and understanding. A Guide tour is also available, along with power point slides to help teachers deliver the innovation course in an effective manner.

Overall Evaluation

The book fulfils its objective of an explorative approach for innovation for those who have only a limited acquaintance with the subject in general, and at the undergraduate market (i.e., scientists, engineers and technologies) with experience of technology-based firms in particular. The treatment of the subject is quite comprehensive and practical. The framework of the book; the nature of innovation, the involvement of innovation, the management of innovation, and the foster innovation has been able to integrate the chapters meaningfully. Many chapters like Technological change, Source of innovation, Technology strategy, Technical entrepreneurs, Funding innovation, and National innovation systems provide a fresh perspective to the subject. The author has put in his vast experience and deep understanding of the subject in the book and, therefore, needs commendation. There is nothing against the book, although a chapter on Stages and Levels of innovation may be added in future. The text is reader friendly and written in clear, straightforward language, avoiding jargon and technical terms, making it relatively easy for students to read and enjoy. We fail in our duty if we don't appreciate models, mini cases, and appropriate examples used in the book, which make the reading more comprehensible and lively. The reviewers strongly recommend the book for undergraduate Business Studies students and as well as an introductory text for those who seek to understand and obtain familiarity with this topic. We agree with the author that chapters can provide the basis for lectures and the case studies can be used for a series of seminars.

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