Saturday 26 October 2013


4. Types of innovation

In this item I discuss a few basic aspects of innovation.

Innovation has much to do with knowledge and learning, but it is not just technology. As recognized already by the innovation economist Joseph Schumpeter, there is innovation in products (goods and services), production processes, design, communication, organization, markets, and institutions. Here, ‘products’ include anything with added value. Services are products ‘that you cannot drop on your toes’, are more or less immaterial. Examples are trade, transport, financial services, care, education, information and communication, administration, etc.

While traditionally innovation was studied mostly in firms and markets, for some time now attention has been broadened to innovation in public or semi-public organizations of many kinds (health care, education, municipal services, etc.)

Innovation is part of a wider process of invention, innovation and the diffusion of innovations. Here, innovation is the activity of developing an invention into practice, in markets, and diffusion is the spread into and across areas of application, and there it yields economic growth. This is not to be seen as a purely linear succession of stages. Innovation and diffusion often elicit supplementary and secondary innovations.

There is a distinction between incremental innovation and radical, disruptive, competence destroying innovation or creative destruction. The latter was characterized by Schumpeter as novel combinations. The distinction is close to that between exploitation, defined as improvements within a basic logic or design, and exploration as breaking through them. The first entails stable perceptions, priorities, meanings, roles and division of labour, the second a break or shift of them. They entail require organizational environments and cultures, and are hard to combine within a single organization.

That is one reason why inter-organizational cooperation is important for innovation, in so-called open innovation, often between one firm (or more) focused on exploitation and one (or more) focused on exploration. An example is the pharmaceutical industry, with small firms developing new active substances or diagnostics and large pharmaceuticals carrying the result through clinical testing, regulatory approval, and large scale production and distribution under a brand name.

In innovation statistics attempts have increasingly been made to include the different dimensions of innovation. Thus, a distinction was made between new for the firm, new for the industry or market, and new for the world, in terms of number of products or share in turnover. Much used measures of innovation have been R&D and patents, since data are available from their registration, but they are input rather than an output measures, relating to invention rather than innovation. New products also are not a perfect measure since they do not by themselves say anything about success in the market.

Innovation policy at first was no more than technology and science policy, but gradually was broadened to include other dimensions, such as design, training and education, marketing, organization, and entrepreneurship.

Since innovation goes beyond invention and entails a host of other factors next to knowledge, it is not easy to prove the economic value of fundamental research, as policy makers demand. To prove it econometrically one would need data on all the other factors and the ways in which they enter a complex causal structure with different possible configurations.

Above all, innovation, especially radical innovation, carries a high risk of failure. As a rule of thumb, only one or two in ten projects achieve success. The few successes justify the cost of the many failures, and failures are not worthless because they increase insight, but this idea is hard to sell in a society that is risk-averse. That yields a major problem in debates on research policy.

Wednesday 23 October 2013


3. Value of innovation

 Concerning the value of innovation for society there is a pro-innovation bias, with the assumption, presumed self-evident, that innovation is beneficial. And often it is, in increasing material prosperity, health, etc. But it need not be.

There is also innovation in crime, terrorism, violence and arms races. The mafia is innovative. Politicians and leaders may be innovative in corruption and suppression.

Innovation is propelled by consumerism and propells it. Demands are stimulated that may seem artificial and may distract from higher values in life and society. In capitalist economies consumer demand is sacred, it is what drives value, but it is driven by advertising and hype. Innovation often pushes demand rather than being pulled by it.

For example, in electronic goods ever new functionalities, forms and features, bells and whistles, in software and hardware, are pushed onto the consumer. If you do not go along with buying the new hardware you will find that your old hardware is no longer supported in software and ancillary equipment (printers, routers), so you are forced to go along or drop out.

You may not like glut of electronic gadgetry for your kids, but if you don’t let them go along you condemn them to isolation and social ostracism.

In  my philosophy blog (items 110 and 111) I discuss the notion from the French philosopher Baudrillard that with new technologies of communication we are wandering into what he calls hyperreality and hyperidentity. A great deal of innovation lies in entertainment, chatter and hype. Those lead us into phantasy, distraction, emotion, mimicry of celebrities, conformism, crowding, opinions instead of facts, emotions instead of arguments, leading us away from realities and individual identities. 

Innovators such as Apple, Google, Facebook, and Twitter, claim, or take it for granted, that their innovations are for the good of scociety, enhancing contact and communication between people, thus furthering the sharing and spread of knowledge and friendship. It is a matter of debate whether that is the case. There are indications that it (also) yields withdrawal into groups of like-minded people, enhancing isolation and distrust with respect to other groups, thus reducing rather than enhancing tolerance and variety. They may feed and confirm rather than loosen conspiracy theories and hysteria.

However that may be, creativity, invention and innovation are part of the vitality of the human being. We find it in the drive towards artistic expression as well as in Nietzsche’s will to power, with a drive towards conquest, and in the earlier notion, in classical Greek philosophy, of thymos, the drive to manifest and deploy oneself. It is part of human drama and tragedy. Nature itself is the paragon of creative destruction. Would we want to stop innovation and take away the vitality of life and society? Perhaps we can curtail it here and there, or redirect it.

Tuesday 22 October 2013


2. My credentials

 I have a masters degree in mathematics (Leyden University 1967) and a PhD in econometrics (Erasmus University Rotterdam 1980). This blog is based on my career in teaching and research on innovation, first at an institute for policy research of small business, the last years as scientific director, and subsequently as a (full) professor at the universities of Groningen, Rotterdam and Tilburg, in the Netherlands.

On innovation and its organization I have published ten books, 200 scientifc articles and 100 articles in newspapers. Citations to my work can be found on www.scholar.google.com I have received three international prizes (Kapp prize, Gunnar Myrdal Prize and Schumpeter prize), and was elected member of the Netherlands Royal Academy of Arts and Sciences.

I acted as a member of a variety of advisory committees and councils, among others a government committee on technology policy, the Scientific Council for Government Policy (for an advisory report on innovation policy), an advisory council for a Max Planck Institute in Jena (Germany) and for an institute (CIRCLE) in Lund (Sweden), and as chairman of a peer review committee for two universities. I also was chairman of a supervisory council for an association of entrepreneurs in environmental innovation.

I served as a visiting professor at universities in a large number of European countries, and I have lectured for a variety of organizations in business and government.

The blog is largely based on a number of my publications, in particular the following:

Books:

A cognitive theory of the firm; Learning, governance and dynamic capabilities. Cheltenham UK:
Edward Elgar, 2009, Paperback 2010.

Inter-firm collaboration, learning and networks; An integrated approach, London: Routledge, 2004,
paperback.

Trust: forms, foundations, functions, failures and figures, Cheltenham: Edward Elgar, 2002, paperback 2003.

Learning and innovation in organizations and economies, Oxford: Oxford University Press, 2000,
paperback 2001.

Inter-firm alliances; Analysis and design, London: Routledge, 1999, hardcover and paperback.

Knowledge and learning in organizations. Part I: The fundamentals of embodied cognition. Part II:
Knowledge and learning in organizations. Edited volume, Cheltenham: Edward Elgar, 2006.

B. Nooteboom & E. Stam (eds.), Micro foundations for innovation policy, Amsterdam:
Amsterdam/Chicago University Press, 2008.


Key articles:

 V.A. Gilsing, B. Nooteboom, W.P.M. van Haverbeke, G.M. Duijsters, & A. v.d. Oord, Network embeddedness and the exploration of novel technologies: technological distance, betweenness centrality and density, Research Policy, 37 (2008), 1717-1731.

B. Nooteboom, W.P.M. van Haverbeke, G.M. Duijsters, V.A. Gilsing & A. v.d. Oord, Optimal cognitive distance and absorptive capacity, Research Policy, 36 (2007): 1016-1034. 

B. Nooteboom, Methodological interactionism: Theory and application to the firm and
to the building of trust, Review of Austrian Economics, 20 (2007): 137-153.

B. Nooteboom, Service value chains and effects of scale, Service Business, 1 (2007): 119-139.

V. A. Gilsing & B. Nooteboom, Exploration and exploitation in biotechnology, Research Policy, 35/1
(2006): 1-23.

V. A. Gilsing & B. Nooteboom, Density and strength of ties in innovation networks: An analysis of new
media and biotechnology, European Management Review, 2 (2005): 179-197.

S. Wuyts, M. Colombo, S. Dutta & B. Nooteboom, Empirical tests of optimal cognitive distance,
Journal of Economic Behaviour and Organization, 58/2 (2005): 277-302.

R. Klein Woolthuis, B. Hillebrand & B. Nooteboom, Trust, contract and relationship development,
Organization Studies, 26/6 (2005): 813-840.

I. Bogenrieder & B. Nooteboom, Learning groups: what types are there?, Organization Studies, 25
(2004)/2: 287-314.

B. Nooteboom, Competence and governance: How can they be combined?, Cambridge Journal of
Economics, 28(2004)/4: 505-526.

T. Klos & B. Nooteboom, Agent-based computational transaction cost economics, Journal of
Economic Dynamics and Control, 25 (2001): 503-526.

B. Nooteboom, Learning by interaction, absorptive capacity, cognitive distance and governance,
Journal of Managament and Governance, 4(2000): 69-92.

B. Nooteboom, Institutions and forms of co-ordination in innovation systems, Organization Studies,
21/5(2000): 915-939.

B. Nooteboom, Innovation and inter-firm linkages: New implications for policy, Research Policy,
(1999): 793-805.

B. Nooteboom, Innovation, learning and industrial organization, Cambrid­ge Journal of Economics,
23/2  (1999): 127-150.

B. Nooteboom, Innovation and diffusion in small business: Theory and empirical evidence, Small
Business Economics, 6 (1994): 327-347.

 

 

 

Monday 21 October 2013


1. Programme

 In this blog I aim to traverse the whole field of innovation, from definitions and forms, through antecedents, consequences, processes, organization, and networks, to business and government policy, and the political economy of innovation.

The blog is aimed at a wide, general audience. I will not take specialized knowledge for granted, avoiding technical terminology, and I will be sparse in footnotes and references to literature.

I look at both the competence side of innovation, in knowledge, skills, and technology, and the governance side, in managing risks and rivalry. In the innovation literature those two sides tend to be separated. Concerning governance there is transaction cost economics as a branch of economics, which is neglected in much of the management literature on innovation. However, it neglects some of the features recognized in that literature, such as radical uncertainty and the process nature of innovation. I also take an evolutionary view of innovation, as developed in neo-Schumpeterian economics. 

I take an interdisciplinary approach, employing insights from (different branches and schools of) economics, management science, sociology (especially concerning innovation networks), and cognitive science (concerning knowledge, learning and invention). Economics builds on rational choice, and the radical uncertainty of innovation yields an obstacle for treating it in those terms. 

Some of the deeper, underlying, more fundamental philosophical issues, concerning knowledge and truth, uncertainty, individual and society, ethics, stability and change, and creativity and art are treated in a philosophy blog (http://philosophyonthemove.blogspot.nl) that I started in July 2012 and continue to run in parallel to the present blog. 

As in the philosophy blog, I aim to present short pieces of text, of around 500 words, that can be read independently, in any order. However, they do build on each other, and I specify the connections for readers interested in them. 

I start with the customary distinction between invention, innovation and diffusion of innovations, between different fields of innovation (products, processes, markets, organization, institutions, ….), and different levels (incremental and radical) of innovation. I proceed with a discussion of entrepreneurship, and differences and complementarities between small and large firms, in competencies, outlook, motivation and conduct. Here one of the classic sources is the innovation economist Joseph Schumpeter.

Second, I consider knowledge, learning and invention. There, I use an embodied cognition view of knowledge and a pragmatist methodology (derived from American pragmatist philosophy). The crux of it is that views of the world are developed in interaction with it. Knowledge precedes action but is also formed in it. The underlying fundamental issues are treated in the philosophy blog.

Third, I consider organization: the role and functioning of organizations and networks, with due attention to issues of governance in combination with competence, and the underlying issues of power and dependence. The underlying philosophy of self and other, in collaboration and competition, is treated in the philosophy blog. In particular, this includes the nature and the working of trust. Concerning networks I consider the role of network structure and position for competence and governance.

Finally, I consider innovation policy and the political economy of innovation. This includes the consideration of institutions, societal systems in which organizations operate, and political processes. Here I employ a discussion of markets that is (or will be) included in the philosophy blog.

The blog allows for comments from readers, and I encourage readers to use that facility. I will respond to any comments made.