CHAPTER 1

INTRODUCTION

1.1 BACKGROUND

The current economic calamity poses new challenges for innovation strategies in established
firms. Most companies solidify or trim down their R&D budgets. I provide some suggestions
on how reducing costs of R&D and more important how it create opportunities for growth
which are some cases more than in years of strong economic growth.

Every companies need to reduce costs, and deciding what should they stay and what should
they go the first dispute that faces them. One of the early cases of downsizing is often
spending on innovation proceses that is R&D, training and education budgets. Long-term
projects are to dismiss, hiring is frozen, and workers are made disused. Unfortunately, this is
the same kind to patients deciding to reduce expenses by not spending money on medication.

During monetary downturns, modernism is the single most important circumstance for
transforming the crisis into an opportunity. While a lot of businesses simply would not be
capable to afford additional investment in innovation, governments should recognize that
innovation systems, with all their academic, industrial, and public components, are strategic
nationwide assets that need to be protected, just like the financial sectors. Times such as these
call for government intrusion to prevent the contraction of the awareness bases upon which
economies are now more than ever dependent.

In the short term process, governments need to afford support to all of the tiny companies that
to help them and manage the crisis that maintain to develop their portfolios of products and
services. The British Innovation Advisory Services replica, where government-supported
specialist are rewarded for and loaned to companies is one paradigm of the type of thing that
governments can do. A further is the Dutch voucher system, underneath which the
government gives coupons to tiny companies, allowing them to basis the expertise (mostly
consultants) they need from public research institutes. Some 80% of such voucher-supported
projects or else would not have been undertaken. This kind of support is significant to help
many small, flourishing companies get through the calamity.
For the long period, governments should do four things so their countries can come forward
from this crisis.

To fill the gap in any serious downfall in private investment in strategic science and
technology (S&T) areas such as nanotechnology, alternative energy, health and life sciences.
This is what the one of the asian country that is South Korean government did when the
country was hit by a major economic crisis in the late 1990. Two years later of spending on
R&D exceeded pre-crisis levels, and Korean businesses cannot able to play catch-up when
the economy bounced back.

Global Thinking:

Encouraging leverage of international investments from nations and regions that have the
cash such as China, the Gulf, and Japan. The Japanese are looking to enlarge globally, the
Chinese are hungry for knowledge transfer, and more recently small and rich Gulf countries
have to be allocated billions of dollars to spend their investments on science, technology, and
learning programs. Expensive long-term programs can become to build up new platforms for
multilateral collaboration.

Focussing Public Program:

Maintaining and expanding levels of funds for public S&T programs. This must be help to
keep a countrys knowledge base expandables. When Finland was hit by a critical economic
crisis in 1990, after the collapse of its main trade associate, the Soviet Union its governments
expenditure on R&D and education in all sectors increased. Ten years afterward, Finland
emerged as one of the most aggressive and innovative countries in the world. In Sweden, a
major economic crisis in the early and mid-1990 saw the number of people involved in R&D
actions increase by about 20%. Swedish businesses appeared from the crisis with global
leadership in sectors such as telecom and technology.

Support Talent:
Government sector used to create big seed capital funds to support the newly created army of
potential entrepreneurs composed of highly skilled people made recently redundant in
specific sectors.

This crisis might settle on the fate of economic systems of many countries for decades to get
nearer. Not all have the facility and resources to come out as winners. These are times for
forging further on – and no time for move back.

While innovation is a today global business imperative, its primary role has to be shifted. The
business value proposition is no longer about designing innovative technologies. Rather, it is
about creating value of innovation or sky blue ocean of uncontested market space that is ripe
for growth. With sky blue ocean, demand is created, as described in the international
bestseller.

Innovation offers businesses with the key essentials to grow. Not just for enterprising
entrepreneurs, innovation can revitalize a grown-up business and take it to the next level. It
also helps motivate and mobilize teams and organizations.

Innovation is the important approach that tough economic climate. The cability which is used
to create a new product and service or method to carrying out business that always important.
In a down economy, it becomes even more important as momentum gained exiting
depression can allow you to gain massive advantages over competitors that fail to innovate.

In the IT Sectors, Many of the companies have been forced to cut their budgets and reduce
staff over the last year, a situation that frequent results in smaller amount of people working
in longer hours to get the similar quantity of job done. Trying monetary times like these have
to lead some IT pros to seem to be IT solutions they may not have considered in better
monetary conditions. Necessity is the most absolutely the mother of discovery, and two IT
vendors may find themselves well - positioned to fit the needs of resource - famished IT staff.

This paper analyses whether or not the economic disorder has favoured creative destruction
encouragement of the innovation on new entrant or, on the converse, has generated a further
awareness of tricks in the most innovative firms.

Innovation Important to Bring Countries to Economic Success

The Information Barometer survey commissioned by GE to measure international opinions

on the need for innovation revealed that corporate innovation remains a popular idea for
making a country prosperous. The survey was designed to analyze perceptions of innovation
challenges internationally, the purpose of innovations on a multi-cultural level, insights for
the current drivers of innovation and the best innovation practices from innovation
champions. Participants in the survey were all directly involved in the innovation process at
their respective companies, and were in the VP position or higher.

Innovation, Globally

As the economy recovers, innovation is seen as the best hope to spur economic growth in the
12 countries surveyed. Out of those surveyed 95 percent of the respondents vision
innovations as the main lever for a more competitive nationalized economy, while 88 percent
think innovations are the most excellent ways to create new jobs. In addition, the U.S.,
Germany and Japan are seen as future innovation leaders.

Innovation Potential in Healthcare, Energy

A grouping of individuals, the government, universities and personal companies are seen as
the drivers of novelty in the next 8 years. By working together, those surveyed believe that
innovation can get better various markets, specifically in the healthcare and power fields.

When asked specifically about innovation in healthcare, those surveyed believe that
innovation can improve the overall health of the population. Respondents also believe
innovations can improve the design of their particular countrys health system, improve the
care for older populations, improve economic sustainability and improve the overall rate of
chronic disease.

When respondents were asked about modernization potential in energy, 83 percent of

respondents think innovation can reduce their countrys carbon footprint. Furthermore,
respondents consider energy innovations can get better their respective countries energy
independence and energy distribution quality. Also, investigation participants think future
innovations could develop the ability for citizens to supervise their energy consumption and
the in general energy costs.

New Innovation Model

Designate by review results, novelty views and methods have distorted. Therefore, a new
novelty model for the 21st century was created, focusing on:
• Individuals

• incorporated solutions

• Impactful innovations

• Incorporating partnerships

The dissimilar needs that innovations address will also modify, with the focus shifting
towards community needs, a fresh environment and overall life improvements.

1.2 Need for the study

The study theme has been reputable as Innovate out of the economic downtown. However it
remains to be justified as to why this ought to be an significant aspect of study and must be
probed into. Thus it is important that the need of study is established before embarking on the
study itself. Economic Downtown is generally studied with the relations, flows and
dependability in mind. However all these are inter organization in nature. What has been
ignored is the universe of this system that exists away from various businesses. The collision
of macro economic forces on the economic, but rarely has it been probed into with a detailed
study and hence makes me ponder over. Macro economic factors like interest rates, liquidity,
tax regime, regulations etc have various political as well as marketable implications.
However, these are controllable for an economy. What is an uncontrollable situation is the
impact of economic failure of a system. It takes a quantum of time for any economy to
recover a downturn, and that is normally spearheaded by corporate. However, the well being
of these corporates is defined by the sacrifices and health of organizations in the background.
It has been mentioned in an off hand manner by many researchers, acamedicians,
professionals and authors that during recession the corporates face pressures, but what has
been ignored often is what happens to the suppliers. They are an inseparable part of the
supply chain and the value chain.

1.3 Aim and Objectives

1.3.1 Aim

The assignment aims to study the current climate of the post-recession period, whilst
critically analyzing the cause and effects of recession on the Economic Downtown.

1.3.2 Objectives
The purpose of the exercise would primarily be a break up of the milestones to be achieved
throughout the achievement of this aim.

Thus the objectives of this study are established as:

1. To conduct literature review on Economic Downtown and related strategies.

2. To identify inter-link within their Economic Downtown and finding critical remedies

To develop on this point by citing for you an absurdly incorrect crash to anticipate consumer
reactions, on the element of a cluster of people who were certainly both clever and well
informed: the reporters and editorial staff of The New York Times. In 1939 the New York
Times reported on the success of recent experiments that obviously foretold the arrival of a
potentially fascinating new product: television. But the New York Times did not think that
television had much of a future – at least not in the United States. Suppose we now consider a
much more recent innovation: the mobile phone. In 1983, when AT&T was being divested in
an anti-trust suit, it was considering whether it should attempt to retain the frequencies that
would be essential for the operation of mobile phones. AT&T therefore hired one of
Americas best-known consulting firms to forecast the likely number of American subscribers
for mobile phones by the year 1999. The forecast that was eventually given to AT&T was
that there might be as many as one million subscribers to mobile phones in 1999. In fact, the
number of subscribers passed the 70 million mark in that year!

How can you account for what now appears (in retrospect, of course) to have been an absurd
underestimate? Partly, there was a failure to appreciate the very large number of ways in
which such phones would be useful. But the underestimate was also caused by neglect of
another consideration that is widespread in accounting for the future demand for innovations.
The fact is that most major innovations enter the world in a very primitive condition, and go
through a long process of technical improvements and cost reduction. The airplane first left
the ground in 1903. The initial flight was less than the length of a football field, and the
airplane was not an innovation of great commercial significance until the late 1930s. Why
not? It took fully one-third of a century because many thousands of design improvements
were necessary before airplanes became sufficiently safe and reliable to become widely used
by the general public. I suspect, if any of us had been present at that first flight in December
1903, we would not have left the scene with visions of regularly scheduled flights crossing
the Atlantic Ocean in six hours or so, with passengers in a reasonably comfortable state.
With respect to the mobile phone in 1983 was, in some important respects, very similar.
Those phones were primitive. They were so heavy and bulky that they hardly deserved to
have been called mobile. The quality of voice transmission was extremely poor. And, most
important, the original mobile phones of 1983 sold for around USD 3 000, compared with
much less than USD 100 in the United States today.

Considering the other recent technology: the laser. In 1960 the laser was merely a fascinating
scientific breakthrough of no obvious usefulness to anyone. But, as a result of the intense
competitive pressures generated in market economies to develop and introduce new products,
the laser came to serve as the platform for a bewildering variety of new applications. It has
become the primary instrument of research in the science of chemistry. It is the instrument of
choice in a wide range of surgical procedures. There are in fact five medical journals in
English that deal exclusively with the use of lasers in medical practice and laser is essential
for the high quality reproduction of music in compact discs (CDs). Transactions at
supermarket checkout counters have been speeded up by lasers that can read (i.e. scan) the
bar codes on each item purchased. The best computer printers today make use of the laser.
Lasers, together with optical fibers, have totally revolutionised the worldwide
telecommunications system. Last, but surely not least, it has recently approved the laser as a
much less painful substitute for the dentists drill.

The activities of lasers had been predicted, on a purely theoretical basis, by Einstein, using no
more than a blackboard and a piece of chalk, as long ago as 1916. But it took over 40 years
before scientists could actually create a laser beam.

The first digital, electronic computer was operating at the University of Pennsylvania, school
of engineering at the end of 1945, and a number of firms were already engaged in the
manufacture and sale of computers by 1950. And yet, as late as 1956 Howard Aiken, a
brilliant physics instructor at Harvard and one of the great pioneers in computer development,
continued to conceive of the computer as no more than a highly specialised scientific
instrument. In 1956, in testifying before a congressional committee he was still, obviously,
thinking of the computer as no more than an instrument suitable for only a narrow range of
scientific research purposes. Aiken stated in that congressional testimony if it should ever
turn out that the basic logics of a machine designed for the numerical solution of differential
equations coincide with the logics of a machine intended to make bills for a department store,
I would regard this as the most amazing coincidence that I have ever encountered. That is, of
course, precisely how it turned out, but it was hardly a coincidence. A technology that was
originally invented for one specific purpose - the numerical solution of large sets of
differential equations - could easily be reprogrammed to solve problems in entirely different
contexts, such as the making out of bills for a department store. But it was obviously not
obvious. Now, nothing could be further from my intention here than to hold Aiken up for
ridicule. He was a brilliant scientist and inventor, and yet he had the most elementary sense of
the potential impact of the invention to which he had made very large contributions.

The crash of a technological innovation will generally depend not only on its inventors, but
also on the creativity of the ultimate users of the new skill.

Considering the factories so long as factories depended on condensation as their primary

power source, the organization and outline of activities on the factory floor had to be
determined by immediacy to a single power source: the condensation engine. Each machine
on the factory floor, in revolve, drew upon this power cause through a clumsy and extremely
wasteful transmission system of leather belts and pulleys. The introduction of electricity, with
separate electric motors attached to each machine, allowed the layout of work to be organized
in a far more flexible and efficient way, depending on the sequence of activities required by
the needs of the production process rather than by the location of the steam engine. The
parallels with the introduction of the computer are obvious. But it is also relevant to point out
that economic historians have freshly devoted a great deal of attention to the electrification of
American factories. The harmony of their studies is that it took regarding 40 years from the
1880s to the 1920s prior to the application of electric power produced a measurable increase
in factory productivity. And one could also make a plausible argument that the interface
between people and computers is a far more complex one than the interface between people
and electric power.

In thinking about high tech innovation, we be liable to be excessively preoccupied with the
toil of the scientists and engineers whose R&D activities have shaped the latest technologies
in the first place. This is a casing of misplaced emphasis. The benefits that can be prepared to
flow from lasers, microprocessors, computers and information knowledge generally, will
ultimately depend not only on its inventors, but also on the inventiveness of the potential
users of the new technology.

Of course, it is also significant to remember that the computer itself has been transformed
since the giant mainframes were complement and, to a considerable extent, replaced by
desktop personal computers. The result has been an explosion of new efficiency
opportunities, insofar as data processing could now be carried out in ways, and in places, with
a degree of flexibility that was not possible with mainframes alone.

Merely concern much greater computer speed to patterns of work that were planned for an
older and slower technology is likely to yield very slight in the way of productivity
development. Redesigning the toil process is a very difficult problem in its own right, and it
necessarily takes a long time, as the early history of electricity amply demonstrates. The
introduction of the PC has required the reorganization of long-standing business practices,
along with the design of new, complex software, tailored specifically for the employees of the
business firm. This, in turn, continues to require the application of managerial skills of a very
high order of sophistication in determining how the patterns of work might be optimally
redesigned in order to exploit the vastly expanded capabilities of the latest generation of
computers.

With respect to the tourism sector, what appears to be called for is an intimate familiarity
with consumer needs and preferences in particular specialised markets, and a speedy and
imaginative approach to how these needs might be catered to in a more efficient, but also a
more attractive and more user friendly manner. But my uninformed speculation suggests that
Information Technology, and the Internet and World Wide Web in particular, are going to
transform the role of travel agents, and doubtless sharply reduce the size of the travel agent
industry, unless this industry can identify a new bundle of services that can be provided to
potential travellers. Any household with access to the Internet – and therefore access to
Google – now has immediate access to detailed information about almost any conceivable
location on the earths surface as a possible candidate for a visit.

Needless to say, ticketing for airplane travel can also be arranged on the Internet, which also
provides invaluable information about the various prices of airplane tickets. In fact, an
American research company Forrester has recently calculated that travel is now the largest
on-line business in the world. The Internet is obviously transforming the tourism business in
many ways, and easy access to information is growing rapidly in each of the separate
components of the industry, and making it increasingly competitive. The ultimate uncertainty
is figuring out new ways of rendering the tourist industry at least minimally profitable. I am
happy to leave this subject to your deliberations over the next two days.
We define modernism as the successful exploitation of new ideas. Often it involves new
technologies or technological applications. Innovation matters because it can deliver better
products and services, new, cleaner and more efficient production processes and improved
business models. For consumers, innovation means higher quality and better value goods,
more efficient services (both private and public) and higher standards of living. For
businesses, innovation means sustained or improved growth. The innovative company or
organization delivers higher profits for its owners and investors. For employees, innovation
means new and more interesting work, better skills and higher wages. Equally, an absence of
innovation can lead to business stagnation and a loss of jobs. For the economy as a whole
innovation is the key to higher productivity and greater prosperity for all. Innovation will also
be essential for meeting the environmental challenges of the future – including moving to a
low carbon economy and reducing waste.

We need to find new ways to break the link between economic growth and resource depletion
and environmental degradation. It is important to every sector of our economy, in both
manufacturing and services. To hold our own in modern manufacturing we will need to
innovate strongly, creating new high-tech manufacturing industries such as biotechnology
and upgrading traditional sectors such as steel and textiles. While British-based
manufacturing faces threats from developing economies, advances in science and technology
also offer many opportunities. In the last ten years, the chemicals (including
pharmaceuticals), computers and office equipment and communication sectors have all
grown faster than the economy as a whole.

The UKs Innovation

The UK is one of the worlds most open trading nations and our consumers can enjoy the
benefits of innovation wherever it occurs. But if UK-based companies fail to innovate, jobs
and profits will suffer, and our standard of living will fall compared with other countries.

We already have some sectors that lead the world in innovation: aerospace, pharmaceuticals,
biotechnology, financial services and many of the creative industries; and there are some
firms in almost all sectors that are global leaders.

However, overall, our performance is not good enough. Although there is no single indicator
of innovation, two measures of technological innovation – business R&D and patenting –
show the UKs performance is only average compared with our international competitors. The
latest international comparisons of data on business R&D (Table 2) show the UK well behind
the US and roughly equal to the EU average. However, it is encouraging that after a steady
period of decline from 1.5% of GDP in 1981 to 1.16% in 1997, we have seen a move in the
right direction to 1.24% in 20023.

Measures of patents filed in Europe, Japan and the US provide an indicator of those patents
judged most valuable by their creators. On this indicator, adjusting for size of the economy,
UK patenting lies well behind that of Japan and the US, and slightly behind the EU average.
As the latest figures we have are for 1998, it is not possible to see what the trend has been
since then.

Innovation ultimately depends on the knowledge, skills and creativity of people at work, but
Government has an important role to play in creating the best possible conditions for
innovation, and developing the significant range of public goods that are essential for a
dynamic and innovative knowledge economy, including a strong science, engineering and
technology base, incentives for knowledge transfer, and high educational standards.

The innovation challenge has been a clear theme of policy-making since 1997. In that time
we have published three White Papers: Our Competitive Future – Building a Knowledge
Drive Economy. These new policies are already beginning to produce results. For example,
since 1997 we have seen a significant cultural change in the relationship between the
university sector and industry. In 2000/2001 there were 248 spin-off companies from British
Universities compared with 203 in the previous year and 70 a year, on average, in the 5 years
before that4. The number of Intellectual Property (IP) licences granted to UK-based
companies, based on Higher Education Institutes IP, increased by 38% from 382 in
1999/2000 to 527 in 2000/2001, while total new (initial) patents filed rose by 26% from 725
to 913 over the same period.

UK companies will have to compete more in the future on unique, high value-added and
innovative products and services. This will require inspirational leadership, stronger
management and leadership skills, a highly skilled workforce, a flexible labour market that
promotes diversity and fair treatment, and high performance workplaces.

The Governments Skills Strategy, 21st Century Skills: Realising Our Potential (published in
July 2003), makes clear that we have many strengths in the way in which we develop skills,
learning and qualifications in this country. Thanks to our recent reforms, our young people
compare well internationally in their literacy, numeracy and science skills. We are as good at
developing highly skilled graduates as the best in the world. But it remains the case that
French, German and US workers produce between a quarter and a third more in every hour
they work than their British counterparts. A highly educated workforce with a culture of
lifelong learning is more likely to adapt to economic change and, as our Skills Strategy makes
clear, improving skills levels across the board, particularly among those with the lowest skills
levels, is a focus for the Governments agenda for enhancing flexibility across the UK. The
Skills Strategy sets out the Governments agenda for acting on both the demand for, and
supply of, skills as a major contributor to improving levels of innovation and productivity. It
commits the Government to creating a more demandled, responsive and flexible training
system delivered through: the Skills Alliance, jointly chaired by the Secretaries of State for
Trade and Industry and Education and Skills; _ the joint Department for Education and Skills
(DfES) and DTI Leadership and Management Unit; _ the joint DfES and DTI sponsored
Skills for Business Network of Sector Skills Councils leading the development of Sector
Skills Agreements; and _ Regional Skills Partnerships – which will bring together activities
on regional and sectoral skills priorities, training, business support and labour market activity
in support of regional economic strategies.

This report builds on the policy themes of the previous White Papers: the need for the
improved funding of science, incentives for knowledge transfer, the development of
innovation-driven regional strategies and clusters, improving knowledge and skills, and the
international battle for talent. To improve our innovation performance, a major cross-
government initiative is required. The DTI and the Office of Science and Technology (OST)
have a key role to play but wider actions across a range of Government Departments are
necessary if we are to achieve the best possible conditions for innovation. If real change is to
be achieved then innovation must become embedded in the thinking of all departments and
agencies, and there must be greater collaboration between them. In addition to the £2.3
billion of R&D funded by the OST, and the Higher Education Funding Councils,
Government Departments including the NHS funded over £4.5 billion of R&D5. This means
that there are substantial opportunities for collaboration across Government, particularly in
knowledge transfer to business. The public sector, which purchased £109 billion of goods and
services in 2001/026, also has huge potential to stimulate innovation by acting as an
intelligent customer. As the European Commission Report Raising EU R&D Intensity7 said:
The boost to innovation derived from defence spending in the USA could be matched in
Europe by innovation-orientated procurement in health and public security. Furthermore,
Government can help through its sponsorship of particular industries and by drafting
outcome-based regulations that promote, rather than restrict, innovation. Recognising the
innovation challenge facing the UK, the Prime Minister has asked the Secretary of State for
Trade and Industry to chair a Ministerial team to lead the innovation agenda across
Government and drive forward the implementation of this report.

What follows is a highly abridged version of the supporting analysis, summarising the UKs
performance against the seven factors:

1. The Sources of new technological knowledge

It play an important role in shaping innovation systems. Science-based technologies are

increasing in importance. New products and services tend to embody a wider range of
technologies, increasing the complexity faced by individual firms. UK-based firms make
extensive use of customers and suppliers as knowledge sources. The UK Science,
Engineering and Technology (SET) base is highly productive and the UK has world class
design expertise. Relatively low levels of innovation spend mean that UK-based firms are
less well placed to benefit from these or from comparable sources internationally;

The capacity to absorb and exploit knowledge defines a firms ability to turn knowledge into
new products, processes or services. Fundamentally it is people who create knowledge,
manage businesses and innovate. Poor skills amongst managers and the workforce more
generally have hindered performance. The culture within UKowned firms appears to place
less emphasis on creativity. Few firms show evidence of systematic adoption of the human
resource management practices typically associated with effective employee relations and a
workplace culture supportive of innovation; _ all investments in innovation need access to
finance. Relatively lower levels of innovation spend are probably more due to a lack of
incentives and capacity than a shortage of funds, although some financing gaps exist. A past
history of macro-economic instability, weaknesses in skills and corporate strategies have all
contributed to lower levels of spend;

_ competition provides a stimulus to innovation and helps determine the intensity of

competition and the ability of firms to spot opportunities and manage risks. Weak
competition policies in the past have reduced incentives to innovate; and entrepreneurship
rates are, at best, moderate; _ customers and suppliers put pressure on firms to deliver better
quality goods and services and provide opportunities for innovation. Many UK-based firms
compete in global markets and the UK is an attractive market for innovative firms from
abroad. The public sector purchased £109 billion of goods and services in 2001-0212. There
are major opportunities to make public sector procurement more effective in stimulating
innovation while achieving spending objectives and value for money; _ the regulatory
environment affects the possibilities and incentive structures for innovation. OECD
comparisons show the UK to be relatively lightly regulated, although there are continuing
business concerns about the impact of new regulations. Some firms appear to lack awareness
of Intellectual Property Rights (IPR); and

_ networks and collaboration are important means of accessing knowledge. Businesses are
increasingly looking outside their sectors for opportunities to collaborate UK-based firms
appear to have many, varied network relationships, but the infrastructure is patchy and
relationships appear to be largely driven by short-term decisions.

Areas of Government influence

Ultimately innovation depends on the knowledge, skills and creativity of those working in
businesses. But Government has an important role in creating the right environment for
innovation. Main mechanisms and channels through which Government – at various levels –
influences business innovation.

The Government has already laid the foundations of an innovation-driven economy in areas
such as macro-economic policy, fiscal policy, competition policy, trade policy and education
and skills (Box 1.5).

Since 1997 we have produced three White Papers, Our competitive future – Building a
knowledge driven economy (1998), Excellence and Opportunity – a Science and Innovation
Policy for the 21st Century (2000) and Opportunity for All in a World of Change –
Enterprise, Skills and Innovation (2001). In these we set in motion a series of micro-
economic measures to stimulate innovation, such as increased investment in the science base,
incentives to encourage research institutions and universities to commercialise their research,
and measures to encourage more small businesses to start up and innovate. This Report builds
on the progress made in those White Papers.
Policies and programmes affecting innovation are determined at a variety of levels. In some
cases, the role of the UK Government is to influence developments on a European or global
scale. Many policies in this Report cover the UK as a whole. But significant aspects of the
innovation policy agenda in Northern Ireland, Wales and Scotland are the responsibility of
the Devolved Administrations. Where matters are devolved, we will work with the to address
the innovation challenge that we all face. In England, the Regional Development Agencies
(R) are significant players in innovation policy. It will work in closer partnership to ensure
that national policy and priorities take into account regional priorities.

Support for investment – Reforms to monetary and fiscal policy – independence for the Bank
of England and the code of conduct on fiscal stability – can have a significant positive impact
on investment in innovation. The new tax incentives for R&D are comparable with, or more
generous than, those in other countries. The small firms rate of corporation tax has been
reduced to 19%, alongside the creation of a new zero starting rate. The Government has also
introduced financial incentives for venture capital.

Better education and training Between 2000/01 and 2005/06, education spending will
increase by 36% in real terms (forecast to rise to 5.5 of in England by 2005/06). This will be
supported by demand and supply side reforms to improve effectiveness. These include
changes to improve standards and skills delivery. And through the new Skills Strategy work
will be done to boost demand for learning and make skills development more responsive to
the needs of employers.

Competition Policy: Recent measures include introducing the Competition Act 1998, with
two major provisions to guard against anti-competitive agreements and abuse of dominance,
and the Enterprise Act 2002. The Office of Fair Trading now has powers to refer markets to
the Competition Commission where they may not be working well. Other changes include
improvements to the mergers and monopolies investigation regimes, and criminal penalties
for those engaging in hard-core cartels.

Better infrastructure for business: The planning system is being reformed so that it will
deliver a higher quality service for the business community, helping competitiveness and
productivity. The Scottish Executive has taken forward a number of initiatives to modernize
the Scottish planning system including a review of Strategic Planning Conclusions and Next
Steps (June 2002) and the updating of National Planning Policy on Economic Development
(November 2002) and Planning for Housing (February 2003).
Transport: The Department for Transports latest progress report, published in December
2002, shows that a good start has been made in delivering the improvements envisaged in the
10 Year Plan. Increased funding is in place; new projects are being planned and delivery is
being improved.

Broadband: The Government is working hard to deliver its target for the UK to have the most
extensive and competitive broadband market in the G7 by 2005. Broadband networks now
cover some 80% of the UK population (although the coverage challenge is much greater in
more remote parts of the UK) and the market is more competitive than our EU G7 neighbours
and the USA. The Government hopes to see broadband available to every community in the
UK by 2005. Departments across Government will spend £1 billion on broadband
connections, bringing broadband to every school in England by 2006 and wiring up every
GPs surgery and every hospital.

1.4 Scope and limitations

1.4.1 Scope

The relevant outcomes expected from the project are:

Better understanding of the Economic Downtown and relevant strategies: This is expected to
be derived from the extensive study of literature and also the detailed study of the selected
case.

Inter relating the Economic Downtown companies would result in the analysis and probing
the latent areas and their trouble-shooting

This would help reach certain proposals and feasible solutions to problems and issues faced
by companies who are the prime subject of this study.

1.4.2 Limitations

The study undertakes an industry specific case study due to lack of resources.

The industry under study has however been chosen with this thought in mind that it should be
an industry that is impacted by recession.
The study is conducted in 2010, and hence is not cross-sectional in nature. It would however
have been interesting to study the impact of recession and methods companies use to come
out of it over a longer time.

The dissertation only studies the impact of recession in qualitative terms suported by
quantitaive measures. However lack of confidential financial data makes it tough to pin down
to details of suppliers and their management.

The study relies on secondary and primary sources for data, and due to confidential nature of
required data, financial aspect has been probed to a limited extent.

1.5 RESEARCH QUESTIONS

1. Is the monetary crisis bringing gales of inventive damage?

2. Is modernism generated through technological may increase and monetary creative

damage?

3. How to crack to identify the hub characteristics of innovative destruction

RESEARCH OBJETIVES

Innovation outgoings are calculated as the combined of expenditures on one of the following
actions:

• R&D performed inside the company

• R&D performed for the company by other enterprises or by research organisations

• Gaining of new or significantly improved machinery, equipment and software

• Purchase or licensing of patents, inventions, know-how, and other types of knowledge

• Training to support inventive activities

• Plan graphic, packaging, process, product, service or industrial design

• Application for a patent or registration of a design.

1.6 RESEARCH STRUCTURE

The data

The practical part of the paper analyses the Innobarometer Survey 2009 that is intended and
composed by the European Commission (European Commission, 2009a). In each of the 27
EU Member states, plus Norway and Switzerland, 200 enterprises from most manufacturing
and private service industries with 20 or more employees were sampled. 5,238 telephone
interviews were completed between the 1st and 9th of April 2009. The sample is a random
sample, stratified by country, enterprise size (5 size bands) and industry (2-digit industry
codes). A detailed description of the survey, including the sampling and data collection
methods, can be found in a methodological report by the European Commission (2009b).

Since 2001, Innobarometer is conducted on a yearly basis. Each year the survey highlights a
different issue/theme, which is picked up on in additional and specific questionnaire items
over and above a core set of variables. The focus of the current, 2009 survey is on innovation
related expenditures and the effects of the economic downturn on innovation related
expenditures. It is this section of the questionnaire from which our key variables are
developed. In the remainder of this section we introduce our dependent and independent
variables and discuss the methodology.

Our dependent variables calculate the modification in innovation related investment as it is

reported by the firms themselves and with reference to special time periods (before, during
and following on from the crisis). Innovation associated investment are captured in a wide
logic, incorporating, not only expenditures on in-house R&D, but also technology embodied
in the purchase of machinery, equipment and software, licensed-in technology (patents or
other know-how), training of staff in support of innovation, and expenditures on design of
products, process and services.

My dependent variables are based on firms responses to the following three questions.

(a) prior to the crises: compared to 2008 has the total amount spent by your firm on all
innovation activities in 2010 increased, decreased or stayed approximately the same?,

(b) throughout the crisis: in the last six months has your company taken one of the following
actions as a direct result of the economic downturn; increased total amount of innovation
expenditures, decreased or maintained? , and
(c) next on from the opening of the crisis: compared to 2008, do you expect your company to
increase, decrease or maintain the total amount of its innovation expenditure in 2010?.

Methodology

We use regressions toward analyse the relationship amid our dependent and independent
variables. The zero order correlations among the dependent and independent variables,
reporting polychoric correlations for the categorical reliant variables and tetrachoric
correlations amid the binary sovereign variables.

CHAPTER II

REVIEW OF LITERATURE

Kitching by 2009 provide a detailed review of literature on cruel economic conditions,

including downturn, and their effects on firms and firm behaviour in the earlier period of 30
or 40 years. Their conclusion on the literature itself is that since studies focussing on
recessions alone are sparse, a wider literature discussing a array of difficult monetary
conditions has to be measured. However, the consequence of the existing prose on the current
monetary crisis is in doubt for two reasons: firstly, not all cruel monetary conditions are
similar enough to a recession, and secondly, the current crisis may be quite dissimilar to
previous crises, most importantly, as the degree of globalisation is now greater than it has
been in previous recessions. Globalisation processes increasingly affect both the threats firms
face and the opportunities available to them. Furthermore, according to Kitching, there are
several actual deficiency in the existing literature. Firstly, the literature rarely focuses on why
firms react the way they do, in other words.

The data on the consequences of actions to longer term firm performance are lacking.
Thirdly, global influences on responses from firms are rarely taken into account.

Regarding the possible impacts on and responses by firms, the literature review by Kitching
noted that three main business strategy related responses. Firstly, most commonly firms react
in the short-term with retrenchment strategies, i.e. by cutting costs, such as innovation
expenditures. Secondly, firms may react with asset strategies, by increasing their innovation
expenditures or market diversification. In spite of the fact that many big firms that have made
their businesses successful during hard economic times, there is, however, thin evidence on
how common this strategy is. Thirdly, and perhaps most importantly, firms react with a
combined strategy of retrenchment and investment. Much of current relevant literature (and
the think-tank of leading academics consulted for Kitching considered that an ambidextrous
strategy to be the most common medium- to longer-term response from firms.

The main conclusions from the broad review in Kitching are that there is no single recession
effect on firms, nor any one best way to accept recessions, and firm characteristics (such as
volume or region) or past performance are not plenty of predictors on future performance.
Ambidextrous strategies, which unite cost efficiency with innovation action may be the most
appropriate responses to recessions, even though possibly most challenging, as firms must
choose wisely the appropriate costs to be cut, and the right investments to be made.

There are a lot of authors that give a definition of a business model and propose a brief list of
components that should be included to describe it. There are many scholars naming
components to the business model, but Osterwalder and Pigneur is one of the most complete
and comprehensive work. First of all, they build their main blocks out from well accepted
strategy literature, such as Hagel and Singer by 1999 and they have gone through all other
scholars lists of components to reveal the total amount of nine components.

Besides, whatever method is considered to identify components in the business model, there
seems to be a fair similarity between the results. Often components vary in its degree of
abstraction leading to different numbers of components, but they basically describe the same.
A comparison of the components of Osterwalder and Pigneur (2005) and two of the most
cited and distinguished research groups on business models, Afuah and Tucci (2000) and
Chesbrough and Rosenbloom (2002).

One result of this practice-driven move to promote a new policy narrative in the UK has,
arguably, been the growth in the volume of the academic literature noted above, together with
a burgeoning range of practice-oriented reports and literature reviews carried out by officials
in the public sector seeking to define how best to achieve innovation, see for example (IDeA
2005).

a. Stress the links between innovation potential and approaches to risk management
within the public sector issues that are also important in the private sector
 b. Focus on success cases aimed at demonstrating the basic case that the public sector is
in fact innovative
c. Highlight the importance of entrepreneurial leadership and innovating championing in
forcing through innovations
d. Under play instances of failure: the reasons for these problems emerging and the
wider implications; and
e. Avoid more detailed prescriptions over how best to achieve innovation within current
country-specific contexts.

Mintzberg in 1983 stated that it can appear in various forms. The purest form is when is
practiced for its own sake. Firms expect nothing back from their activities and they become
socially responsible because that is a novel strategy for corporations to behave. Moore (2003)
argued that there is a tension between social and economic endeavors and by becoming
socially responsible, firms are actually working to ease this tension. He concluded that if is
properly applied in business practices, then it must not be at the service of greater
profitability.

Moore, Goyder (2003) articulated his concern that many firms are taking as mere compliance
with expectations. According to Goyder, compliance will make firms tell stakeholders what
they want to hear, so that firms are seen as fitting into societys template. This is opposite to
real or what Goyder calls conviction , in which firms truly believe in a set of purposes and
values that have convictions to act on them.

David Waldman et al. (2006) define as actions on the part of the firm that appear to advance,
or acquiesce in the promotion of some social good, beyond the immediate interests of the
firm and its shareholders, which is required by law. Such actions may result in a company
embodying socially responsible attributes in their products.

However, there is a great deal of ambiguity and uncertainty about what really means as well
as what drives a business to pursue it. Whatever are the motivations behind theories, it is also
interpreted as the concept of triple bottom line (People, Planet, Profit) which captures an
expanded spectrum of values and criteria for measuring organizational success; economic,
environmental and social. Whereas business ethics and corporate governance combine to
generate the means to achieve organizational excellence, the real test is when this excellence
is converted into business sustainability and here plays a major role.
A basis for the antithetic relation between innovation and can be constructed drawing on
natural selection models of innovation and disruptive technologies (Midttun 2006).

Early models saw innovation as a linear sequence of functional activities. Either new
opportunities arising out of research gave rise to applications, which eventually found their
way to the market place technology push, or the market signaled needs for something new
which then provided new solutions to the problem (need pull). The limitations of such an
approach are clear; in practice, innovation is a coupling and matching process and the
interaction is a critical element. Sometimes the push will dominate, sometimes, the pull, but
successful innovation requires the interaction between the two (Tidd 2006).

Roy Rothwell argues the nature of innovation process has evolved from simple linear models
of 1960s to increasingly complex interactive models. His fifth generation innovation concept
considers innovation as a multi-actor process, which requires high levels of integration at
both intra-and inter-firm level.

Schumpeter saw innovation as a process of creative destruction. Certain steady state

innovations are disrupted by occasional discontinuities, which can lead to technology. In the
meantime, the seminal study of Christensen (1997) indicates that with each generation,
almost all of the previously successful players failed to make the transition effectively and
were often squeezed out of the market into bankruptcy.

Berkhout and Green (2003) dispose a system approach to innovation. They suggest potential
ways to link innovation, sustainable research, and management. They also identify a number
of limitations in the way that innovation is currently conceptualized innovation is a
distributed process across many actors, firms and other organizations, and is influenced by
regulations, policy and social pressures.

Eric Von Hippel has introduced the notion of user-driven innovation to describe the ability of
users to initiate and develop extremely complex products. However, user driven innovation
does not only benefit firms, but creates public goods as well as specific benefits for the
involved users. While there is growing literature on user driven innovation theory, there
exists very little research on how innovation can be driven by other stakeholders besides
users and consumers. Empirical evidence for stakeholder driven innovation includes Stafford
and Hartman (2001), Matsumoto (2002), Hartman & Liang (2003).
Currie 2008 define innovativeness in a public sector context as the quest for creative, unusual
or novel solutions to problems and needs, including new services, new organisational forms
and process improvements.

They go on to associate innovativeness with risk-taking and pro-activity. Risk-taking

involves the willingness to take moderate risk in committing resources to address
opportunities. Pro-activity ensures that entrepreneurship functions by anticipating and
preventing problems before they occur, exhibiting perseverance, adaptableness, and assuming
dependability for failure (Currie, Humphreys, Ucbasaran and McManus 2008).

Mulgan and Albury (2003) define innovation as new ideas that work:

Successful modernism is the creation and achievement of new processes, products, services
and methods of delivery which result in important improvements in outcomes competence,
effectiveness or excellence.

These innovations can be:

a. Incremental : fairly minor changes to existing services or processes;

b. Radical: innovative service, product or delivery technique, but dynamics of the sector
remains unchanged
c. complete or transformational: foremost innovations often driven by the emergence of
fresh technologies, which transform sectors, giving rise to new workforce structures,
new types of organization, new relationships stuck between organizations and step-
change in general performance.

According to Geoff Mulgan (2007: 18), Human beings are rational and without licence from
the top, few people in hierarchical organisations will be willing to take risks. Political and
official leaders can establish a culture in which innovation is seen as natural. In some cases
the cultures then become embedded at least for a time.

Though the successful fruition of an innovative idea requires that many people come together
throughout the innovation journey, it has also been noted that innovation champions can be
critical at the stage at which an idea is turned into a viable prototype for testing. Innovation
champions are those individuals who are willing to invest resources and organisational
capacity for designing, implementing and evaluating an innovation (Literature Review 2009).
Leadership does not always need to be attributed to the role played by one individual, as a
minority coalition can advocate and influence public sector change. For example, though it
was Steve Kelman who led the initiative to reform the US Federal governments procurement
system, around 18% of the employees were already active advocates of the reform even
before its launch. In time, this minority influenced a second group to support the initiative
with their ranks increasing to around 40% soon after the initiative was launched (Eggers and
Singh 2009: 26).

Others, however, highlight the need for a collective or distributive model of leadership. The
individual model does not appear to account for significant variety and complexity in
organisational contexts. An exclusive focus on individualised leadership also misses the
opportunity to use the potential of staff both individually and collectively. Identifying and
enabling emergent collective leadership approaches allows for the development of leadership
appropriate to the context, and which can develop beyond the restrictions of universally
prescribed models. Emergent approaches also allow staff and teams working together to
develop their own sense of meaning rather than allow it to be imposed or assumed by others
more powerful in the organisational hierarchy (Lawler 2007).

Academic inquiry into public sector innovation is a new and growing field. Just over half
(51.5%) of the 167 academic journal articles examining public sector innovation tracked by
the extensive Thomson-Reuters database of academic journal publications in the period 1971
2008 were published in the three years: 2006,2008. The growth in the volume of the
non-academic literature produced by governments and non-government organisations,
although harder to track numerically with the same rigour, also appears to exhibit the
characteristics of an emerging field. This recent rise in interest is not dissimilar from that
exhibited by the more general literature on innovation (24% of the 1971,2008 output has been
published in the 2006/08 timeframe).

A new Service Agenda was also introduced in Australia with the aim of producing fewer
letters (either paper or electronic) by 10% per year from 2006 to 2010 (Dunleavy, Margetts,
Bastow and Tinkler 2008). Other recent measures by Australian governments to both
improve direct government services and help society more efficiently utilise resources
include:
The introduction of the BasicsCard, a PIN-protected card for buying essential goods and
services through the existing EFTPOS network, which helps ensure that half of welfare
payments force targeted recipients to purchase essential items.

The use of electronic voting for Australian Defence personnel serving overseas at the 2007
federal election which marked the first time this capability has been used in both a technical
and a business context (APSC 2008), and offers a possibility for the technology to expand to
enhance cost and efficiency at future elections.

The Australian Taxation Office easing public and business difficulties by producing and
improving a Making It Easier to Comply booklet over the past five years which details ATOs
current and future work designed to make the taxpayer experience easier, cheaper and more
personalised (APSC 2008).

To improve citizen-centred service delivery, Centrelink provided a drought bus to assist

communities in drought and flood-affected areas with advice on specific drought and flood
relief and to assist on tax, health issues and even depression. In the year to June 2008, a large
proportion of the 13,000 customers who utilised the bus were new to Centrelink (Moran
2009).

The introduction of the Queensland governments, another citizen-centred delivery service,

that delivers 100 services through 70 outlets in rural and remote Queensland. By offering
services at one counter in a community (perhaps a post office, a local clerk of the court, a
newsagent or another small shop), a cheaper system emerges while the public interacts with a
local person rather than a distant bureaucrat. The system also promotes local business and
helps an individual town. A franchise agreement with the State pays the agent per referred
query. (Moran 2009).

Public service innovation is also an emerging area of academic inquiry, referred to as new
governance. New governance is concerned with articulating a more explicitly experimentalist
approach to innovation in public policy. This work, which draws upon innovation
management experience in the automotive industry, stresses the ways in which, in an
uncertain decision-making environment, managers in the public sector are better off adopting
explicitly exploratory and experimental approaches in which goals and intended outcomes are
fairly fluid, efforts are redirected as learning advances, and overly hierarchical command and
control systems are avoided (see Sabel 1994; Sabel and Zeitlin 2003).
More recently, Terry Moran, Secretary of the Department of the Prime Minister and Cabinet,
urged greater innovation if Australias public service is to become the best in the world.
Moran noted the need to attract and retain the highest quality creative thinkers and managers
to enhance public sector management; greater coordination in regard to the roles and
responsibilities of the Commonwealth and the States and Territories in relation to service
delivery; the need of the work with people from the private and community sectors, think
tanks, academics, stakeholders and members of the public; the need for staff to work together
rather than as a collection of separate institutions by promoting the mobility of officers to
enhance the transfer of knowledge, skill and people across different levels of government;
and better measurement of results to test the effectiveness of policy interventions by also
asking citizens what they think about the quality of the services the provides and taking
action to make them better.

Moran also stressed the need for the strengthen focus on service delivery which enables
public servants who create policy to learn from those who deliver it. This may mean that
public servants (including senior officials) should experience front-line policy
implementation by perhaps spending a week staffing a Centrelink claims desk or a Medicare
office (Moran 2009).

In short, how to achieve public sector innovation is regarded as a topical but challenging
issue by a range of practitioners and academic commentators. Or as put by Stephen
Goldsmith, Director of the Innovations in American Government Program at the Harvard
Kennedy School, the innovation process cannot remain a topdown, bureaucratic process, far
removed from the concerns of citizens. Governments need to draw upon all their sources of
innovation … to produce regular and successful innovations (Eggers and Singh 2009).

The new impetus to fostering innovation in the APS has now resulted in the Reform of
Australian Government Administration initiative. The aim is to develop a blueprint for the
reform, able to position the APS as the best public service in the world (Advisory Group on
Reform of Australian Government Administration 2009).
CHAPTER 3

RESEARCH METHODOLOGIES

The practical part of the paper analyses the Innobarometer Survey 2009 that is intended and
composed by the European Commission (European Commission, 2009a). In each of the 27
EU Member states, plus Norway and Switzerland, 200 enterprises from most manufacturing
and private service industries with 20 or more employees were sampled. 5,238 telephone
interviews were completed between the 1st and 9th of April 2009. The sample is a random
sample, stratified by country, enterprise size (5 size bands) and industry (2-digit industry
codes). A detailed description of the survey, including the sampling and data collection
methods, can be found in a methodological report by the European Commission (2009b).

Since 2001, Innobarometer is conducted on a yearly basis. Each year the survey highlights a
different issue/theme, which is picked up on in additional and specific questionnaire items
over and above a core set of variables. The focus of the current, 2009 survey is on innovation
related expenditures and the effects of the economic downturn on innovation related
expenditures. It is this section of the questionnaire from which our key variables are
developed. In the remainder of this section we introduce our dependent and independent
variables and discuss the methodology.

Our dependent variables calculate the modification in innovation related investment as it is

reported by the firms themselves and with reference to special time periods (before, during
and following on from the crisis). Innovation associated investment are captured in a wide
logic, incorporating, not only expenditures on in-house R&D, but also technology embodied
in the purchase of machinery, equipment and software, licensed-in technology (patents or
other know-how), training of staff in support of innovation, and expenditures on design of
products, process and services.

1. My dependent variables are based on firms responses to the following three questions.
2. prior to the crises: compared to 2008 has the total amount spent by your firm on all
innovation activities in 2010 increased, decreased or stayed approximately the same?,
 3. throughout the crisis: in the last six months has your company taken one of the
following actions as a direct result of the economic downturn; increased total amount
of innovation expenditures, decreased or maintained
4. next on from the opening of the crisis: compared to 2008, do you expect your
company to increase, decrease or maintain the total amount of its innovation
expenditure in 2010

Methodology

We use regressions toward analyse the relationship amid our dependent and independent
variables. The zero order correlations among the dependent and independent variables,
reporting polychoric correlations for the categorical reliant variables and tetrachoric
correlations amid the binary sovereign variables.

3.1 NOTIONAL STRUCTURE

Addressing the research question requires conceptualizing of (i) innovation investment during
(and before) the crisis, which is then linked to (ii) firm behaviour that is associated with
creative destruction on the one hand and creative accumulation on the other hand. The
Innobarometer captures whether or not firms increased or decrease investment in innovation
related activities as a direct response to the recession as well as investment decisions prior to
the crisis.

The concepts creative destruction and creative accumulation are multidimensional and the
remainder of this segment discusses how the two concepts are operational. The key facets
relevant for both concepts divided into four dimensions: (i) characteristics of the innovating
firms, (ii) the different market structures that support innovation, (iii) the characteristics of
the key technologies from which innovations are derived, and (iv) the type of knowledge,
learning and innovations involved. In Figure 1 the two concepts – creative destruction and
accumulation are seen to be at two polar ends with respect to the four dimensions. For
example, innovation by creative destruction is characterised through the activities of small
firms, while the opposite – relevance of large firms is associated with innovation as creative
accumulation. The reader should bear in mind that these are seen as the polar ends of a
continuum (or four continuums: one at each level). This paper uses multiple measures to
capture each level of analysis individually. The aim of the paper is to see if the modernism
behaviour of the firms leans closer to imaginative destruction or accumulation during the
depression with respect to the period before the depression.

Characteristics of the innovating firms

Small firms, new entrants are at the core of the innovation process Innovations are driven by
large, incumbent firms that seek new solutions through formal research

Low barriers to entry into markets and low levels of concentration Barriers to entry are high
due to relative importance of appropriation and cumulativeness of knowledge and high costs
of innovation

Characteristics of the key technologies

 New technologies around which a large number of opportunities arise

 Technological advancement based on path dependent technological trajectories
 Type of knowledge and innovation Path-breaking innovations, with a greater
relevance of applied knowledge. High relevance of past innovations and
accumulated knowledge (formal R&D) leading to a large number of more incremental
innovations

Characteristics of the innovating firms

An important perception in connection with imaginative destruction at the firm level in

Figure 1 is entrepreneurship or entrepreneurial behaviour (Schumpeter, 1911 (1934). Key
driving forces are attributed to the (sudden) insights of individuals (Usher, 1954). Innovation
is associated with small firms because flexibility and responsiveness are important. This type
of innovation behaviour may for example be found in spin-offs from established companies.
The development of the ideas to new products, services or processes is likely to favour
external collaborations/strategic alliances as such set-ups help to overcome possible resource
and capability issues within new and comparatively small firms.
In creative accumulation insight is replaced with research as the key source of innovation.
These propose innovations are largely developed by large firms and with interior R&D
laboratories. Creative growth also leans towards collaboration of large corporations with the
research base – research carried out by universities, public and private research institutes.
Embedding externally or jointly generated generic research in turning it into a new product or
service requires the necessary absorptive capacity, i.e. own capabilities and research
competencies inside the firms (Cohen and Levinthal, 1990).

Another fundamental distinction at the firm level is the relative importance new firms as
opposed to incumbents as drivers of innovation in the creative destruction and creative
accumulation models. Incumbents may be at a disadvantage compared to newly established
firms in bringing about technological discontinuities and path-breaking innovation. As
Tushman and Anderson (1986) suggest existing firms may face a lack of competence in the
case in which technological discontinuities required new capabilities and skills. This is
referred to as competence-destroying discontinuities (see also Henderson and Clark, 1990).
Similarly, Leonard-Barton (1992) argues that each firm builds a knowledge set based on core
capabilities, systems and values. Core competencies may turn into core rigidities in the sense
that they can create inertia to change and innovate which is driven from outside the core
competencies.

March (1991) and Levinthal and March (1993) investigate the issue from an organizational
and learning perspective, suggesting that the capability of incumbents to survive is linked to
their capacity to put forward effective processes of organizational adaptation. That firms are
able to exploit current knowledge while at the same time exploring future technologies (see
also Tushman et al., 2004). Finally, Christensen and Rosenbloom (Christensen and
Rosenbloom, 1995; Christensen, 1997) emphasize the fact that the advantage of the attackers
with respect to the incumbents relies on the fact that the latters business is nested within a
value network which they define as the context within which a firm competes and solves
customers problems. In case of innovations which change the structure of the relevant value
network, large firms fail to keep up not for a lack of technological competences but rather
because they get stuck with their old context and customers.
In conclusion the two stylized models creative destruction and creative accumulation suggest
that on the one hand small and newly established firms due to higher flexibility and
responsiveness are more likely to introduce path-breaking innovations during technological
discontinuities, while large established firms on the other hand are more likely to bring about
frequent and incremental innovations along technological trajectories based on accumulated
knowledge.

Characteristics of the market structure

In his work on creative accumulation Schumpeter (1942) put forward suggested that large
firms and conditions of monopolistic competition are more affective in bringing about
technical progress. He writes: What we have got to accept is that [the large-scale
establishment or unit of control] has come to be the most powerful engine of progress and in
particular of the long-run expansion. In this respect, perfect competition is not only
impossible but inferior, and has no title to being set up as a model of ideal efficiency
(Schumpeter, 1942 p. 106). Other scholars lately explored this issue (Galbraith, 1952; Sylos
Labini, 1962; for a review see Scherer, 1992; and Cohen, 1995).

Nelson and Winter (1982) suggest that the market structure in a specific industry, the degree
of concentration and rate of entry, is influenced by the level that technological opportunities
arise and the ease with which innovations can be protected from imitation (i.e. the
appropriability conditions). High technological opportunities together with a low degree of
appropriability cause less concentration in an industry and vice versa. The former being
associated with creative destruction and the latter with creative accumulation.
Characteristics of the key technologies

Patterns of creative destruction and creative accumulation overlap or as associated with

technological regimes (Freeman et al., 1982; Malerba and Orsenigo, 1994, 1996; Breschi et
al., 2000). Klevorick et al. (1995) define technological opportunities along the following
three dimensions: (i) advancements in scientific and technical understandings; (ii)
technological advancements originated in other industries; and (iii) within-industry feedbacks
from technology. Their evidence suggests that differences in the degree and the source of
technological opportunities account for difference in R&D expenditure and technological
advances across industries.

Technological opportunities are often associated with the productivity of R&D. The higher
the technological opportunities, the higher the expected return of a unit of R&D expenditure
(under a given the level of appropriability). Within this perspective, high levels of new
technological opportunities favour creative destruction because the presence of technological
opportunities increases the expected return of insight and idea generation of entrepreneurs
and new firms. On the other hand, industries characterized by low technological opportunities
are less attractive for new entrants and potential innovators. Consequently, low technological
opportunities are associated to the creative accumulation model.

3.2 Type of knowledge and innovation

Creative destruction is associated with path-breaking innovations and radically new solutions
which break with traditional solutions. Key driving forces are new insights followed up by
entrepreneurs. Creative accumulation on the other hand is associated with frequent, but more
incremental type of innovations, based on past innovation activities of incumbent firms.
These two patterns are linked to differences in the type of knowledge.

Malerba and Orsenigo (1994) and Breschi et al. (2000) link cumulative learning processes
and the nature of knowledge feeding into the innovative processes to patterns of creative
destruction and accumulation. Knowledge bases refer to (i) generic knowledge – situated in
formal R&D labs, universities etc – and (ii) applied knowledge which is seen as closer to
commercialisation processes and is situated within firms (i.e. to a lesser extent involves
formal research). It is the generic knowledge and formal research which is more relevant in
the creative accumulation process, because it is the large, established firms that have the
internal and financial resources to carry out in-house R&D and the competencies to turn
generic knowledge developed outside the firms, e.g. in universities, and feed them into the
development of new products and services.

Cumulativeness means that firms innovation activities are driven by past innovation
activities. Cumulativeness is therefore high when the firm is established and can build on a
history of innovation success, and where there is a tradition of research inside the firm.
Cumulativeness is linked with creative accumulation.

This section developed four dimensions of creative destruction and creative accumulation:
the characteristics of the innovating firms, the market structure, the key technology, and the
knowledge and innovation involved. The following section explains how these dimensions
are operationalized, i.e. how creative destruction and accumulation, as well as innovation
activity before and during the crisis, are measured using the Innobarometer data.
CHAPTER 5

DATA ANALYSIS AND INTERPRETATION

The data derives from the Innobarometer Survey 2009 designed and collected by the
European Commission (European Commission, 2009). Innobarometer is conducted on a
yearly basis since 2001. Each year it emphasises a different issue, which is reflected in the
questionnaire items. The focus of the current 2009 survey is innovation related expenditure
including the effects of the economic downturn on innovation related expenditure. In total
5,238 enterprises from the 27 EU Member states, plus Norway and Switzerland responded to
the questionnaire. The sample is a random sample stratified by country, enterprise size (5 size
bands) and industry (2-digit).

The dependent variables

The dependent variable is a direct measure of innovation related investment in response to the
economic downturn. The following question is analysed: In the last six months has your
company taken one of the following actions [increased, decreased or maintained the
innovation spending] as a direct result of the economic downturn?. The variable is called
INVEST. It takes a value of 1 for decrease, 2 for maintain and 3 for increase in innovation
investment.

The dependent variable above with the investment decisions prior to the economic downturn
using the following question: Compared to 2006, has the amount spent by your firm on all
innovation activities in 2008 increased, decreased, or stayed approximately the same (adjust
for inflation). The relevant variable is called INVEST_1. Table I compares the investment
patterns across INVEST_2 and INVEST_1, and, therefore, identifies the propensity of firms
to increase or decrease innovation expenditure before and during the recession.
Table 1 Investment in innovation related activities before and after the economic downturn

INVEST_1 (before the crisis) INVEST_2 (during the crisis)

N % N %

(1) (2) (3) (4)

Increase 1,985 37.93 453 8.65
Decrease 472 9.02 1,231 23.52
Maintain 2,207 42.17 2,961 56.57
No innovative activities 328 6.27 457 8.73
D/K 242 4.62 132 2.52
Total 5,234 100 5,234 100

Source: Innobarometer 2009: own calculations.

Table I column 2 shows that 37.9% of enterprises declared that they increased innovation
investment prior to the crisis (INVEST_1). This compares to only 8.7% of companies that
declared that they increased investment in innovation as a direct result of the economic
downturn (INVEST_2; column 4). The drop in the propensity to increase investment is
mirrored in the propensity to decrease innovation investment. 9.0% of firms decreased their
expenditures before the recession, and 23.5% decreased investment during the recession.

Table 1 also shows that the largest share of firms – both before and during the crisis –
maintained the level of innovation investment. Our discussions focus (albeit not exclusively)
on explaining the behaviour of the 37.9% and 8.7% of firms that increased innovation
investment before the crisis and in response the crisis because the aim of the paper is to
determine where the innovation potential – and with it new sources of growth lie, and if these
differ from the patterns under economic growth.

The independent variables

The independent variables are designed to capture patterns leaning towards creative
destruction and accumulation as developed in the framework in Section 2 summarised in
Figure 1. Table 2 provides in the first column the variable names and in the second column
the description of the variables. The final two columns indicate if the variable is assumed to
be positively or negatively correlated with the concepts creative destruction and accumulation
respectively.

Table 2

Overview of the independent variables – variable name and description – broken down into
the four dimensions of creative destruction and accumulation

VariableName Variable description Creative Creative

destructio accumulation
n

Characteristics of the innovating firms

NEW Firm was established after 1st January 2001 + -

SIZE1 20-49 employees (base group) + -

SIZE2 50-249 employees + -
SIZE3 250-499 employees - +
SIZE4 500 or more employees - +

INTRD Firm had expenditures on in-house research - +

& development since 2006

EXTRD Firm had expenditures on research and - +

development performed for the company by
other enterprises or by research organisations
since 2006

Characteristics of the market structure

APPR Firm applied for a patent or registered a - +

design since 2006

CMPT Increased pressure from competitors had a + -

positive effect on innovation in your
company since 2006

INTMKT Firm operates in international markets - +

Characteristics of the key technologies

 TECHOPP Emergence of new technologies to be + -
exploited had a positive effect on innovation
since 2006

MKTOPP New opportunities to enter new markets had a + -

positive effect on innovation since 2006

Type of knowledge and innovation

BASIC Firm has strategic relationship in support of - +

innovation with research institutes and
educational institutions since 2006

APPLIED Firm has strategic relationship in support of + -

innovation with customers, suppliers or
competitors since 2006

The first variable listed in Table 2 is named NEW and is coded 1 for all those firms that were
newly established after 2001 and 0 otherwise. This variable used as a proxy to identify new
entrants, and, therefore, is assumed to be highly, positively correlated with the concept
creative destruction while negatively associated with creative accumulation. The second set
of variables contains four dummies representing the size of the firm. Small firms (20 to 49
employees) are used as the base comparison group in the regressions. Large size is associated
positively with creative accumulation while the reverse is the case for creative destruction.
The next two variables capturing the characteristics of the innovative firms are used to
measure the importance of research in the innovation process. They are called INTRD and
EXTRD and capture if a firm engaged in internal or external R&D (coded 1 and 0 otherwise).
As discussed in Section 2, research is seen as positively correlated with creative accumulation
and negatively with creative destruction.

Characteristics of the market structure are proxied by three dummy variables, the first of
which captures appropriability conditions. The relevant variable is called APPR and is coded
1 if a firm had expenditures in connection with patent applications or design registrations.
Appropriability is an important indicator for creative accumulation. There are no direct
measures of market concentration or barriers to entry in the Innobarometer. The two variables
used in this paper capture the level of competition and exposure to international markets
(CMPT and INTMKT). Stronger competition is assumed to be associated with those markets
in which there are many small firms and lower entry barriers. With respect to the
international market, the assumption is the role played by large, multinational company is
stronger and that this favours creative accumulation.

With respect to the types of knowledge the paper distinguishes between basic and applied
knowledge. Access to basic knowledge is measured by cooperation with universities and
research institutes, while applied knowledge is measured by cooperation with other firms.
The relevant variables BASIC and APPLIED are coded 1 if the enterprise cooperated with
the knowledge base and 0 otherwise.

Three collections of control variables are included in the empirical analysis. The first captures
growth in turnover over the three years 2006-2008 before the crisis. The rationale is the
following. Past economic performance plays a role in increasing financial resources available
for innovation and, thus, may lead to increased innovation activity in the current period.
Nonetheless, it is also possible that firms invest in innovation in order to address a drop in
sales of their existing goods and services. Growth in turnover is measured using three
dummies indicating a growth below 10 percent, between 10 and 50 percent and above 50
percent. We include two digit industry dummies and country dummies in the regressions.

The regressions predict investment in innovation based on firm, market, technology and
knowledge or innovation characteristics which taken together are used to capture patterns of
creative destruction and accumulation. The relationships between innovation investment and
the independent variables are assumed to be linear. Because the dependent variable is
categorical – decrease, increase or unchanged investment in innovation activities –
multinomial logistic regressions are estimated with the category unchanged as the base group.
Table 3 reports the results of the multinomial logit model.

Table 3

Regression results predicting an increase or decrease in innovation expenditure during and

before the crisis
 INVEST_1 (before the crisis) INVEST_2 (during the crisis)
Increase Decrease Increase Decrease
   (1) (2)  (3)  (4) 

Characteristics of the innovating firms

NEW -0.39** 0.11 -0.25 -0.02

  (0.01) (0.62) (0.34) (0.89)
SIZE1 0.10 -0.10 -0.34** -0.16
  (0.31) (0.55) (0.03) (0.14)
SIZE2 0.02 -0.10 -0.68*** -0.09
  (0.90) (0.64) (0.00) (0.50)
SIZE3 0.03 -0.03 -0.79*** 0.04
  (0.87) (0.91) (0.00) (0.82)
INTRD 0.43*** 0.33** 0.25 0.03
  (0.00) (0.04) (0.14) (0.82)
EXTRD 0.23** -0.01 -0.04 -0.06
  (0.02) (0.95) (0.79) (0.58)

Characteristics of the market structure

APPR 0.56*** 0.38* 0.37** 0.10

  (0.00) (0.07) (0.03) (0.43)
CMPT 0.19* 0.13 0.04 0.19*
  (0.05) (0.42) (0.78) (0.08)
INTMKT -0.08 0.06 0.20 0.14
  (0.41) (0.70) (0.20) (0.17)

Characteristics of the key technologies

TECHOPP 0.28*** -0.16 0.02 0.01

  (0.00) (0.32) (0.91) (0.89)
MKTOPP 0.08 -0.19 0.51*** -0.06
  (0.43) (0.23) (0.00) (0.58)

Type of knowledge
 BASIC 0.05 -0.26 0.20 -0.01
  (0.62) (0.12) (0.20) (0.95)
APPLIED 0.54*** 0.36** 0.27 0.09
  (0.00) (0.02) (0.13) (0.42)

Control variables

GROWTH1 0.41*** -0.53*** 0.22** -0.30***

  (0.00) (0.00) (0.02) (0.00)
GROWTH2 0.07 -0.82*** -0.14 -0.41***
  (0.61) (0.00) (0.49) (0.00)
GROWTH3 -0.06 -0.26 -0.45** -0.19
(0.63) (0.37) (0.01) (0.21)
Industry dummies Included Included Included Included
Country dummies Included Included Included Included

Model fit

Observations 2,820 2,792

LR Chi2(130) 644.59*** 401.66***
Log Likelihood -2,397 -2,267

Source: Innobarometer 2009: own calculations.

Estimation method is Multinomial Logit. The base group is no change in innovation

investment compared to the previous period.

Table 3 Column 1 provides the estimates of the propensity to increase investment into
innovation compared with unchanged investment prior to the recession; Column 2 compares
decrease in investment with unchanged investment prior to the recession. The estimates of
Columns 3 and 4 assess the propensity to increase, decrease investment in innovation the
base comparison group is no change in investment during the crisis.
Before the crisis (Column 1) the following variables have a positive association with
increased investment – INTRD, EXTRD, TECHOPP, CMPT, APPR, APPLIED – while
NEW has a negative association. Thus, before the crisis increase in innovation investment is
driven by variables leaning towards creative accumulation as formal research, strong
appropriability conditions and established firms are more likely to increase investment. Two
indicators used to measure behaviour of creative destruction are, too, relevant. These are the
level of technological opportunities and cooperation with other firms (APPLIED).

Column 2 of Table 3 contains estimates predicting a decline (as opposed to unchanged)

investment in innovation prior to the crisis. Three variables significantly predict decline in
investment – INTRD, APPR and APPLIED. In the first instances, this could appear counter
intuitive; however, it is those firms which are innovative per se that adjust investment
upwards or downwards compared with firms that do not change innovation expenditures.
Added to this, the firms that decreased investment prior to crisis are less likely to have
experienced a growth in turnover.

The discussion now turns to Columns 3 and 4 which contains the coefficients estimating the
propensity to invest during the crisis. The variables predicting an increase in investment are
MKTOPP which ash the strongest effect, APPR and SIZE. Compared with Column 1 (before
the crisis) formal R&D whether internal or acquired is not positively associated with
increased investment. In terms of opportunities, the relevance shifts from technological to
market openings; and while newly established firms are not (more or) less likely to increase
investment as was the case before the crisis. In Column 4 predicting a decrease in investment
during the crisis, the only variable predicting a drop in investment is CMPT which was used
as a proxy for the market concentration.

In conclusions there are two key points that derive from the analysis. Firstly, there is now
exact demarcation between creative destruction on the one hand and accumulation on the
other. Secondly, there is some support that increased investment in innovation is more
strongly associated with patterns leaning towards the creative accumulation type, compared
with during the crisis, where there is some indication that creative destruction type behaviour
is associated with increased investment.
CHAPTER 5

CONCLUSION

This study attempts to uniqueness the role of innovation fostered by public capital in
monetary growth. Government spending is both the driving force and the source of
innovation, and having an important effect on promoting economic growth. The innovation is
an effective mechanism that transforms public capital into higher output.

Innovation performance is positive to economic growth, and the rate of private capital
investment can promote economic growth. However, there exists a unidirectional causality
from economic growth to innovation spending. The findings suggest that the government
should increase financial support to foster the innovation environment and the ability of
independent innovation.

5.1 SUGGESTION FOR THE FUTURE STUDY

On the limitations described above, some suggestions are given for the future study.

Finding the exact mitigation plans and the execution, but only one respondent reply for the
relevant questions. So this can go to future study to find more plans and confirm them. This
study contacted through internet by e-mail, it is not much reliable than the straight interview
and direct observation. Further research should be carried out directly with the case.

In UK companies will have to compete more and additional on the basis of single and
innovative products and services. This will involve inspirational leadership, stronger
management skills, a highly-trained and motivated workforce, a flexible labor market that
promote assortment and fair treatment, and workplaces that recognize environmental issues
and the need for superior resource productivity.

The Governments agenda for acting on both the demand for, and supply of, skills as a major
contributor to raising productivity. It commits the Government to generated a more demand-
led training system and, through Department for Education and Skills and other relevant
Departments will realize the Strategy in England, focusing chiefly on co-sponsorship of
Sector Skills Councils. Comparable initiatives are in progress in Scotland and Wales.
Co-sponsorship of the ability for Business network to develop the capacity and capability of
division Skills Councils to boost employer leadership on skills. Using our funding of R to
ensure the successful development of Regional Skills Partnerships and working with the
Department for Work and Pensions to make straight our targets and objectives towards the
same objective of raising employment, efficiency and competitiveness.

The innovate and deliver elevated value products and services critically depends on a high
level of administration and technological skills: _ to put up on the achievement of the Science
Enterprise Centres we will toil with Business Schools and Management Institutes to build up
curriculum stuff and case studies to aid the teaching of the skills groundwork the
management of high tech, speedy growth businesses, as well as innovative product
development. We see the Tiny Business Service as having a most important role to
participate in raising the modernism performance of tiny Medium sized Enterprises in
England. Encourage innovation, skills and information transfer will be made one of the key
escape themes for Business Link. To advance the rate of innovation of small companies, the
SBS will make certain Business Link proactively targets companies with high improvement
potential.

Industry Link will tailor aid to a companys definite needs depending on its altitude of
innovation capability and the step it has reached in the product/service verve cycle.

 Suggested services will include

 rational Property Rights advice
 assistance with R&D grants
 backing with Knowledge Transfer Partnerships
 brokering group effort between companies and higher instruction Institutes
 alerting SMEs to community procurement opportunities
REFERENCES:

1. Midttun A. 2006. and innovation, compatibility or contradiction? Towards a dynamic

reinterpretation of , The Norwegian School of Management, paper 3.

2. Morhardt, J.E., Baird, S., & Freeman, K. 2002. Scoring corporate environmental and
sustainability reports using GRI 2000, ISO 14031 and other criteria, Corporate Social
Responsibility and Environmental Management, vol. 9, no. 1, pp. 215–233.

3. Norman, W. & Macdonald, C. 2004. Getting to the bottom of Triple Bottom Line,
Business Ethics Quarterly. vol. 16, no. 2, pp. 45-59.

4. Prahalad, C.K. 2004. The Fortune at the Bottom of the Pyramid: Eradicating Poverty
through Profits, Philadelphia: Wharton School Publishing.

5. Prahalad, C.K. & Hammond, A. 2002. Serving the worlds poor, profitably, Harvard
Business Review, vol. 80, no. 9, pp. 48-57.

6. Tidd, J. 2006, A Review of Innovation Models, Science and Technology Policy

Research Unit, University of Sussex.

7. Rudd, K. 2009. John Paterson Oration, Australia New Zealand School of Government
Annual Conference, Canberra, 3 September. (http://www.pm.gov.au).

8. Sabel, C. 1994. Learning by Monitoring: The Institutions of Economic Development,

in Smelser, N. and Swedberg, R. (eds), Handbook of Economic Sociology, Princeton:
Princeton University Press and Russell Sage Foundation, pp. 137–165.

9. Sabel, C. 2004. Beyond Principal-Agent Governance: Experimentalist Organisations,

Learning and Accountability, in De Staat van de Democratie. Democratic voorbij de staat, ed.
Ewald R. Engelen and Monika Sie Dhian Ho, Amsterdam: Amsterdam University Press, pp.
173–195.

10. Sabel, C. and Zeitlin. J. 2003. Active Welfare, Experimental Governance, Pragmatic
Constitutionalism: The New Transformation of Europe, Paper presented at the International
Conference of the Hellenic Presidency of the European Union, The Modernisation of the
European Social Model and EU Policies and Instruments, Ioannina, Greece, May.
11. Warner, M. and Bel, G. 2008. Competition or Monopoly? Comparing Privatisation of
Local Services in the US and Spain, Public Administration, Vol. 86, Issue 3, pp. 723–735.

12. Windrum, P. 2008. Innovation and Entrepreneuriship in Public Services, in Windrum,

P. & Koch, P. (eds) Innovation in Public Sector Services. Cheltenham: Edward Elgar.

13. Windrum, P. and García-Goñi, M. 2008. A Neo-Schumpeterian Model of Health

Services Innovation, Research Policy, Vol. 37, Issue 4, pp. 649–672.

14. Individualization And Public Sector Leadership, JOHN LAWLER; Volume 86, Issue
1, pages 21–34, March 2008.

15. Buckle down. (2009). economist.com.

16. Business Dictionary. (2010). Business Dictionary - Recession. Retrieved April 21,
2010, from Business Dictionary:
http://www.businessdictionary.com/definition/recession.html

17. Christensen, C. M. and Rosenbloom, R. S. (1995), Explaining the attackers

advantage: technological paradigms, organizational dynamics, and the value network,
Research Policy 24 (2) 233-257.

18. Cohen, W. (1995), Empirical studies of innovative cctivity, in P. Stoneman (ed.),

Handbook of the Economics of Innovation and Technological Change. Basil Blackwell:
Oxford.

19. Dosi, G. (1997), Opportunities, incentives and the collective patterns of technological
change, The Economic Journal 107 (444), 1530-1547.

20. Dosi, G., Nelson, R. and Winter, S. G. Eds. (2002), The 7ature and Dynamics of
Organizational Learning. Oxford University Press: Oxford.

21. Dosi, G. and Grazzi, M. (2010), On the nature of technologies: Knowledge,

procedures, artefacts and production inputs, Cambridge Journal of Economics 34 (1), 173-
184.

22. European Commission (2009a), Innobarometer 2009. Brussels, DG Enterprise and

Industry.
23. European Commission (2009b), Innobarometer 2009. Analytical Report, Flash
Eurobarometer No 267 – 2009, www.proinnoeurope.
eu/admin/uploaded.../Innobarometer_2009.pdf, accessed 4 July 2010.

24. Filippetti, A. and Archibugi, D. (2009), Innovation in times of crisis: The uneven
effects of the economic downturn across Europe,. SSRN Working Paper. Freeman, C., Clark,
J. and Soete, L. (1982), Unemployment and Technical Innovation.

25. Frances Pinter: London. Freeman, C. and Louca, F. (2001), As Times Goes By: From
the Industrial Revolutions to the Information Revolution. Oxford University Press: Oxford.

26. Galbraith, K. (1952), American Capitalism: The Concept of Countervailing Power.

Houghton-Mifflin: Boston.

27. Geroski, P. A., Van Reenen, J. and Walters, C. F. (1997), How persistently do firms
innovate?, Research Policy 26 (1), 33-48.

28. Granstrand, O., Patel, P. and Pavitt, K. (1997), Multi-technology corporations: Why
they have distributed rather than distinctive core Competences, California Management
Review 39 (4).

29. Henderson, R. M. and Clark, K. B. (1990), Architectural innovation: The

reconfiguration of existing product technologies and the failure of established firms,

30. Administrative Science Quarterly 35( ) 9-30.