In just a short period of time the spatial location of invention can shift substantially. The San Francisco Bay Area grew from 5 percent of U.S. domestic patents in 1975-1984 to over 12 percent in 1995-2004, for example, while the share for New York City declined from 12 percent to 7 percent. Smaller cities like Austin, Texas, and Boise, Idaho, seem to have become clusters of innovation overnight. Despite the prevalence of these movements, we know very little about what drives spatial adjustments in U.S. invention, the speed at which these reallocations occur, and their economic consequences. In this paper, HBS professor William R. Kerr investigates whether breakthrough inventions draw subsequent research efforts for a technology to a local area. Evidence strongly supports the conclusion that centers of breakthrough innovations experience subsequent growth in innovation relative to their peer locations.
No one organization can monopolize knowledge in any given field. That's why modern companies must develop a new expertise: the ability to attract novel solutions to difficult or unanticipated problems from outside sources around the world. A conversation with Harvard Business School professor Karim R. Lakhani on the keys to managing distributed innovation.
Despite the current strength and promise of the Internet software market, the future pace of growth and innovation is not assured. The principles of choice, opportunity, and interoperability were important in the growth of PC software and in the overall health of the information technology ecosystem, and these same principles will shape competition in Internet software, according to HBS professor Marco Iansiti. Given the unprecedented speed at which this industry is developing, consumers and the industry should watch carefully as different companies compete. Choice, opportunity, and interoperability should serve as an important lens, particularly when focused on companies with especially large footprints in the new markets.
A central challenge to modern business cycle analysis is that standard macro models are unable to generate fluctuations in the stock market with the amplitude, persistence, and lead-lag pattern observed in the data. At the same time, standard macro models predict that good news about future, such as those received during 1994-1995 on the arrival of IT, lead to recessions rather than expansions. HBS professor Diego Comin and coauthors develop a model that overcomes these two problems by explicitly incorporating an endogenous speed of diffusion of technologies that is increasing in the resources spent in adoption. Revisions in beliefs about future profits generate fluctuations in the stock market with the amplitude and lead over output observed in the data. The firms' investment decisions in adoption leads to a shift in labor demand that increases hours worked and output.
What makes sharing new ideas across cultural lines so difficult? Given that disclosing new ideas makes one person vulnerable to the other, innovation communication requires trust. The literature on workplace relationships distinguishes affect-based trust—feelings of socio-emotional bond with the other—and cognition-based trust—judgments of the other's reliability and competence. Recent organizational psychology research on capabilities needed to work across cultures has also identified affect-relevant strengths such as confidence and nonverbal communication. HBS professor Roy Y.J. Chua and Columbia Business School professor Michael W. Morris survey a sample of business executives with diverse professional networks, assessing their inter-cultural capability and measuring both kinds of trust as well as idea sharing in their working relationships.
The changeover from defined benefit to defined contributions retirement plans in the United States has created a vast group of individuals that faces (or will face) the difficult problem of using a lump sum of assets to provide consumption for a relatively long but uncertain number of years. Up to this point, however, consumers appear not to have embraced annuitization. HBS professor Julio J. Rotemberg suggests an alternative instrument that, like immediate annuities, provides longevity insurance and postpones income until old age. In the proposed Mutual Inheritance Fund (MIF), a pool is formed by having individuals of a particular age buy shares in a mutual fund. The income from the underlying assets in the mutual fund is reinvested in the fund so that the value of the shares in an individual's name (and possibly also the number of these shares) grows over time. The basic idea behind the MIF is that the shares of pool members who die are liquidated, and the proceeds are then distributed in cash to the remaining members in proportion to the number of mutual fund shares that are currently in their name.
Smart science-based businesses view today's economic turmoil as an opportunity to stoke up research and innovation for long-term competitive advantage, says professor Vicki L. Sato. How about your business?
Think you could be CIO? Jim Barton is a savvy manager but an IT newbie when he's promoted into the hot seat as chief information officer in The Adventures of an IT Leader, a novel by HBS professors Robert D. Austin and Richard L. Nolan and coauthor Shannon O'Donnell. Can Barton navigate his strange new world quickly enough? Q&A with the authors, and book excerpt.
How can Japan create a better business environment for innovation? Japan presents a unique case of industrial structures that have produced remarkable developments in certain sectors but seem increasingly inadequate to do the same in modern technology industries, which rely on ecosystems of firms producing complementary products. Robert Dujarric and HBS professor Andrei Hagiu present three case studies of software, animation, and mobile telephony to illustrate potential sources of inefficiencies. Like all advanced economies, Japan faces two interconnected challenges. The first challenge is rising competition from lower-cost countries with the capacity to manufacture midrange and in some cases advanced industrial products. At the same time, Japan confronts changes in the relative weights of manufacturing and services, including soft goods, which go against the country's long-standing competitive advantage and emphasis on manufacturing. If Japan is to continue to prosper in a world where its ability to rely principally on manufacturing will diminish, its policymakers will need to capitalize on its untapped innovative power.
Like a good case study, this month's question divided respondents nearly down the middle, says professor Jim Heskett. Can managers lead both a large, established organization and encourage intrapreneurial effort inside it? Readers weighed in. (Online forum now closed. Next forum begins June 5.)
An economic crisis is a charter for business leaders to rewrite and rethink how they do business, says Harvard Business School professor Lynda M. Applegate. The key: Don't think retrenchment; think growth.
Since it hit the airwaves half a century ago, Kind of Blue by Miles Davis has influenced the hearts and minds of jazz fans everywhere. Its songs became instant classics, and it has also converted many a nonfan to appreciate the music's subtlety and complexity. In a new business case, HBS professor Robert D. Austin and Carl Størmer highlight the takeaways for thoughtful managers and executives from this story of creation and innovation.
Simple solutions to complex problems lead to breakthroughs in industries from retailing to personal computers to printing. So let's try health care, too. According to HBS professor Clayton M. Christensen and coauthors of The Innovator's Prescription, such disruption to an industry might look like a threat, but it "always proves to be an extraordinary growth opportunity." Book excerpt.
The H-1B visa program governs most admissions of temporary immigrants into the U.S. for employment in patenting-related fields. This program has become a point of significant controversy in the public debate over immigration, with proponents and detractors at odds over how important H-1B admission levels are for U.S. technology advancement and whether native U.S. workers are being displaced by immigrants. In this study, Kerr and Lincoln quantify the impact of changes in H-1B admission levels on the pace and character of U.S. invention over the 1995-2006 period.
A provocative new book, The Venturesome Economy, argues that the world isn't flat at all, says HBS professor Jim Heskett. But in supporting innovation, does flatness even matter? Readers around the world weighed in with a constellation of viewpoints. (Online forum now closed; next forum begins February 5.)
Published in 2008
This paper examines the sciences of design as an emerging field of study that cuts across disciplinary boundaries. The paper summarizes and synthesizes the positions, reflections, opportunities, and challenges expressed at the first doctoral consortium to explore the topic, held in 2008. It thus provides a useful agenda for clarifying and articulating important strands of this nascent field.
The innovation process is fraught with uncertainty. Managers often do not know ahead of time the ideal mix of individuals and skills needed to solve innovation-related problems. One way around this uncertainty is to have multiple paths, approaches, or designs explored at once. The "parallel search" principle can be used inside the firm just as it may be used more generally by pursuing "open innovation". However, having too many searchers attempting to solve the same problem can undercut the benefits if it leads to less effort and investment. The authors study the outcomes of 645 software development contests, conducted by a software outsourcing vendor, involving over 9,000 coders, to understand the relationship between parallel search and increasing competition and innovation.
From Facebook to smartphones, advances in technology are changing the way we work and communicate. Professor David Yoffie led three experts in a recent panel discussion on "The Technology Revolution and its Implications for the Future" at the HBS Centennial Business Summit.
The past 10 years have seen a profound change in the conditions under which financial innovations are pursued. Because patents fundamentally alter the way in which innovations can be used, assessing the impact of patenting is critical to understanding the future of financial innovation. Litigation is crucial to delineating the boundaries of patent awards, and this paper examines the litigation of such financial patents to gain insights into the future of financial innovation. This paper seeks to understand the litigation of financial innovations, an area where patents have only recently been granted.
HBS professor Clayton M. Christensen, who developed the theory of disruptive innovation, joins colleagues Michael B. Horn and Curtis W. Johnson to advocate for ways in which ideas around innovation can spur much-needed improvements in public education. A Q&A with the authors of Disrupting Class: How Disruptive Innovation Will Change the Way the World Learns.
Business leaders must manage and support creativity just as they would any other asset. Harvard Business School professors Teresa Amabile, Mary Tripsas, and Mukti Khaire discuss where creativity comes from, how entrepreneurs use it, and why innovation is often a team sport. From the HBS Alumni Bulletin.
How long are technology adoption lags? Can cross-country differences in technology adoption lags account for a significant fraction of cross-country GDP disparities? Diego Comin of Harvard Business School and Bart Hobijn of the Federal Reserve Bank of New York develop a new benchmark to understand the diffusion process of individual technologies and the consequences that this has for aggregate growth. This benchmark provides a rationale for the evolution of diffusion measures that include how many units of technology each adopter has adopted in addition to the traditional extensive margin. The model is estimated to obtain measures of adoption lags for 15 technologies in 166 countries.
Managers face a range of options to diffuse innovative practices within their organizations. This paper focuses on one such technique: providing practice-specific information through mechanisms such as internal seminars, demonstrations, knowledge management systems, and promotional brochures. In contrast to corporate mandates, this "information provision" approach empowers facility managers to decide which practices to actually implement. The authors examine how corporate managers diffused advanced environmental management practices within technology manufacturing firms in the United States. The study identifies several factors that encourage corporate managers to employ information provision, including subsidiaries' related expertise, the extent to which the subsidiaries were diversified or concentrated in similar businesses, and the geographic dispersion of their employees.
Management could change a lot in the coming years, says HBS professor Jim Heskett. A few reasons: continued development of the Internet and the transparency and communities it has spawned, and new attitudes toward work. But will innovation in management mostly be confined to entrepreneurs? What do you think? Online forum now closed.
Prize-linked savings (PLS) products are savings vehicles that may appeal to people with little savings and little interest in traditional savings products. PLS products offer savers a return in the form of the chance to earn large prizes, rather than in more traditional forms of interest or dividend income or capital appreciation. The probability of winning is typically determined by account balances, and the aggregate prize pool can be set to deliver market returns to all savers. Prize-linked assets are offered in over twenty countries around the world—including the U.K., Sweden, South Africa, and many Latin American and Middle Eastern countries—but are not available in the United States, where state laws and federal regulations make the offering of prize-linked programs problematic. This working paper provides a first look into demand for a PLS product in the United States.
Consumers appear increasingly willing to make purchase decisions based upon their emotions about a product—how it looks, or sounds, or makes them feel using it. But the traditional design process based on user experience goes only so far in creating radical innovation. Harvard Business School visiting scholar Roberto Verganti is exploring the new world of "design-driven innovation."
What factors should influence the design of a complex system? And what is the impact of choices on both product and organizational performance? These issues are of particular importance in the field of software given how software is developed: Rarely do software projects start from scratch. The authors analyzed the evolution of a commercial software product from first release to its current design, looking specifically at 6 major versions released at varying periods over a 15-year period. These results have important implications for managers, highlighting the impact of design decisions made today on both the evolution and the maintainability of a design in subsequent years.
Published in 2007
Corporate R&D labs used to be the key for companies to create competitive advantage. But in the 21st century, innovation is moving out of the lab and across the globe. That's why Harvard Business School professor Alan MacCormack and his research collaborators believe that a real source of competitive advantage is skill in managing innovation partnerships.
Fostering innovation in a mature company can often seem like a swim upstream—the needs of the existing business often overwhelm attempts to create something new. Harvard Business School professor Lynda M. Applegate shows how one of the forces that threatens established companies can also be a source of salvation: disruptive change. Plus: Innovation worksheets.
Collaboration is becoming a new and important source of competitive advantage. No longer is the creation and pursuit of new ideas the bastion of large, central R&D departments within vertically integrated organizations. Instead, innovations are increasingly brought to the market by networks of firms, selected according to their comparative advantages, and operating in a coordinated manner. This paper reports on a study of the strategies and practices used by firms that achieve greater success in terms of business value in their collaborative innovation efforts.
It has been well documented that strong trust between a buyer and supplier provides many advantages, such as increased productivity. But according to new research coauthored by HBS professor Felix Oberholzer-Gee, trusting relationships can also have a negative side that managers must take into account.
Apple's continuing development from computer maker to consumer electronics pioneer is rich material in a number of Harvard Business School classrooms. Professor David Yoffie discusses his latest case study of Apple, the 5th update in 14 years, which challenges students to think strategically about Apple's successes and failures in the past, and opportunities and challenges in the future.
Published in 2006
The development and diffusion of new innovations are central to economic growth, and understanding the firm-level underpinnings of technology progress is important to academics, policymakers, and business managers. While many researchers have examined (either separately or together) corporate research and development and technology diffusion, they run into two significant data constraints. William R. Kerr and Shihe Fu describe how they developed a new dataset for studying corporate innovation that encompasses three important existing datasets. This paper summarizes the Industry R&D Survey for researchers who want to study innovation through the Census Bureau's data.
Why have decades of executives fumbled innovation? One reason: Existing corporate structures, controls, and incentives do work against out-of-the-box thinking. Professor Rosabeth Moss Kanter, who has just published a Harvard Business Review article on the topic, discusses her research into the classic traps of innovation and how to avoid them.
Over the past ten years there's been a clear link between IT investment and productivity growth in the U.S. economy. But what impact has IT had on competition? This paper identifies several recent changes in the competitive dynamics of U.S. industries and shows that they are associated with IT intensity; the more IT and industry has, the greater the changes. Using case studies, previous research, and a simple model, the authors offer a theory that explains these patterns in the data. They argue that IT allows the rapid spread of business process innovations, which in turn leads to more turbulent and concentrated industries.
It seems clear that firms with an existing R&D function are better able to use related outside research than firms without an R&D function. But can specific products also "absorb" a firm's knowledge of related technologies? Using patent data and the example of automobile carburetors, Daniel Snow studied how companies may adapt a component of a "radical innovation" technology for their own current-technology products. He also poses a far-reaching question for companies: Can they capture the returns of these inventive activities?
The "Long Tail," a term coined by Chris Anderson—and the title of his new book—describes the item popularity curve. Does the Long Tail represent a paradigm shift for business and consumer behavior? What are its implications for management going forward?
Published in 2005
When true broadband arrives, everything will change—work, play, and society—say professors Robert Austin and Stephen Bradley. What a truly interactive world will look like is the subject of their new book The Broadband Explosion.
A "Robin Hood" cardiac hospital in India—which charges wealthy patients, yet equally welcomes the destitute—is an exciting example of entrepreneurship in the subcontinent, says HBS professor Tarun Khanna.
Published in 2004
Great firms can be undone by disruptors who analyze and exploit an incumbent’s strengths and motivations. From Clayton Christensen’s new book Seeing What’s Next.
You have three potential innovations, but resources to develop just one. Here are diagnostics to help you make the best decision. From Strategy & Innovation newsletter.
Professor Felix Oberholzer-Gee and co-author Koleman Strumpf floored the disbelieving music industry with their findings that illegal music downloads don’t hurt CD sales. Oberholzer discusses what the industry should do next.
Published in 2003
"Right stuff" managers may be entirely wrong to lead a new-growth business. An excerpt from The Innovator's Solution by Clayton M. Christensen and Michael Raynor.
In their new book, The Innovator’s Solution, HBS professor Clayton Christensen and co-author Michael E. Raynor propose four guidelines for developing a "disruptive growth engine." The problem: According to the authors, few organizations have been able to achieve more than one disruptive technology in their lifetimes. Why is it so difficult?
Teradyne was successful. Hewlett-Packard was not. Professor Clark Gilbert writes about how two companies had such different results with disruptive innovation.
Clayton M. Christensen, author of The Innovator’s Dilemma, talks about his upcoming follow-on book on creating sustainable new-growth businesses. His conclusions may surprise you.
Managers know they need growth to survive—but innovation isn't easy. In this Harvard Management Update article, HBS professor Clayton Christensen and co-authors detail the six keys to creating new-growth businesses.
Published in 2001
From countries to companies, HBS Professor Clayton Christensen sees disruptive technologies upsetting applecarts all over the globe. In his talk at the HBS Global Alumni Conference 2001, Christensen discussed how disruptive technologies could change forever the health field, Microsoft, and even the Harvard Business School.
According to HBS professor Clayton M. Christensen, the venture capital industry—like computers, telephony, and brokerage before it—is susceptible to the same forces that have waylaid many seemingly invincible players. What that means, said the author of the influential bestseller The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail, is that the time is ripe for the right people to create new, disruptive forms of financing.
When introduced with speed and flair, disruptive technologies have the power to boost new companies and lay low other, seemingly invincible incumbents. Technology-savvy experts at Cyberposium considered their own successes and failures with the volatile medium, and passed on a bit of advice, too.
