Innovation

98 Results

 

Innovation, Reallocation, and Growth

Daron Acemoglu, Ufuk Akcigit, Nicholas Bloom, and William Kerr

Industrial policies that subsidize (often large) incumbent firms, either permanently or when they face distress, are pervasive. Despite the ubiquity of such policies, their effects are poorly understood. They may encourage incumbents to undertake greater investments, increase productivity, and protect employment. But they may also reduce economic growth by discouraging innovation by both entrants and incumbents and slowing down reallocation. The reallocation implications of such policies may be particularly important because the existing literature attributes as much 80 percent of productivity growth in the United States to reallocation when less efficient firms exit and more efficient firms enter. In this paper, the authors build a model of firm innovation and growth that enables an examination of the forces jointly driving innovation, productivity growth, and reallocation. This model fits the key moments from microdata reasonably well, and is in line with the range of micro estimates in the literature. Read More

Fostering Translational Research: Using Public-Private Partnerships to Improve Firm Survival, Employment Growth, and Innovative Performance

Sen Chai and Willy C. Shih

The authors demonstrate that a unique Danish mediated public-private partnership model for fostering the translation of basic science into commercial applications help firms significantly decrease the likelihood of bankruptcy while substantially increasing the average level of employment. Funded firms in the study were granted significantly more patents and published more peer-reviewed papers, and the impact of these publications was significantly higher. In addition, the mediated partnership model improved the knowledge produced as well as the collaborative behavior of scientists with a significantly higher level of citations and more cross-institutional coauthored publications. Read More

Three-Dimensional Strategy: Winning the Multisided Platform

Done right, companies competing as a multi-sided platform often win with higher percentage profit margins than those enjoyed by traditional resellers. The problem is that a winning strategy is far from self-evident. Professor Andrei Hagiu explains the potential and the pitfalls for life as an MSP. Open for comment; 2 Comments posted.

The Novelty Paradox & Bias for Normal Science: Evidence from Randomized Medical Grant Proposal Evaluations

Kevin J. Boudreau, Eva C. Guinan, Karim R. Lakhani, and Christoph Riedl

A key task for executives and managers involved with innovation is to evaluate new ideas and proposals. In the sciences, one longstanding hypothesis contends that research ideas outside the mainstream are susceptible to being discounted, rejected, or ignored. These days, expert peer review in academic science is the approach most relied upon for enabling research agendas and providing research funds. Are novel research projects—those deviating from existing research paradigms—treated with a negative bias in expert evaluations? In this paper, the authors investigate how nascent scientific hypotheses are evaluated, specifically looking at the process by which medical research grant proposals are assessed by "gatekeepers": in this case, elite researchers from a leading medical school. Innovation requires novelty—but novelty, as this paper shows, is not appreciated and is in fact penalized. These findings help explain concerns about incrementalism in science and also point at the challenge that most organizations face when dealing with novel topics Read More

10 Reasons Customers Might Resist Windows 8

Has Microsoft become too innovative? Professor Rosabeth Moss Kanter, a leader in the field of change management, discusses reasons that people might not rush to embrace Windows 8. Open for comment; 25 Comments posted.

Why Business IT Innovation is so Difficult

If done right, IT has the potential to completely transform business by flattening hierarchies, shrinking supply chains, and speeding communications, says professor Kristina Steffenson McElheran. Why, then, do so many companies get it wrong? Open for comment; 5 Comments posted.

Colocation and Scientific Collaboration: Evidence from a Field Experiment

Kevin Boudreau, Ina Ganguli, Patrick Gaule, Eva Guinan, and Karim Lakhani

In recent years there has been considerable interest in the policy arena on fostering collaborative and especially interdisciplinary collaborations. Yet there is scant evidence on how to do this in practice. To learn how team members find each other in the scientific community and decide to collaborate, the authors designed and carried out an experiment involving Harvard University and its affiliated hospitals. Results suggest that matching between scientists may be subject to considerable frictions, even among scientists in relatively close geographic proximity and in the same organizational system. However, even a brief and focused event facilitating face-to-face interactions can be useful for the formation of new scientific collaborations. Read More

Public Procurement and the Private Supply of Green Buildings

Timothy Simcoe and Michael W. Toffel

Government purchasing programs often have policy objectives that go beyond getting a good deal for the taxpayer. For example, governments may purchase products with enhanced environmental or safety features not only to reduce environmental impacts and safeguard employees, but also to promote broader adoption of similar products in the private market. Such policies have been deployed by governments across the United States and European Union, but little is known about how well they actually work. This paper examines the impact of environmentally friendly government procurement policies on private-sector adoption of the targeted products. The authors find that municipal government green building procurement policies that apply only to municipal buildings also accelerate the use of green building practices in the private sector, both in the cities with these policies as well as in neighboring cities. They also find that such government policies encourage private-sector investment in complementary services, which likely reduces green building costs to private developers. Read More

Funding Innovation: Is Your Firm Doing it Wrong?

Many companies are at a loss about how to fund innovation successfully. In his new book, The Architecture of Innovation, Professor Josh Lerner starts with this advice: get the incentives right. Open for comment; 4 Comments posted.

How Technology Adoption Affects Global Economies

In a series of research papers, Associate Professor Diego A. Comin and colleagues investigated the relationship between technology adoption and per capita income. They found that the rate at which nations adopted new tools hundreds of years ago strongly affects whether those nations are rich or poor today. Open for comment; 11 Comments posted.

Five Ways to Make Your Company More Innovative

How do you create a company that unleashes and capitalizes on innovation? HBS faculty experts in culture, customers, creativity, marketing, and the DNA of innovators offer up ideas. From HBS Alumni Bulletin. Open for comment; 11 Comments posted.

Organization Design for Distributed Innovation

Carliss Y. Baldwin

MIT professor Eric von Hippel first coined the term "distributed innovation" to describe a system in which innovation emanates not only from the manufacturer of a product but from many sources including users and rivals. Over the years, systems of distributed innovation—so-called business ecosystems—have become increasingly prevalent in many industries. These entities generally encompass numerous corporations, individuals, and communities that might be individually autonomous but related through their connection with an underlying, evolving technical system. In this paper, prepared for the 1st Organizational Design Conference, held at Harvard Business School in August 2012, HBS professor Carliss Baldwin examines four central themes: 1) Distributed innovation as the unintended consequence of modularity; 2) The advantage of business ecosystems for creative problem-solving; 3) Organizational design of business ecosystems; and 4) Competition and technological innovation in business ecosystems. Overall, Baldwin argues that the potential benefits of distributed innovation must be recognized, and the field of organization design must broaden its traditional focus on the individual firm to encompass this compelling new approach for creating value. Read More

HBS Cases: Who Controls Water?

In a recent field study seminar, Professor Forest L. Reinhardt discussed the case "Woolf Farming & Processing," which illustrates how access to water—a basic building block of agriculture—is affected by everything from complex government-mandated requirements to a 3-inch endangered bait fish. Open for comment; 4 Comments posted.

Is JC Penney’s Makeover the Future of Retailing?

The stuffy department store chain has become emboldened under new CEO Ron Johnson, with plans for an innovative store upgrade, simplified prices, and a brand polish. Professor Rajiv Lal discusses whether Johnson can repeat his previous magic at Apple and Target. Open for comment; 45 Comments posted.

Open Innovation and Organizational Boundaries: The Impact of Task Decomposition and Knowledge Distribution on the Locus of Innovation

Karim R. Lakhani and Michael L. Tushman

Open innovation, enabled by low-cost communication and the decreased costs of memory and computation, has transformed markets and social relations. In contrast to firm-centered innovation, open innovation is radically decentralized, peer based, and includes intrinsic and pro-social motives. In this paper the authors use in-depth examples from Apple, NASA, and Lego to argue that in contexts of increasing modularity and decreased communication costs, open innovation will at least complement, if not increasingly substitute for, more traditional innovation modes. For this reason emerging theories of innovation, organizational design, and leadership for innovation must be informed by these contrasting innovation modes and the implications for governance, incentives, intellectual property, managerial choice, professional and organizational identity, and organizational cultures. Read More

When to Sell Your Idea: Theory and Evidence from the Movie Industry

Hong Luo

How completely should an innovator develop his idea before selling it? HBS assistant professor Hong Luo addresses this question in a theoretical framework that links the sales stage to the innovator's "observable quality." She uses the context of Hollywood movie script writing-looking at whether it's better to pitch the mere idea for a film or to write the entire screenplay and then try to sell it "on spec." Read More

HBS Cases: Clocky, the Runaway Alarm Clock

There had not been an innovative breakthrough in alarm clock design since the snooze button until entrepreneur Gauri Nanda created Clocky. Her runaway hit has been the inspiration for several cases written by Professor Elie Ofek. Open for comment; 8 Comments posted.

It’s Alive! Business Scholars Turn to Experimental Research

Business researchers are turning increasingly to experiments in the lab and field to unlock the secrets of what motivates CEOs, consumers, and policymakers. Open for comment; 5 Comments posted.

First-Party Content, Commitment and Coordination in Two-Sided Markets

Andrei Hagiu and Daniel Spulber

Two-sided platforms face a challenging coordination problem that consists of attracting both buyers and sellers. Participation by both depends on their expectations of participation on the other side of the market. To improve such coordination, many platforms provide "first-party content," such as games (e.g. Microsoft's Halo on Xbox), objective search results (Google and Bing) or, in the case of Amazon and eBay, product information and payment systems. First-party content makes participation more attractive to one side (typically, users), independently of the presence of sellers. Importantly, first-party content may be either a complement or a substitute for third-party sellers' products. For instance, Halo is a substitute for games provided by Electronic Arts on the Xbox; on the other hand, the Xbox Live online playing system is a complement. Similarly, Amazon's shipping services complements its third-party sellers' offerings, but the products Amazon sells under its own name compete with them. Professors Hagiu and Spulber examine the incentives that two-sided platforms have to invest in first-party content in order to coordinate adoption by both sides. The authors show that the incentives for firms to use first-party content depend crucially on the nature of buyers' and sellers' expectations and the relationship between first-party content and third-party seller participation (complements or substitutes). Read More

Perfecting the Project Pitch

Entrepreneurs may be great innovators, but not necessarily great presenters. Associate Professor Thomas Steenburgh teaches them the fine art of product pitching. Open for comment; 8 Comments posted.

How Disruptive Innovation is Remaking the University

In The Innovative University, authors Clayton M. Christensen and Henry J. Eyring take Christensen's theory of disruptive innovation to the field of higher education, where new online institutions and learning tools are challenging the future of traditional colleges and universities. Open for comment; 20 Comments posted.

Five Discovery Skills that Distinguish Great Innovators

In The Innovator's DNA, authors Jeff Dyer , Hal Gergersen, and Clayton M. Christensen build on the idea of disruptive innovation to outline the five discovery skills that distinguish the Steve Jobses and Jeff Bezoses of the world from the run-of-the-mill corporate managers. Open for comment; 21 Comments posted.

Inducement Prizes and Innovation

Liam Brunt, Josh Lerner, and Tom Nicholas

Throughout recent history, many foundations have tried to induce innovation through competition, offering massive cash prizes to inventors who meet the challenge of creating world-changing inventions. For instance, in 1996 the X Prize Foundation offered $10 million to the first non-government organization to launch a reusable, suborbital manned spacecraft twice within two weeks. The prize was awarded in 2004 to a project financed by Microsoft co-founder Paul Allen. The problem is that inventors cannot win these competitions if they cannot come up with funding to realize their inventions, and research and development costs often exceed the amount of the cash prize. So, does the incentive of an eventual prize really induce innovation? In this paper, Liam Brunt, Josh Lerner, and Tom Nicholas look to answer that question, using a data set of prizes awarded by the Royal Agricultural Society of England (RASE) between 1839 and 1939. Read More

Embracing Paradox

CEOs are often innovation cheerleaders, hoping that new ventures will eventually help reshape the industry for the better. But in tough economic times, the other senior company executives often choose to ignore innovative ventures and focus instead on the traditional core business, which reliably generate cash flow. This leads to a situation in which the CEO turns into more of a broker than a leader—trying to negotiate deals between the heads of the core units and the new units. That's a recipe for failure, according to Michael L. Tushman, Wendy K. Smith, and Andy Binns, who argue that firms can thrive only if the whole senior management team can embrace the tensions between the new and the old. In this paper, they introduce three guiding principles to help executives grow their core businesses while still nurturing their new ones. Read More

HBS Faculty Comment on Environmental Issues for Earth Day

Harvard Business School faculty members offer their views on the many business facets of "going green." Open for comment; 4 Comments posted.

The Contingent Effect of Absorptive Capacity: An Open Innovation Analysis

Andrew A. King and Karim R. Lakhani

Does experience with adopting technology improve a person's capacity for inventing better technology? On the other hand, does invention experience increase the capacity for adoption? This paper explores how adoption and invention affect each other, using data from several programming competitions sponsored by The MathWorks Corporation. Research was conducted by Andrew A. King of the Tuck School of Business at Dartmouth College and Karim R. Lakhani at Harvard Business School. Read More

Platform Competition under Asymmetric Information

Hanna Halaburda and Yaron Yehezkel

Research by Hanna Halaburda (Harvard Business School) and Yaron Yehezkel (Tel Aviv University) shows how pricing, profits, and market efficiency are affected in two-sided markets, such as with smartphone and video game platforms, when users and developers do not know the utility or costs associated with the platform until they join. Read More

Schumpeterian Competition and Diseconomies of Scope: Illustrations from the Histories of Microsoft and IBM

Timothy Bresnahan, Shane Greenstein, and Rebecca Henderson

Firms dominant in one era are often less successful in new technological eras, despite being able to exploit economies of scope and other incumbent advantages. What leads to this Schumpeterian creative destruction? Researchers Timothy Bresnahan (Stanford), Shane Greenstein (Northwestern), and Rebecca Henderson (Harvard Business School) look to IBM and Microsoft for an answer. Read More

The Most Important Management Trends of the (Still Young) Twenty-First Century

HBS Dean Nitin Nohria and faculty look backward and forward at the most important business trends of the young twenty-first century. Read More

The Dark Side of Creativity: Original Thinkers Can Be More Dishonest

Francesca Gino and Dan Ariely

Anyone who has spent significant time with artists knows that creative genius often comes with a dark side. This paper offers experimental evidence, specifically with regard to the relationship between creativity and unethical behavior. Research involving four experiments with university students was conducted by Francesca Gino of Harvard Business School and Dan Ariely of the Fuqua School of Business. Open for comment; 40 Comments posted.

Sustainable Cities: Oxymoron or the Shape of the Future?

Annissa Alusi, Robert G. Eccles, Amy C. Edmondson, and Tiona Zuzul

Among the issues looming large in the twenty-first century is a rapid rise in the number of people living in cities and a rapidly growing awareness of our threat to the Earth's environment. In response to both, a number of major corporations and various government bodies have teamed up to explore the idea of "ecocities" —urban communities ideally designed around the idea of environmental sustainability. This paper explores the idea by looking at several ecocities in progress in China, Abu Dhabi, South Korea, Finland, and Portugal. Research by professors Robert G. Eccles and Amy C. Edmondson, doctoral candidate Tiona Zuzul, and HBS research assistant Annissa Alusi. Open for comment; 2 Comments posted.

Agglomerative Forces and Cluster Shapes

William R. Kerr and Scott Duke Kominers

HBS professor William R. Kerr and doctoral candidate Scott Duke Kominers develop a theoretical model for analyzing the forces that drive agglomeration, or industrial clustering. It is rare that researchers systematically observe the forces like technology sharing, customer/supplier interactions, or labor pooling that lead to firm clustering. Instead, the data only portray the final location decisions that firms make (for example, firms that utilize one type of technology are clustered over 50 miles, while those using another technology are clustered over 100 miles). The researchers' model identifies how these observable traits can be used to infer properties of the underlying clustering forces. Read More

Modularity for Value Appropriation--How to Draw the Boundaries of Intellectual Property

Carliss Y. Baldwin and Joachim Henkel

Many firms have adopted models of "open innovation," in which they seek ideas from external sources such as university labs, independent entrepreneurs, customers, and other companies. While such a business model has the potential to create value, the inherent intellectual property issues can be sticky. This paper discusses how companies can address these issues by adopting a system of modularity, wherein innovation in one part of a project will not require changes in all the other parts. Research was conducted by Joachim Henkel of Technische Universität München and Harvard Business School professor Carliss Y. Baldwin. Read More

Growth Through Heterogeneous Innovations

Ufuk Akcigit and William R. Kerr

Economists have long recognized that innovation is central to economic growth and development. But as a profession, economics is just beginning to model the many types of innovations that exist and the amazing heterogeneity in the firms that conduct research and development--from General Electric to Silicon Valley start-ups. This paper provides theoretical and empirical evidence surrounding how firm size influences the types of R&D undertaken, with particular focus on choices to pursue exploration R&D (capturing new product lines) versus exploitation R&D (refining current product lines internally). From the choices made by individual firms and new entrepreneurs, the model then builds to consider aggregate economic growth. Research was conducted by Ufuk Akcigit of the University of Pennsylvania and William R. Kerr of Harvard Business School. Read More

Boundary Spanning in a For-Profit Research Lab: An Exploration of the Interface Between Commerce and Academe

Christopher C. Liu and Toby E. Stuart

In science-based industries, innovation requires bridging the boundary between universities and companies. As entrepreneurial faculty venture into the world of commerce by building relationships and reputations in industry, company researchers and dealmakers seek access to the distributed knowledge base that resides within the community of scholars. But what happens within organizations when scientists venture deeply into the world of academe? In this look at one influential life sciences company, Christopher C. Liu of the Rotman School of Management and Toby E. Stuart of Harvard Business School find important connections between publishing, the allocation of rewards within the company, and the structure of the communication network inside and beyond the borders of the organization. Read More

The Effect of Market Leadership in Business Process Innovation: The Case(s) of E-Business Adoption

Kristina McElheran

The connection between market leadership and the adoption of new technologies is central to understanding how firms maintain or gain competitive advantage over time. One key determinant of firm openness to either product or process innovation is how radical or incremental a particular change is for the organization. Using the context of IT-enabled business processes for e-buying and e-selling, a setting that offers a complementary view to studies that have focused on R&D expenditure and patents as measures of innovation, HBS professor Kristina McElheran sheds light on whether, when, and why market leaders might be more likely to adopt new innovations. This study represents the first robust, multi-industry evidence that market leaders are far more likely to adopt incremental rather than radical business process innovations. Read More

Business Model Innovation and Competitive Imitation

Ramon Casadesus-Masanell and Feng Zhu

When and why should an entrant adopt a new business model when the innovation could be imitated by an incumbent? In this paper, HBS professor Ramon Casadesus-Masanell and University of Southern California professor Feng Zhu examine the desirability, or lack thereof, of business model innovations when they cannot be protected, opening the door to competitive imitation. Issues of competing through new business model design become more important given the increasing number of opportunities for business model configurations enabled by technological progress, new customer preferences, and deregulation. Read More

What Top Scholars Say about Leadership

Rakesh Khurana

As a subject of scholarly inquiry, leadership—and who leaders are, what makes them tick, how they affect others—has been neglected for decades. The Handbook of Leadership Theory and Practice, edited by Harvard Business School's Nitin Nohria and Rakesh Khurana, brings together some of the best minds on this important subject. Q&A with Khurana, plus book excerpt. Read More

HBS Cases: iPads, Kindles, and the Close of a Chapter in Book Publishing

Peter Olson

Book publishing is changing before our very eyes, even if the industry itself is fighting the transition with every comma it can muster. Harvard Business School professor Peter Olson, former CEO of Random House, wonders if books themselves may be in jeopardy. Read More

When Open Architecture Beats Closed: The Entrepreneurial Use of Architectural Knowledge

Carliss Y. Baldwin

Entrepreneurial firms rich in knowledge but poor in other resources can use superior architectural knowledge of a technical system to gain strategic advantage over larger and better endowed rivals. This paper presents a model and provides examples showing that architectural knowledge can be applied strategically to change a firm's scope and boundaries, make innovations more or less autonomous, and change the span of problems it must solve. Read More

One Strategy: Aligning Planning and Execution

Marco Iansiti

Strategy as it is written up in the corporate playbook often becomes lost or muddled when the team takes the field to execute. In their new book, Professor Marco Iansiti and Microsoft's Steven Sinofsky discuss a "One Strategy" approach to aligning plan and action. Read More

The Determinants of Individual Performance and Collective Value in Private-Collective Software Innovation

Ned Gulley and Karim R. Lakhani

Why do people expend personal time and effort toward creating a public good? Over the past decade, collaborative, community-based approaches to developing knowledge-intensive products like encyclopediae, music, and software have gained prominence in both practice and scholarly analysis. "Open source software development," for example, is distinguished by self-selection of distributed participants into tasks, free revealing of knowledge, collective creation of shared software artifacts, and participants' ability to generate new innovations by reinterpreting and repurposing knowledge and artifacts created by others. The MathWorks' Ned Gulley and HBS professor Karim R. Lakhani study the determinants of individual performance and collective value in software innovation by analyzing 11 programming competitions that mimic the working of the open source software community. Read More

Accelerating Innovation In Energy: Insights from Multiple Sectors

Rebecca M. Henderson and Richard G. Newell

How should the energy sector best respond to the threat of climate change? In this introductory chapter to a forthcoming book, Harvard Business School's Rebecca M. Henderson and Richard G. Newell of Duke University frame the discussion by highlighting the volume's contributions concerning four particularly innovative sectors of the U.S. economy: agriculture, chemicals, life sciences, and information technology. These four sectors have been extraordinarily important in driving recent economic growth. Henderson and Newell describe why accelerating innovation in energy could play an important role in shaping an effective response to climate change. Read More

The Evolution of Science-Based Business: Innovating How We Innovate

Gary P. Pisano

Science has long been connected to innovation and thus to the business enterprise. However, the nature of the connection between science and business in recent decades has begun to change in important ways. On the one hand, we have witnessed the decline of corporate industrial laboratories. At the same time, we have seen the emergence of a new class of entrepreneurial firms that are deeply immersed in science in sectors like biotech, nanotech, and more recently energy. HBS professor Gary P. Pisano examines the changing nature of the science-business intersection and describes the emergence of a science-based business as a novel organizational form. He also describes the institutional and organizational challenges created by this convergence. Read More

Can Entrepreneurs Drive People Movers to Success?

Benjamin G. Edelman

Call them next-generation driverless taxis or people movers, the age of personal rapid transport is just around the bend. Could PRT change the face of public transportation in cities and smaller communities? HBS professor Benjamin G. Edelman weighs the benefits and opportunities for entrepreneurs and for society. "Right now, the field is wide open," he says. Read More

Government’s Positive Role in Kick-Starting Entrepreneurship

Josh Lerner

The U.S. government has spent billions of dollars bailing out troubled companies. Is it time for Uncle Sam to invest in new entrepreneurial firms as well? Professor Josh Lerner makes the case for limited government involvement in his book Boulevard of Broken Dreams: Why Public Efforts to Boost Entrepreneurship and Venture Capital Have Failed—and What to Do about It. Read More

Modeling a Paradigm Shift: From Producer Innovation to User and Open Collaborative Innovation

Carliss Y. Baldwin and Eric von Hippel

We are in the midst of a major paradigm shift: technological trends are causing a change in the way innovation gets done in advanced market economies. In addition to the model of producer-based design—the idea that most important designs for innovations would originate from producers and be supplied to consumers via goods and services that were for sale—two increasingly important models are innovations by single user firms or individuals, and open collaborative innovation projects. Each of these three models represents a different way to organize human effort and investments aimed at generating valuable new innovations. HBS professor Carliss Y. Baldwin and MIT Sloan School of Management professor Eric von Hippel analyze the three models in terms of their technological properties, specifically their design costs and architectures, and their communication requirements. The researchers argue that as design and communication costs decline, single user and open collaborative innovation models will be viable for a steadily wider range of design. These two models will present an increasing challenge to the traditional paradigm of producer-based design—but, when open, they are good for social welfare and should be encouraged by policymakers. Read More

Breakthrough Inventions and Migrating Clusters of Innovation

William R. Kerr

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. Read More

Markets or Communities? The Best Ways to Manage Outside Innovation

Karim R. Lakhani

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. Read More

Principles that Matter: Sustaining Software Innovation from the Client to the Web

Marco Iansiti

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. Read More

Technology Innovation and Diffusion as Sources of Output and Asset Price Fluctuations

Diego A. Comin, Mark Gertler, and Ana Maria Santacreu

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. Read More

Innovation Communication in Multicultural Networks: Deficits in Inter-cultural Capability and Affect-based Trust as Barriers to New Idea Sharing in Inter-Cultural Relationships

Roy Y.J. Chua and Michael W. Morris

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. Read More

Can a Continuously-Liquidating Tontine (or Mutual Inheritance Fund) Succeed where Immediate Annuities Have Floundered?

Julio J. Rotemberg

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. Read More

The Challenges of Investing in Science-Based Innovation

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? Read More

The IT Leader’s Hero Quest

Robert D. Austin, Richard L. Nolan, and Shannon O'Donnell

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. Read More

Capitalizing On Innovation: The Case of Japan

Robert Dujarric and Andrei Hagiu

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. Read More

Do Innovation and Entrepreneurship Have to Be Incompatible with Organization Size?

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.) Closed for comment; 81 Comments posted.

Building Businesses in Turbulent Times

Lynda M. Applegate

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. Read More

Kind of Blue: Pushing Boundaries with Miles Davis

Robert D. Austin

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. Read More

How to Revive Health-Care 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. Read More

The Supply Side of Innovation: H-1B Visa Reforms and US Ethnic Invention

William R. Kerr and William F. Lincoln

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. Read More

Is the World Really Flat?

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.) Closed for comment; 41 Comments posted.

The Sciences of Design: Observations on an Emerging Field

Sandeep Purao, Carliss Y. Baldwin, Alan Hevner, Veda C. Storey, Jan Pries-Heje, Brian Smith, and Ying Zhu

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. Read More

Parallel Search, Incentives and Problem Type: Revisiting the Competition and Innovation Link

Kevin J. Boudreau, Nicola Lacetera, and Karim R. Lakhani

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. Read More

Social Media Leads the Future of Technology

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. Read More

The Litigation of Financial Innovations

Josh Lerner

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. Read More

How Disruptive Innovation Changes Education

Clayton M. Christensen, Michael B. Horn, and Curtis W. Johnson

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. Read More

Getting Down to the Business of Creativity

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. Read More

An Exploration of Technology Diffusion

Diego A. Comin and Bart Hobijn

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. Read More

Diffusing Management Practices within the Firm: The Role of Information Provision

Michael J. Lenox and Michael W. Toffel

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. Read More

Where Will Management Innovation Take Us?

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. Closed for comment; 60 Comments posted.

Consumer Demand for Prize-Linked Savings: A Preliminary Analysis

Peter Tufano, Nick Maynard, and Jan-Emmanuel De Neve

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. Read More

Radical Design, Radical Results

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." Read More

The Impact of Component Modularity on Design Evolution: Evidence from the Software Industry

Alan MacCormack, John Rusnak, and Carliss Y. Baldwin

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. Read More

Best Practices of Global Innovators

Alan D. MacCormack

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. Read More

Jumpstarting Innovation: Using Disruption to Your Advantage

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. Read More

Innovation through Global Collaboration: A New Source of Competitive Advantage

Alan MacCormack, Theodore Forbath, Peter Brooks, and Patrick Kalaher

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. Read More

The Dark Side of Trust

Felix Oberholzer-Gee

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. Read More

The Evolution of Apple

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. Read More

The Industry R&D Survey: Patent Database Link Project

William R. Kerr and Shihe Fu

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. Read More

Lessons Not Learned About Innovation

Rosabeth Moss Kanter

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. Read More

Scale without Mass: Business Process Replication and Industry Dynamics

Erik Brynjolfsson, Andrew McAfee, Michael Sorell, and Feng Zhu

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. Read More

Capturing Benefits from Tomorrow’s Technology in Today’s Products: The Effect of Absorptive Capacity

Daniel Snow

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? Read More

What Happens When the Economics of Scarcity Meets the Economics of Abundance?

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? Closed for comment; 36 Comments posted.

The Broadband Explosion: Thinking About a Truly Interactive World

Robert D. Austin and Stephen P. Bradley

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. Read More

Entrepreneurial Hospital Pioneers New Model

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. Read More

The Innovator’s Battle Plan

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. Read More

A Diagnostic for Disruptive Innovation

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. Read More

Music Downloads: Pirates—or Customers?

Felix Oberholzer-Gee

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. Read More

How to Pick Managers for Disruptive Growth

"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. Read More

Is “the Innovator’s Solution” to Sustained Corporate Growth an Unnatural Act?

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? Closed for comment; 11 Comments posted.

The Lessons of New-Market Disruption

Teradyne was successful. Hewlett-Packard was not. Professor Clark Gilbert writes about how two companies had such different results with disruptive innovation. Read More

Are Crummy Products Your Next Growth Opportunity?

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. Read More

Six Keys to Building New Markets by Unleashing Disruptive Innovation

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. Read More

How Technological Disruption Changes Everything

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. Read More

Angels Face the Innovator’s Dilemma

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. Read More

David, Goliath, and Disruption

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. Read More

Do MBA Programs Face “The Innovator’s Dilemma”?

Closed for comment; 9 Comments posted.