innovation economics - presentation 1

8/14/2019 Innovation Economics - Presentation 1

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Thursday, April 16, 2009Thursday, April 16, 2009 11

Economics ofEconomics of

InnovationInnovation

Organisational InnovationOrganisational Innovation

InstructorInstructor : Professor Zhao Yulin: Professor Zhao Yulin

PresenterPresenter : Kumara Uluwatta: Kumara Uluwatta


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OutlineOutline Challenges in organisational

innovations conceptualconsiderations

Different forms of organisationalinnovation

Measurement of the outcomes oforganisational innovations

Barriors to organisational innovations Some empirical studies Conclusions


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Challenges in organisationalinnovations

Organisational innovations are addressed bydifferent academic disciplinesfrom differenttheoretical backgrounds (organisational

science, economics, work psychology,sociology etc.) No single commonly accepted definition and

theorybase Outcomesof organisational innovations are

difficult to define and measure Specific (new) set of performance indicatorsnecessary for the measurement oforganisational innovations


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Invention or Innovation?Invention or Innovation?

Invention an idea or model fora new product or system, not yet

entered the economic system. Innovation accomplished with

commercial transaction involvingnew product or system. It is a

part of the economic system

-Schumpeter


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Innovation- Five typesInnovation- Five types

New productsNew products

New methods of productionNew methods of production New sources of supplyNew sources of supply Opening of new marketsOpening of new markets New ways of organizingNew ways of organizing

businessesbusinesses-- Schumpeter (1934)Schumpeter (1934)


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Oslo Manual (2005)Oslo Manual (2005)

1992 (1st ed.) : measuring technological1992 (1st ed.) : measuring technologicalinnovationinnovation 1997 (2nd ed.) : measuring technological1997 (2nd ed.) : measuring technological

innovation + collection of non-technologicalinnovation + collection of non-technologicalinnovation data technological change bothinnovation data technological change bothcalls for and results fromcalls for and results from institutional andinstitutional andorganisational change.organisational change.

2005 (3rd ed.) : includes organisational and2005 (3rd ed.) : includes organisational andmarketing innovationsmarketing innovations organisationalorganisational

innovations are not only a supporting factorinnovations are not only a supporting factorfor product and process innovation; theyfor product and process innovation; theycan also have an important impact on firmcan also have an important impact on firmperformance on their ownperformance on their own


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InnovationInnovation

An innovation is the implementationAn innovation is the implementation

of a new or significantly improvedof a new or significantly improvedproduct (good or service), or process,product (good or service), or process,a new marketing method, ora new marketing method, or a newa neworganisational methodorganisational methodin businessin business

practices, workplace organisation orpractices, workplace organisation orexternal relationsexternal relations

-- Oslo Manual (2005)Oslo Manual (2005)


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Organisational innovationOrganisational innovation

Implementation of a newImplementation of a neworganisational method in the firmsorganisational method in the firms

business practices, workplacebusiness practices, workplaceorganisation or external relations.organisation or external relations.

Changes in firm structure orChanges in firm structure ormanagement methods that are intendedmanagement methods that are intendedto improve a firms use of knowledge, theto improve a firms use of knowledge, thequality of goods and services, or thequality of goods and services, or the

efficiency of work flows.efficiency of work flows.--


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A new organisational method inA new organisational method inbusiness practicesbusiness practices: e.g. codifying: e.g. codifyingknowledge; education and trainingknowledge; education and trainingschemes; supply chain management;schemes; supply chain management;

business reengineering; leanbusiness reengineering; leanproduction; quality managementproduction; quality managementsystemssystems

In workplace organisationIn workplace organisation: new: new

methods for distributing responsibilitymethods for distributing responsibilityand decision making among employeesand decision making among employees

In external relationsIn external relations: with other firms or: with other firms or

public institutions or customerspublic institutions or customers


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Organisational innovationon entreprsie level

Organisational structure job rotation, job enrichment, job enlargement, coaching

functions, teamwork, smaller business units, netwerking,

outsourcing, adapting technology and productionprocess Organisational procedures

quality management, environmental management,preventive maintenance, just-in-time, supplymanagement, knowledge management

Supporting systems: personnel policy andindustrial relations personnel, working hours, competence management,

training, labour conditions (pay systems, contracts),industrial relations, workers participation, legislation...


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Organisational innovationsOrganisational innovations

can be understood incan be understood in

different waysdifferent ways Enablers for other types of innovations:Enablers for other types of innovations:implementation and use of other forms ofimplementation and use of other forms ofinnovations (e.g. material product, serviceinnovations (e.g. material product, serviceor technical process innovations) might beor technical process innovations) might belinked to organisational innovationslinked to organisational innovations

Distinct form of innovationDistinct form of innovation - direct source of- direct source ofcompetitive advantage:competitive advantage: organisationalorganisationalinnovations can directly improveinnovations can directly improve

performanceperformance Prerequisites for knowledge development inPrerequisites for knowledge development in

firms:firms: Firms' ability to acquire, create andFirms' ability to acquire, create andmake the best use of competencies, skillsmake the best use of competencies, skills

and knowledge is closely linked toand knowledge is closely linked toorganisational and managerial practicesorganisational and managerial practices


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Organisational innovations can beOrganisational innovations can beunderstood as the non-technical part ofunderstood as the non-technical part ofprocess innovationsprocess innovations

Unlike product and service innovations,Unlike product and service innovations,process innovations areprocess innovations are not directlynot directlyimplemented in the marketimplemented in the market

While the effects of product and serviceWhile the effects of product and serviceinnovations can be directly measured byinnovations can be directly measured bymonetary indicators, the effects of processmonetary indicators, the effects of processinnovations are not directly visible in sharesinnovations are not directly visible in sharesof sales and areof sales and are therefore more difficult totherefore more difficult tomeasure.measure.

Schumpeter: success (economic, market,Schumpeter: success (economic, market,social etc.) distinguishes an innovation fromsocial etc.) distinguishes an innovation froman invention, therefore organisationalan invention, therefore organisationalinnovations need to beinnovations need to be defined anddefined and


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Organisational innovationOrganisational innovation

vs. organisational changevs. organisational change

Organisational innovation involves a certainOrganisational innovation involves a certaindegree ofdegree ofintentionalityintentionality

Organisational innovation typically has aOrganisational innovation typically has a

specific aim specific aim intended outcomeintended outcome Organisational innovation is mostly anOrganisational innovation is mostly an

organizational change, butorganizational change, but not everynot everyorganisational change is also anorganisational change is also an

organisational innovationorganisational innovationThe distinction between organisationalThe distinction between organisational

change and organisational innovation ischange and organisational innovation isclearly possibleclearly possible ex postex post after the outcome after the outcome

can be observedcan be observed (due to time-lag)(due to time-lag)


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MeasuringMeasuring different formsdifferent formsof organisational innovationof organisational innovation

Complexity and different aggregationComplexity and different aggregationlevels of organizational innovationslevels of organizational innovations::

Organisational innovation is not oneOrganisational innovation is not oneaggregated concept, but is composedaggregated concept, but is composedof many different aspects such as,of many different aspects such as,

Decentralized organizations,Decentralized organizations,

TQM, HRM, Lean Mgt,TQM, HRM, Lean Mgt,Innovative work systems (greatInnovative work systems (greatvarietyvariety of specific indicators)of specific indicators)


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Different life cycle of organisationalDifferent life cycle of organisational

innovations:innovations:OrganisationalOrganisationalinnovations do not have a 'sell-by-innovations do not have a 'sell-by-date' as product and servicedate' as product and serviceinnovations tend to have (typicallyinnovations tend to have (typically3 years). Novelty does not seem to3 years). Novelty does not seem to

be the single main criterion definingbe the single main criterion definingan organisational innovationan organisational innovation

Interfirm vs. intrafirm diffusion ofInterfirm vs. intrafirm diffusion of

organisational innovationsorganisational innovationsTheTheextent of implementation within theextent of implementation within thefirm seems to be important. Partialfirm seems to be important. Partialimplementation vs. full use ofimplementation vs. full use oforganisational concepts makes aorganisational concepts makes a

great differencegreat difference


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Thursday, April 16, 2009Thursday, April 16, 2009

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Measuring the outcomes ofMeasuring the outcomes of

organisational innovationorganisational innovation

Different organisational innovations can aim atthe same outcome (e.g. task integration andflexible working schedules both aim at increasedflexibility) Different organisational innovations can

be conflicting in their effects (e.g. standardisationmight increase quality but atthe same time decrease flexibility) There is no"one best indicator" to measure theeffect/outcome of organisational innovation, given

that organisationalinnovation itself is a multidimensionalphenomenon and however there are twoand however there are twocategories of outcomes.categories of outcomes.

Firm level outcomesFirm level outcomes

Employee level outcomesEmployee level outcomes


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Potential firm levelPotential firm level

outcomes of organisationaloutcomes of organisational

innovations:innovations:

Improved quality of goods or servicesImproved quality of goods or services

Reduced costsReduced costs Reduced time to respond toReduced time to respond to

customers orcustomers or supplierssuppliers Increased flexibility (product, processIncreased flexibility (product, process

flexibility)flexibility) Increased productivityIncreased productivity More product or service innovationsMore product or service innovations


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Potential employee levelPotential employee level

outcomes of organizationaloutcomes of organizational

innovations:innovations:

Improved employee satisfactionImproved employee satisfaction

Improved work-life balanceImproved work-life balance Increased autonomy at workIncreased autonomy at work Increased motivationIncreased motivation


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Barriers to sustainableOrganisational innovation

lack of senior level vision and commitment tosustainability

Nervousness over taking a pioneering or leadershiprole onsustainable innovation

Sustainability is not seen as area of businessopportunity

Sustainability issues are rarely included in thecorporate strategy, business development and/or theopportunity search process

Lack of awareness of sustainability/environmentalawareness amongst key business functions

Organisational systems and procedures are ofteninflexible (BureaucracyBureaucracy, structure, communication andrisk aversion etc.)

Product designers and design consultancies still have

a poorunderstanding of sustainability


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Some empirical studies

Massimo G. Colombo, Marco Delmastro and LarissaRabbiosi, University of Pavia, Autorit Garante dellaConcorrenza e del Mercato and Politecnico di Milano Leanorganisation, High Performance work practices and

profitability: Evidence from panel data Davide Antonioli, Massimiliano Mazzanti, Paolo Pini

and Ermanno Tortia, University of Ferrara Technologicaland organisational innovations, industrial relations and firmperformances: An analysis of the determinants of innovationactivities

Michela Marchiori and Angelo Caruso, University ofUrbino Pursuing success in enterprise innovation: modellingand managing its inner complexity

Fabrizio Cesaroni and Andrea Piccaluga, St.Anna Schoolof Advanced Studies and University of Lecce Technologytransfer from Italian universities: is an entrepreneurialuniversity model starting up?


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Conclusions

Organisational innovations can be understood both

as enablers for other types of innovations and as adistinct form of innovation (direct source ofcompetitive advantage)

Measurement of organisational innovations andtheir effects is methodologically challenging :-

Complexity of organisational innovations organisational innovation is a multidimensionalphenomenon (different aggregation levels) -Longer life cycles of organisational innovationsthan of product or service innovations (novelty lessimportant) - Significant differences regarding theintrafirm diffusion of organisational innovations(extent of implementation) - Multidimensionalrelationship between organisational innovationsand their outcomes (complementarity vs.conflicting effects) - Structural equation modelling

offers the possibility to consider some of theseas ects


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THANK YOUTHANK YOU

innovation economics - presentation 1

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