Research group 2007/2008 - Understanding Innovation

CAS workshop on
“Innovation in firms”

Venue: Sem gjestegård, Asker, Norway

30 October - 1 November 2007

Organized by Jan Fagerberg, David Mowery & Bart Verspagen
Centre for Advanced Study (CAS)
at the Norwegian Academy of Science and Letters

Innovation in capitalist societies depends crucially on the activities of firms. The key role of firms for innovation was emphasized by Schumpeter nearly hundred years ago and, more recently, by Nelson & Winter. In their account firms are described as heterogeneous actors that perceive the world differently, make different strategic choices and act accordingly. Firms are producers as well as users of knowledge, hence innovation does not stop at the front door, but depends on a complex interplay between firms and their environments (including users). Since Nelson and Winter first outlined this perspective a few decades ago a good deal of new research has emerged, mainly in business & management studies, on firms as knowledge-based organizations and the implications of this for innovation.

In parallel with this outpouring of research the saliency of innovation as a concern for policymakers and citizens alike has grown. One result of this increased interest in innovation is a much more extensive effort to collect data on innovation activities within firms. Although such data were rare a few decades ago, most if not all European countries now conduct extensive surveys of innovation activities and similar activities are taking part in other parts of the globe, including some developing countries. There is also an increasing amount of case-study evidence on this topic.

How does the current state-of-the-art in evolutionary analysis, as pioneered by Schumpeter, Nelson & Winter, and others, help us to understand the role of firms in innovation processes, and innovation processes in firms? And what light does the new empirical evidence throw on this body of evolutionary thinking about firms and innovation? These are the questions that we wish to address in this workshop.

Central themes:

(1) The knowledge-based firm

It is natural to start by taking stock of existing interpretations & theories about knowledge, capabilities, innovation and firms. What are the central insights, controversies and challenges that have emerged since Nelson and Winter presented their approach a quarter of a century ago?

(2) How (and why) do firms differ in their approaches to innovation?

A central argument in the evolutionary literature is that firms are cognitively different, develop different firm-specific capabilities and make different strategic choices with respect to innovation. What can the available empirical evidence tell us about the existence, sources, character and consequences of such heterogeneity? Is there a limited number of “strategic types” and how are these related to the (economic, industrial, social & institutional) context in which firms operate? To what extent can we still generalize about firm behavior in the presence of heterogeneity?

(3) Blurred boundaries: Firms & environments

Innovation consists of combining and recombining knowledge. The richer the knowledge base the larger the scope for innovation. It follows logically that firms that wish to continue to excel in innovation has to focus not only on internal knowledge but also on the vast amount of knowledge that resides in its environment. Cohen & Levinthal in a justly famous contribution fifteen years ago coined the concept “absorptive capacity” for the ability of a firm to identify, access and exploit external knowledge. Since then there has been a burgeoning literature on the subject and many new concepts have been suggested such, for instance, “innovation system”, “open innovation” & “democratic innovation” (reflecting the growing importance of user-involvement in innovation) What can the new empirical evidence that has emerged in recent years, not the least the innovation surveys, tell us about these issues?

(4) Innovation and development

Innovation – the ability to combine, recombine and commercialize knowledge – is not limited to the rich part of the world or to “high tech” industries. But just how different are developing countries, or countries “catching up”, from advanced countries when it comes to the opportunities and demands facing firms (and what are the consequences)? This is a controversial issue, and the evidence has been patchy at best. Recently, several developing countries have carried out relatively large scale surveys on innovation activities that may provide an opportunity for providing more solid evidence on the subject.