class: center, middle, inverse, title-slide # 7. A Developped Country Perspective ### Thierry Warin, PhD, HEC Montreal, Harvard University & Cirano --- # Readings - Remaking Singapore - Short, J. C., Ketchen, D. J., Palmer, T., & Hult, G. T. (2007). Firm, strategic group, and industry influences on performance. Strategic Management Journal, 28, 147–167. - T. Tong and J. Reuer, Firm and industry influences on the value of growth options, Strategic Organization 4, 71e95 (2006). --- # Content This session is all about innovation: - Effects of **structure** and industrial change on business performance - Industrial effects on growth strategy - Technological changes, radical industrial innovations and impacts on companies > Effects of the Industry on the Competitiveness and Performance of MNCs: A Developped Country Perspective --- # 1. Theories --- ## Definitions Innovation is very often associated with the notion of entrepreneur (Redlich, 1951), although innovation can be much more general. - Schumpeter (1939) is the first to define innovation in its economic sense and integrating the market process. - He saw innovation characterized by: (1) the construction of new plants and equipment, (2) the introduction of new enterprises, and (3) the emergence of new leaders in companies. He saw innovation as being different from invention (Robertson, 1967). --- ## Other definition - **Radical innovation** and **incremental innovation**. - **Technological** and **organizational** innovations. Innovation is often associated with technology. - **Competitive innovation**. Even if one can imagine that it is interesting to be the smallest number of competitors possible in a market, the fact remains that one company benefits from the innovations of other companies. --- ## Innovation and invention What is the difference between innovation and invention? - According to Roland (1977), invention and innovation should not be separated, and innovation has a broader dimension than the invention. - An invention is an innovation, but an innovation can also be non-technological. Innovations concern products as well as production processes. --- ## Data Science and Innovation How is *innovation* measured? 1) measure R&D spending 2) measure the number of patents. 3) directly question companies by questionnaire (Mairesse et Mohnen, 2002). --- <img src="./session7_resources/gitr2016.png" width="400px" style="display: block; margin: auto;" /> --- <img src="./session7_resources/networkedReadinessFramework1.png" width="900px" style="display: block; margin: auto;" /> --- <img src="./session7_resources/nriRanking1.png" width="600px" style="display: block; margin: auto;" /> --- # 2. Structure and Performance --- ## A theoretical perspective Innovation and market structures: 1) Schumpeter (1939) -> monopoly 2) Arrow (1962) -> competition 3) and Stiglitz and Dasgupta (1981). Relying on the invisible hand, competition is the driving force behind a process of discovery and innovation. - A useful extension of this process (Tushman and Anderson, 1986) is the one that identifies the creative destruction of Schumpeter (1939) by which the new one must destroy the old to emerge. Only the first market structure makes it possible to make profits on innovation. - The competitive structure will push to make incremental **innovations** - Fethke and Birch (1982) add the dimension of **risk**. - The greater the risk of failure, the more firms invest in **short-term** projects. --- ## An economic geography perspective The REAL question focuses on the analysis of the countries and sectors that allow the creation of world leaders in R&D. - What are the countries of origin of the world leaders in R&D? - What are the key sectors? - Where are the Canadian companies? - Is Canada's economic and regulatory infrastructure conducive to the development of Canadian R&D leaders? --- ## An economic geography perspective How countries can help to improve the infrastructure that would enhance the degree of innovation within their economies and thus continue to be relevant in terms of comparative advantages. 1. the country makes public expenditure in R&D 2. the country subsidizes the R&D of its enterprises 3. the country offers tax credits to its enterprises --- ## An economic geography perspective The question now is: among the top 1,000 firms with the most important investment in R&D, where do they come from? - The leading countries are all part of the G20, which confirms the neoclassical premise that firms in developed countries are the ones most seeking to innovate. - The quality of institutions in developed countries and industrial policies are likely to be an asset for these companies. --- # 3. Case Study: IRI, A Change in Paradigm --- ### Evolution as regards R&D expenditures of the leading companies for the 2019 most represented countries <img src="session7_files/figure-html/unnamed-chunk-4-1.png" width="50%" style="display: block; margin: auto;" /> --- ### Number of leading companies in R&D for the most represented countries in 2019 <img src="session7_files/figure-html/unnamed-chunk-5-1.png" width="50%" style="display: block; margin: auto;" /> --- ### Number of leading companies in R&D per 100 bibllion $US of GDP for the most represented countries in 2019 <img src="session7_files/figure-html/unnamed-chunk-6-1.png" width="50%" style="display: block; margin: auto;" /> --- ### Evolution as regards the number of leading companies in R&D for the 2019 most represented countries <img src="session7_files/figure-html/unnamed-chunk-7-1.png" width="50%" style="display: block; margin: auto;" /> --- ### Evolution as regards the number of leading companies in R&D per 100 billion $US of GDP for the 2019 most represented countries <img src="session7_files/figure-html/unnamed-chunk-8-1.png" width="50%" style="display: block; margin: auto;" /> --- # 4. Canadian businesses’ position among the leaders in R&D --- ### Evolution as regards the number of leading companies in R&D for the 2019 most represented countries and Canada <img src="session7_files/figure-html/unnamed-chunk-9-1.png" width="50%" style="display: block; margin: auto;" /> --- ### Evolution as regards the number of leading companies in R&D per 100 billion $US of GDP for the 2019 most represented countries and Canada <img src="session7_files/figure-html/unnamed-chunk-10-1.png" width="50%" style="display: block; margin: auto;" /> --- # 5. To go further --- ### Evolution as regards the number of leading companies in R&D & the total of their R&D investments (in millions of $US) <img src="session7_files/figure-html/unnamed-chunk-11-1.png" width="50%" style="display: block; margin: auto;" /> --- ### Evolution as regards the percentage of R&D investments mmade by companies in Canada in the total R&D investments <img src="session7_files/figure-html/unnamed-chunk-12-1.png" width="50%" style="display: block; margin: auto;" /> --- ### Net sales/R&D investment ratio per total R&D investment for the 2019 most represented countries and Canada <img src="session7_files/figure-html/unnamed-chunk-13-1.png" width="50%" style="display: block; margin: auto;" /> --- ### Evolution as regards the R&D per employee in $US <img src="session7_files/figure-html/unnamed-chunk-14-1.png" width="50%" style="display: block; margin: auto;" /> --- # Review Questions - What market structure makes it possible to make profits by innovating? What market structure only encourages incremental innovation? What is the role of risk? Illustrate with case study(s) used in progress, if necessary. - What is your analysis of the growth countries and sectors that are enabling the creation of world leaders in R&D? - Where do the world leaders in R&D come from? Illustrate with case study(s) used in progress, if necessary. - What is the difference between innovation and invention? - How is innovation usually measured? - What are the forms of innovation? - How else can innovation be measured? How is this better than the usual measures? What are the concrete lessons? - What is Canada's place in this new measure of innovation based on innovation performance?