Local Search vs. Exploration in Innovation Processes

Table of content

Tables/Graphics

Introduction

A. Description
I. The setting / context
II. Innovation
III. The innovative organization
IV. Exploitation /exploration

B. Answering the questions
I. “When?”: Levels of the innovation process
II. “How?”: Exploration, Exploitation and Ambidexterity
III. “Why?”: Endogenous and the exogenous approach

C. Decision making framework
I. Dimension overview
II. The framework

Conclusion

References

Tables/Graphics

Table 1: Overview of general questions

Table 2: Overview of different elements within different dimensions

Table 3: Overview of terminological problems

Table 4: Overview of label concepts

Table 5: Overview of dimensions to define conceptualize styles

Table 6: Intuitive dimension affiliation for exploration and exploitation

Table 7: Overview of exogenous and endogenous elements that help choosing innovation styles on every level of the innovation process.

Table 8: Horizontal and vertical ambidexterity

Table 9: Desired framework content (summary of chapter B.)

Graphic 1: Combination of approaches, levels and styles

Introduction

Internationalization, shorter product life cycles and increasing complexity have lead to a situation in today’s world where organizations around the globe, on every level of the innovation process and in every industry, face increasing competition. Especially affected by these characteristics are high-tech industries, which are often characterized through a high rate of product novelties, cutting edge technology and rapidly changing industry standards. Examples for high-technology industries that have been used in academic journal articles and that have been subject to empirical research are the robotic industry¹, the semiconductor industry² and the optical disc industry³. Especially in those industries organizations rely on constant and ongoing innovation to create and sustain competitive advantages⁴ and, therefore, to stay in business. Those innovative companies that constantly innovate and that are characterized through a high level of entrepreneurship can also be illustrated as “knowledge-creating companies” or “learning organization”⁵. But what makes them so innovative? How do they choose an innovation style⁶? How is innovation managed? My point in this paper will be that innovation management should be able to answerer the following three questions:

illustration not visible in this excerpt

Table 1: Overview of general questions

These questions seem to be most important since Fagerberg⁷ states in the introduction of the Oxford Handbook of Innovation: “In spite of the large amount of research in this area during the past fifty years, we know much less about why and how innovation occurs than what it leads to.” Additionally, the question of “when?” is added to conceptualize the innovation process into dependent innovation process levels that follow each other in a distinct order.

To answerer these questions I will start with a general description of what innovation is, what exploration and exploitation are, I will describe the general setting in which organizations have to operate and what defines an innovative organization.

A. Description

I. The setting

As I⁸ have pointed out in the introduction a lot of research has been done especially in the high-technology industry. In particular within the high-technology industry the decision for the right innovation styles is a strategic choice and is substantial for survival because within that industry, the success depends on the ability to innovate consistently⁹.Steele and Murray¹⁰ point out that “...organizations, which need to adapt continuously to complex and changing conditions, can only survive and proliferate through innovation.”

The necessity for constant innovation in industries like the high-technology industry can be explained by the concept of hypercompetition. Hypercompetition is defined by D’ Aveni¹¹ as “...an environment characterized by intense and rapid competitive moves, in which competitors must move quickly to build advantage and erode the advantage of their rivals”. But, as Wiggens and Ruefli¹² point out this concept “...is seen across a broad range of industries”. Therefore the ability to constantly innovate and to create innovations becomes even more important for all organizations. There are different labels¹³ in use that describe organizations that survive a turbulent and hypercompetitive environment because of their ability to correspond. Examples for these other labels are “knowledge-creating companies” or “learning organizations”¹⁴. However the core idea behind these labels is always the same – being constantly innovative either through innovation, learning or knowledge-creation. But what is innovation?

II. Innovation

Definitions for “Innovation” exist in large quantities. One reason for that is that “innovation” is a social construct¹⁵ hence is not a naturally existing object. The terminological definition always refers to the perception of the author. Kline and Rosenberg¹⁶ therefore point out “... it is a serious mistake to treat innovation as if it were a well-defined homogeneous thing that could be identified ...” The different dimensions that have been looked at in research always depended on the subject of research and depended on which dimensional concept of innovation was in the centre of research. Therefore it is not possible to define innovation accurately. A proof for that are the intense variations and the extensive diversity of innovation concepts, which point out the complexity and the vagueness of innovation apprehension.

Especially when it comes to the question “how?” innovation is achieved or “why?” innovation occurs many different characteristics along different dimensions have been used to describe the phenomenon of innovation. Already in the year 1967 Becker¹⁷ notices that “... at the moment there is only a slender thread of agreement or commonality among the writers on innovation.”

A very recent conceptualization of innovations has been done by Ying Li¹⁸ in 2008. Ying Li defines and conceptualizes innovation along three different dimensions.

illustration not visible in this excerpt¹⁰²⁰

Table 2: Overview of different elements within different dimensions

These different²¹ dimensions can be easily used to categorize the object of research and to select studies and research results for comparison.

But a very early and basic approach to economic development and innovation has been made by Schumpeter²² the “pioneer”²³ of innovation research, who conceptualizes innovation within the following two dimensions: First, he defines the innovation process as a three level concept which is made of the three different levels invention, innovation and diffusion. Within that dimension, the invention is conceptualized as a basic idea while the innovation is the carrying out of that idea. Diffusion is the further dissemination²⁴. The understanding of Schumpeter’s innovation process definition is very close and comparable to Ying Li’s²⁵ value chain conception.

Secondly, Schumpeter defines and names five different types of innovation. These types are: Product innovations, process innovations, organizational innovations, usage of new resources and the tapping of new markets. The distinction between product innovation and process innovation gets the most attention. Schmoolker²⁶ calls it the distinction between “product technology” and “production technology”.

In a lot of research the impact of innovations has also been attempted to measure. Most commonly used is the unilateral dimension from incremental to radical. Incremental innovations can be characterized as continuous improvements of a referring type, as opposed to radical innovations which are the introduction of a very new type.²⁷

Further on my emphasis will be on the innovation process how Schumpeter calls it or respectively the level of the value chain which could lead to all different types of innovation and includes incremental and radical innovations. Although especially radical innovations are believed to be the source of competitive advantages. To systemize my findings I will try to explain what the coherence of innovative organizations across industries is and what distinguishes them from organizations that are not innovative.

[...]

¹ cf. Katila/Ahuja 2002

² cf. Stuart/Podolny 1996

³ cf. Rosenkopf/Nerkar 2001

⁴ see Barney 1991

⁵ Rosenkopf/ Nerkar 2001, p. 287

⁶ I use style instead of method or technique to underline the ambiguity

⁷ Fagerberg 2006, p. 20

⁸ I use description instead of definition to emphasis on the social construction of the concepts

⁹ cf. Rosenkopf/Nerkar 2001, p. 287

¹⁰ Steele/Murray 2004, p. 316

¹¹ D’Aveni 1994, pp. 217–218

¹² Wiggens/Ruefli 2005, p. 887

¹³ I use label instead of terminology to underline the vagueness and ambiguity

¹⁴ Rosenkopf/ Nerkar 2001, p. 287

¹⁵ see Boghossain 2001, pp. 6-8

¹⁶ Kline/Rosenberg 1986, p. 283

¹⁷ Becker/ Whisler 1967, p. 467

¹⁸ cf. Ying Li et al. 2008

¹⁹ cf. Ying Li et al. 2008, p. 111

²⁰ cf. Ying Li et al. 2008, p. 112

²¹ cf. Ying Li et al. 2008, p. 112

²² cf. Schumpeter 1949
23Blättel-Mink 2006, p. 31

²⁴ cf. Fagerberg et al. 2005, p. 4

²⁵ cf. Ying Li et al. 2008, p. 112

²⁶ Schmoolker 1966, p. 166

²⁷ cf. Fagerberg et al. 2005, p. 7