Question

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Corporate Strategy/ Exploring Strategy:
Read the text and answer the questions below.

Are large firms better innovators than small firms?

The famous Austrian economist Joseph Schumpeter proposed that large firms are proportionately more innovative than small firms. This proposition is a controversial one. If true, it would discourage laboratory scientists and engineers from leaving their large-firm employers to set up their own ventures. It would encourage large firms like Google to keep on buying up small innovative firms and absorbing them into their own corporate strategies. It would make government policy-makers more tolerant of huge, domineering firms like Microsoft who claim that their large scale is important to continued innovation in computer software.

Schumpeters proposition for the advantages of large firms in innovation has several points in its favor:

• Large firms have grater and more diverse resources, helping them to bring together all the various necessary elements for innovation.
• Large firms may have a greater propensity for innovation risk, knowing that they can absorb the costs of innovation failure.
• Large firms have better incentives to innovate, because they are more likely to be able to capitalize on innovation, having all the required complementary assets (distribution channels and so on) to roll it out fast and under their control.

On the other hand, there are good reasons why small firms might be more innovative:

• Small firms are typically more cohesive so that knowledge is more easily shared.
• Small firms are typically more flexible and less bureaucratic, so that they can nnovate faster and more boldly.
• Small firms are more motivated to innovate simply to survive, while large firms can simply defend and exploit their dominance of existing markets.

There has been plenty of research on whether small or large firms are proportionately more innovative. Some researchers have focused on the input side, for example measuring whether large firms are more research intensive in terms of R&D (research and development)-expenditure as a percentage of sales. Other researchers have focused on the output side, for example counting whether large firms have proportionately greater numbers of patents for innovations. There is no final consensus on the overall patterns of innovation. However, recent research findings suggest that in general:

• Large firms are relatively less research intensive in high-technology industries, for example electronics and software.
• Large firms are relatively more innovative in service industries than in manufacturing industries.

It seems that the research so far cannot provide any firm rules about whether large or small firms are better innovators in general. However, research scientists, acquisitive large firms and government policy makers need to consider carefully the specifics of particular industries.

Associated questions to Text 2:

1. What kinds of managerial action might you consider if you were trying to increase the innovativeness of a large firm in a high-technology manufacturing industry?

2. One of the big dilemmas in innovation is ‘technology push or market pull’. Describe this dilemma in as much detail as possible.

Answer 1

Answer 1)

Following are some managerial actions should implement for increasing innovativeness of large firm:

• Introduce skill mapping and understand intersts of employees
• Schedule creative workshops
• Schedule creative quiz competition for employees and encourage them to make innovative solutions.
• Invest budgets into employee ideas and innovation
• Boost confidence of innovation makers by rewarding them
• Invest more money on technology
• Start innovative portals where employee or group of employees can post their thoughts and idea. Consider and analyze those ideas and implement accordingly.
• Arrange third party consultant for innovation management.

Answer 2)

Technology push innovation :

In this innovation, employer invest more money for making and getting ideas from employees or contingent workers. Technology push innovations can create intrinsic or extrinsic motivation between workers.

Technology push innovation involved large amounts of money and Manpower. Technology pushed innovation can create a certain impact on market. It can create too many ideas but not expected ones.technology push innovation required lot of marketing. Preferred by large organizations.

Market pull innovation -

Market pull innovations are always better than technology push innovationd as it is accepted by market needs. Market pulled innovation involved less amount of money and does not required large amounts of money.

Market pull innovations are profitable and innovators must be rewarded for such market pulling idea. Small companies generally focus market pull ideas rather than large companies.