Dissertation

University of Salford
School of Management
RESEARCH INTO FACTORS THAT IMPACT ON THE
SUCCESS OF TECHNOLOGICAL INNOVATION
MARK BIRMAN
Dissertation submitted in part fulfillment of the requirements for
the degree of
Master of Business Administration
at the University of Salford
April, 2006

Acknowledgements
The author would like to thank the University of Salford for
providing the required facilities during the studies. I would
like to express my gratitude to the research supervisor for
reading and commenting on earlier drafts. Participation of
the interviewees during the investigation is appreciated a
lot. Many thanks to my family for patience and
encouragement during the study.

Abstract
Innovation is not just a process of ideas generation and
technology development, it is also a process of
commercialization in order to reach the customer and put
the innovation into widely used practice. Commercial
success of technological innovation and the key success
factors are of the main concern in this research. The
appropriate literature review has been conducted first in
this study. As a result different product development and
marketing activities having impact on the success of
innovation’s commercialization have been identified.
Three activities are investigated in more depth –
marketing, HRM, and financing. Qualitative data have
been collected then during semi structured interviews with
a number of managers representing certain organizations
from different industries. The following data analysis and
interpretation are suggested. The results of the work done
in this study are presented at the end

Table of Contents
Chapter 1. Introduction .............................................................................................................. 1
1.1 Introduction and background of the research .................................................................. 1
1.2 Objectives and scope of the research ............................................................................. 2
1.3 Research methodology, process and design .................................................................. 2
1.4 Outline of dissertation ...................................................................................................... 4
Chapter 2. Literature Review..................................................................................................... 5
2.1 Introduction ...................................................................................................................... 5
2.2 Customer needs and positioning ..................................................................................... 5
2.3 Marketing and innovation strategy, diffusion ................................................................... 9
2.4 Organizational characteristics, value chain, HR............................................................ 16
2.5 Finance .......................................................................................................................... 21
2.6 Environment & Competition ........................................................................................... 22
2.8 Chapter Summary.......................................................................................................... 26
Chapter 3. Theoretical Framework.......................................................................................... 27
3.1 Introduction .................................................................................................................... 27
3.2 Dependent Variable ....................................................................................................... 27
3.3 Independent Variables................................................................................................... 27
3.3.1 Marketing, Product/Service Strategy ............................................................................. 27
3.3.2 Attributes of Innovation .................................................................................................. 28
3.3.3 Organizational Characteristics....................................................................................... 28
3.3.4 Human Resources ......................................................................................................... 29
3.3.5 Financing Innovation...................................................................................................... 29
3.3.6 Managing Uncertainty and Risk..................................................................................... 29
3.4 Relationships and Associations between Key Variables ............................................... 29
3.5 Development of Research Questions............................................................................ 33
3.5.1 Research Question No 1 ............................................................................................... 33
3.6 Summary and Conclusions............................................................................................ 33
Chapter 4. Description of Investigation ................................................................................... 34
Chapter 5. Analysis and Interpretation of Data ....................................................................... 37
Chapter 6. Conclusions and Future Work ............................................................................... 42
Chapter 7. Appendix................................................................................................................ 45
Chapter 8. Bibliography........................................................................................................... 48

Dissertation
Mark Birman Page 1 of 49
“All truth passes through three stages. First it is ridiculed.
Second it is opposed. Third it is accepted as being self evident.”
Arthur Schopenhauer
Chapter 1. Introduction
1.1 Introduction and background of the research
It has been an era of technology constantly developing during the twentieth
century. Development of new technology often requires extensive R&D activity
involving a lot of creativity and innovative ideas. Technology, however, is not a
mean by itself; it is developed in order to serve the needs of people. At the
same time new customer needs often appear as a result of adoption of new
technology. Nowadays technological innovation continues to be a big issue of
interest in every industry, since it can contribute a lot to economy growth and
population welfare as claimed by Jacobs in ‎(30):
“The emergence of new products in place of old
ones is absolutely necessary to economic life;
otherwise the planet would long since have been
ruined from excessive, monotonous exploitation of
the same few resources”
Talking about technology there can be a particular hot topic during different
periods of time, whether it is the motor car industry in 19th through 20th
centuries, or computer, semiconductor and space technologies in the second
half of the 20th century. Quite rapid development and wide research can be
observed nowadays in medical healthcare and biotechnology. Such a progress
in some areas can sometimes even raise different ethical and philosophical
questions. As a result of technological progress different problems can arise
such as unemployment, pollution etc. Anyway, it is hard to overestimate the
importance of innovative technology in today’s life.
Innovative projects carried out by organizations in different industries are
considered in the investigation. Among the industries investigated there are
telecommunication industry rapidly developing nowadays, IT industry which is

Dissertation Introduction
another hot area today, chemical industry, beverage production. Therefore, the
investigated organizations reflect a wide range of industries serving different
needs of people today.
1.2 Objectives and scope of the research
Very often when people have a technological idea in mind they ask themselves
how the new technology could be applied in the real life bringing benefits to the
stakeholders. Moreover, a lot of other questions come up when the technology
is being implemented and brought into life. Is it possible to implement it at all?
Does the organisation have enough resources? Does the market need this? Is
the timing appropriate for such technology?
These and other questions will be considered in the research. In other words,
the aim is to find out how to estimate the possibility to apply the new technology
in real life, so commercial success could be reached in the market. The major
product development and commercialization activities are going to be
considered in order to find out the critical success factors. This research also
had a number of minor objectives, namely to study the impact of the marketing
strategy, human resource management and finance management on the
success of innovation’s commercialization of innovations in more details.
There is one more reason of the study: the author of the research is intending to
enter the market with a new product using an innovative technology.
1.3 Research methodology, process and design
The research process is carried out using Sekaran’ s ‎(24) model, which suggest
the following steps should be carried out:
1. “Identify research topic – broad area
2. Define research situation (problem)
3. Determine how to conduct research
4. Collect research data
5. Analyze and interpret research data
6. Determine research conclusions”

As opposite to exploratory study which is “undertaken when not much is known
about the situation at hand”, the goal of a descriptive study is “to offer to the
researcher a profile or to describe relevant aspects of the phenomena of
interest from an individual, organizational, industry-oriented, or other
perspective”. This research, therefore, is considered as a descriptive study.
According to Sekaran’s ‎(24) definitions the investigation is correlational since
“the important factors associated with a problem” are identified as opposed to
causal studies when “the researcher wants to delineate the cause of one or
more problems”. This correlational study is conducted in the natural
environment “with minimum interference by the researcher with the normal flow
of work”. As opposed in causal studies “the researcher tries to manipulate
certain variables so as to study the effects of such manipulation”.
According to Sekaran ‎(24) “the unit of analysis refers to be the level of
aggregation of the data collected during the subsequent data analysis stage”.
Certain projects within organizations are considered as units of analysis in the
study, since a commercial success of certain innovative products/services is
investigated.
A study can be cross-sectional or longitudinal in terms of time horizon. This
study is cross-sectional since the data is gathered only once during the
research. During a longitudinal study the data can be collected two or more
times. According to Sekaran ‎(24) study setting can be either contrived or
noncontrived. This research is undertaken in the natural environment so it can
be defined as noncontrived.
This research is designed in phenomenological manner. The study’s issue looks
rather like a soft problem, so it will be using qualitative data for further analysis,
which will be collected using semi structured interviews. Quantitative data
can be used in other types of study. Much bigger sample size is required then in
order to come up with statistically based conclusions. Quantitative data analysis
is more suitable for considering of hard problems when exact data is operated.
According to Sekaran ‎(24) there can be a hypothesis-testing study which
“usually explains the nature of certain relationships, or establishes the
differences among groups or the independence of two or more factors in a
situation”. Case study analysis is another type of research which “involves in-

depth, contextual analyses of matters relating to similar situations in other
organizations”.
A deductive data analysis has been carried out through “arriving at conclusions
by interpreting the meaning of the results”. ‎(24)
In this study data on three independent variables was collected through
interviews, the variability in the dependent variable was then described using
the independent variables.
1.4 Outline of dissertation
The research has several chapters as following:
 ‎Chapter 1. Introduction chapter discusses the background and aim of the
research.
 ‎Chapter 2. Literature Review is carried out first in order to identify the
critical factors influencing the commercial success of innovation.
 ‎Chapter 3.Theoretical Framework clearly defines the problem as a
dependent variable of the study, as well as the independent variables
influencing the problem
 ‎Chapter 4. Description of Investigation considers the questions
discussed during semi structured interviews in order to collect qualitative
data
 ‎Chapter 5. Analysis and Interpretation of Data considers the data
collected during the investigation in order to identify the major tendencies
and dependencies.
 ‎Chapter 6. Conclusions contain the summary of the work done and
suggest possible future work.

Dissertation Literature Review
Chapter 2. Literature Review
2.1 Introduction
The aim of this chapter is to find out the key variables affecting the topic of
interest. This is done through exploring different sources of existing knowledge
and related work done so far. Different theories and concepts will be considered
in the literature review. The main questions and problems that have been
addressed to date will be discussed as well.
According to Sekaran ‎(24) “the purpose of the literature review is to ensure that
no important variable that has in the past been found repeatedly to have had an
impact on the problem is ignored”.
The chapter has a number of subchapters reflecting different areas of product
development and commercialization of innovation.
2.2 Customer needs and positioning
According to Trott ‎(29) a commercial opportunity comprised with a technical
opportunity, “…where this is aligned with existing commercial and technical
competences to ensure that the company genuinely has the ability to turn the
opportunity into a product”. Trott ‎(29) claims then that “the process of turning
genuine business opportunities into commercial success is one of the most
long-standing and fundamental issues facing businesses”
Trott ‎(29) defines technology as “knowledge applied to products or production
processes”
According to Trott ‎(29) a new product can come up basing on the existing
technology as a result of well defined business strategy. In other words, Trott
‎(29) considers the importance of good product positioning in the market
according to customer needs. One of the important product development
issues he thinks is Market Entry Timing: “Decisions about how and when to
enter the market can make a substantial difference to the new product’s
prospects. Timing the entry to the market can make or break an innovation”

Evans ‎(10) also considers the importance of the timing of market entry:
“Enter too early and the business may get caught up
in a higher degree of risk due to incomplete
standards, unreliable vendor products, or lack of
industry-wide acceptance of a particular solution.
Enter too late and the competitive advantage may
be lost”
Hutlink ‎(15) also suggests that early entry is not always good due to the
technological and market uncertainties when dealing with new products: “This
may allow later entrants to develop superior skills for the market, thereby
allowing them to outplay the first movers with their own offering.”
A dominant managerial logic impacting a firm’s ability to recognize the
potential of an innovation, is defined by Afuah ‎(1) as “a common way of viewing
how best to do business as a manager in the firm”.
Another factor affecting a firm’s ability to recognize the potential of innovation
considered by Afuah ‎(1) is the type of innovation itself – whether it is rather
incremental or radical, knowledge based or bulk processing.
The research conducted by Lüthje ‎(17) has shown that product users often can
be a source of innovation. Therefore retailers contacting with the end-users
have an important role in recognizing the potential of innovation:
“Market-oriented manufacturers could therefore
benefit from innovative ideas that are developed by
the end customers”
Rogers ‎(23) considers five adopter categories of members of a social system –
innovators, early adopters, early majority, late majority, laggards. Rogers ‎(23)
argues then that different characteristics of these adopter categories can be
used for audience segmentation.
Thomke ‎(27) also claims that for any product there will almost always be users
that will experience needs ahead of everyone. He calls them Lead Users.
Thomke ‎(27) argues that “a wealth of information pertaining to product
development resides in lead users”. The lead user method developed in
different studies “allows new product development to arise from a sensitive

understanding of product features that, ideally, will matter most to customers
several years later”. Among the benefits of lead user methods Thomke ‎(27)
suggests the following:
 “Access to richer and more reliable information on emerging customer
needs” that can be complemented traditional market research
 “Development of better products and service concepts since these come
out of better data on consumers’ likely needs”
 “Acceleration of the product and service development process”
Thomke ‎(27) suggest then the main characteristics of lead users:
 Lead users face new needs “months or years before the bulk of the
market encounters them”
 “Lead users expect to benefit significantly by finding a solution to their
needs”, so they can develop them by themselves before a commercial
solution appears in the market
 Lead users, in contrast to early adopters, “facing needs for products and
services that do not exist in the market”
Rogers ‎(23) considers a model of the innovation-decision process of an
individual or organization. This process consists of five sequential stages:
1. Knowledge – this stage occurs when an individual or organization “is
exposed to an innovation’s existence and gains some understanding of
how it functions”
2. Persuasion – during this stage an individual or organization “forms a
favourable or unfavourable attitude toward the innovation”
3. Decision – occurs when an individual or organization “engages in
activities that lead to a choice to adopt or reject the innovation”
4. Implementation – when the innovation is put into use
5. Confirmation – during this stage an individual or organization “seeks
reinforcement of an innovation-decision already made, or reverses a

previous decision to adopt or reject the innovation if exposed to
conflicting messages about the innovation”
Similar to Rogers ‎(23), Narayanan ‎(21) also introduced a model of innovation
adoption. The model describes the same five major steps carried out by an
individual or a firm adopting the innovation: awareness, attitude formation,
decision, implementation, confirmation.
Rogers ‎(23) claims that diffusion of an innovation is an uncertainty-reduction
process.:
“Potential adopters want to know the degree to
which a new idea is better than an existing practice.
So relative advantage is often an important part of
message content about an innovation. The
exchange of such innovation-evaluation information
lies at the heart of the diffusion process”
Considering rate of adoption of an innovation Rogers ‎(23) suggests that five
major attributes of innovation perceived by individual can predict an innovation’s
rate of adoption – relative advantage, compatibility, complexity, trialability,
observability.
Like Rogers ‎(23), Tidd ‎(28) also suggests the following characteristics of an
innovation affecting diffusion:
 Relative advantage – the degree to which the innovation is perceived to
be better than competing products
 “Compatibility – the degree to which the innovation is perceived to be
consistent with the existing values, experience and needs of potential
adopters”
 “Complexity - the degree to which the innovation is perceived as being
difficult to understand or use”
 “Trialability - the degree to which the innovation can be experienced with
on a limited basis”
 “Observability - the degree to which the results of an innovation are
visible to others”

Gain ‎(13) also considers different attributes of innovation such as relative
advantage:
“The decision to adopt a technology is influenced by
(1) the ability of a potential adopter to judge whether
the benefits of using the innovation will outweigh the
risks of using it, and (2) whether the innovation
improves upon the existing technology. The more
benefit people anticipate from adopting the
innovation relative to what they now do, the more
rapidly it will diffuse”
According to Rogers ‎(23) homophily is the degree of similarity of two
individuals. Rogers ‎(23) claims then that in contrast to heterophily “such
homophily can act as an invisible barrier to the rapid flow of innovations within a
social system, as similar people interact in socially horizontal patterns”.
The critical mass of innovation adoption occurs when “enough individuals have
adopted an innovation that the innovation’s further rate of adoption becomes
self-sustaining”. According to Rogers ‎(23) this point is particularly important in
diffusion of interactive innovations when “the benefits from each additional
adoption increase not only for all future adopters, but also for each previous
adopter”.
Similarly to the critical mass, a threshold is a number of individuals engaged in
an activity required for an individual to join that activity. According to Rogers
‎(23) different types of adopters have different levels of threshold – a late
majority individual, for example, has a much higher threshold than an innovator.
2.3 Marketing and innovation strategy, innovation diffusion
Concerning approaches in business management Narayanan ‎(21) considers
two perspectives – market based and resource based. Using the market based
approach the company positions itself according to the market needs while
taking into account the rest of competitors. When working according to the
resource based approach the unique resources as the main asset are
considered.
Narayanan ‎(21) considers the importance of combining technologies in order to
develop new product. He claims then that there are many companies which are

very good in developing new technologies, on the other hand they are not so
good in positioning and generating new products from a variety of technologies.
Regarding the dynamics of technological change Narayanan ‎(21) considers two
closely linked processes: innovation and diffusion.
Innovation process considers development of new technical opportunities.
Diffusion process reflects evolution of markets. Both processes are interrelated.
They are also presented by Narayanan ‎(21) as two dimensions of technological
change matrix.
Rogers ‎(23) defines diffusion as “the process by which an innovation is
communicated through certain channels over time among the members of a
social system. The four main elements are the innovation, communication
channels, time, and the social system”
Moreover Rogers ‎(23) claims that “more than just a beneficial innovation is
necessary for its diffusion and adoption to occur”
Considering the dynamics of diffusion of innovation Narayanan ‎(21) presents it
as S-curve already mentioned in this paper. According to S-curve there are four
major periods of time during diffusion of innovation: emergence, rapid growth
phase, slow growth phase, maturity.
The same idea is expressed by Lutzenhizer ‎(18):
“The success of an idea or invention depends upon
a social process of adoption. Successful innovations
follow predictable patterns of acceptance known as
the “S-curve” where older technologies are
eventually supplanted by new ones. The S-curve
traces both a process of increasing improvements to
a new technology, as well as the process of
increasing adoption by users.”
Similar to Rogers ‎(23) and Lutzenhizer ‎(18) Tidd ‎(25) also considers S-shaped
dynamics of the process of diffusion. Tidd ‎(25) goes in more depth and
considers different models of adoption such as Epidemic, Bass, Probit,
Bayesian etc. He claims then that robust generic models of adoption still have
not been identified yet. Tidd ‎(25) suggests that the process of innovation

adoption will generally depend on the interaction between demand-side and
supply-side factors.
Summing up Tidd ‎(25) claims that the process of diffusion should be managed
with as much care as the process of technology development, because “better
products do not necessarily result in more sales”.
Drucker ‎(8) claims it is a matter of time while a new knowledge and technology
can transfer into commercial success:
“There is a protracted span between the emergence
of new knowledge and its distillation into usable
technology. Then there is another long period before
this new technology appears in the market place in
products, processes, or services”
Trott ‎(29) considers the importance of combining commercial and technological
strengths in order to generate new business opportunities. According to the
model introduced by Trott ‎(29) the key activity here is the continual external
scanning carried out by the organization’s commercial and technical divisions.
This process should be undertaken along with the process of assimilating
internal knowledge from the organization’s knowledge bases:
“It is the assimilation of knowledge from the external
environment via the company’s external linkages
with its internal capabilities that leads to new
business opportunities being created”
According to Evans ‎(10) one of the main roles of executive is detection and
mapping of technical innovations into business impact: “the translation from
technical innovation to business impact should be made immediately upon
detection, and the technical details should be held as background or
supplementary information only”
This puts a stress on the primary importance of commercialization.
According to Evans ‎(10) new technologies can bring value to existing business
directions as well: “be sure to look for cost takeout opportunities and
opportunities to enhance business value in current initiatives in addition to the
creation of solutions to new business problems”

Moreover Evans ‎(10) suggests that extracting more value using new
technologies can be reached more rapidly than new product development or
new implementation.
Trott ‎(29) considers different models of innovation:
 Serendipity – the most important factor here is an unexpected discovery
 Linear models developed after the World War II describe the innovation
process as an interaction between three major activities – science base,
technological development and the need of the market. Trott ‎(29) divides
them into two types:
Technology Push – when scientists make unexpected discoveries,
while “the marketplace was a passive recipient for the fruits of
R&D”
Market Pull – this model “emphasizes the role of marketing as an
initiator of new ideas resulting from close interactions with
customers”
 Simultaneous coupling model suggests “that it is the result of
simultaneous coupling of knowledge within all three functions that will
foster innovation”
 Interactive model – more sophisticated model which links together
Technology Push and Market Pull models. “It emphasizes that
innovations occur as the result of interaction of the marketplace, the
science base and the organization’s capabilities. Like the coupling
model, there is no explicit starting point”. Innovations can occur here
from a wide variety of points through interaction between them.
Afuah ‎(1) also considers different models of innovation and divides them into
static and dynamic models. Dynamic models are perceived as more advanced
since they “take a longitudinal view of innovation and explore its evolution
following introduction”. Foster’s S curve model considered by Afuah ‎(1) is said
to provide “one way of predicting the end of an existing technology and the
arrival of a technological discontinuity”.

There are two major mechanisms of diffusion considered by Narayanan ‎(21) –
technology substitution and bandwagon effect.
Discussing the diffusion of innovation in the market Tidd ‎(28) considers three
issues connected to the marketing of innovations:
1. “How the characteristics of an innovation affect adoption.
2. How the process of commercialization and diffusion affects adoption.
3. What techniques are available for forecasting future patterns of
adoption”
Forecasting of adoption might be helpful when future market demand estimation
is needed. However, according to Tidd ‎‎(28) forecasting is quite difficult when
innovative products are considered, since such products and their markets often
are not well defined. Certain forecasting methods are not so useful because of
the lack of past data. Companies often conduct different customer surveys
when forecasting adoption of innovative products. Brainstorming undertaken
among a group of experts can also be helpful in order to identify new products
or services.
Examining the issue of technology-intensive products, which often adopt the
technology push approach to product innovations, Trott ‎(29) suggests that it
“can allow a company to target and control premium market segments,
establish its technology as the industry standard, build a favourable market
reputation, determine the industry’s future evolution, and achieve high profits.”
On another hand, such products “shift market structures, require consumer
learning and induce behaviour changes, hence the difficulties for consumers
when they are asked to pass judgement.”
Trott ‎(29) suggests then that it is not a simple decision whether to use
technology push or market pull approach for product development. There is
still a lot of argument concerning this matter. Considering market research and
its influence on new product development Trott ‎(29) claims that “great care must
be exercised in market research, for there are times when market research
results produce negative reaction to discontinuous new products (innovative
products) that later become profitable for the innovating company”

In contrast Miyazaki ‎(19) perceives the process of innovation as more complex
rather than just combination of technology-push and market pull approaches:
“Unlike traditional demand-pull and market push concepts, complex interactions
among various interest groups considerably stimulate the innovation process
and thus innovation process is better seen from the system perspective.”
Rogers ‎(23) claims that a technology usually has two major aspects – hardware
and software. A hardware aspect reflects “the tool that embodies the technology
as a material or physical object”, while a software aspect reflects “the
information base for the tool”.
Rogers ‎(23) considers six major steps of Innovation Development process that
usually occur consequently:
 Recognizing a problem or a need
 Basic and applied research
 Development
 Commercialization
 Diffusion and adoption
 Consequences
Considering the role of new technology in business environment Evans ‎(10)
claims that “emerging technologies can be applied as an enabler of cost
reduction, increased resilience and security, and competitive advantage…
Emerging technologies provide new ways to deliver value and can dramatically
reshape business processes. Disruptive technologies can reshape entire
industries”
Afuah ‎(1) makes a distinction between technical and administrative innovation.
A technical innovation is about new or improved products, services or
processes, while an administrative one dealing with organizational structure and
administrative process.
Considering problem solving strategies affecting the ability to recognize the
potential of innovation Afuah ‎(1) takes as an example two approaches –
inductive and deductive: “in the deductive approach one starts with the problem

and looks for a solution to match. In the inductive, one starts with solutions and
finds problems to match”
Those two approaches can be compared to the previously considered concepts,
the inductive approach is similar to technology push, while deductive one – to
market pull.
Another important issue considered by Rogers ‎(23) is diffusion networks
addressing different factors influencing diffusion of innovation and different
strategies available. Talking about interpersonal communication and information
flow Rogers ‎(23) considers two models: hypodermic needle model and two-step
flow model. The hypodermic needle model claims that mass media has “direct,
immediate, and powerful effects on individual members of a mass audience”.
The two-step flow model introduced later, on another hand, considers the role of
opinion leaders in diffusion networks. The model argues that “communication
messages flow from a source, via mass media channels, to opinion leaders,
who in turn pass them on to followers”. Rogers ‎(23) also claims: “when a social
system’s norms favor change, opinion leaders are especially innovative”
Rogers ‎(23) considers the role of change agents in the diffusion process.
According to Rogers ‎(23) there have been seven roles of a change agent:
1. “To develop a need for change on the part of clients,
2. to establish an information-exchange relationship,
3. to diagnose problems,
4. to create an intent to change in the client,
5. to translate an intent into action,
6. to stabilize adoption and prevent discontinuance,
7. to achieve a terminal relationship with clients”
Rogers ‎(23) claims that more attention should be dedicated to consequences of
an innovation. According to Rogers ‎(23) consequences are classified as “(1)
desirable versus undesirable, (2) direct versus indirect, and (3) anticipated
versus unanticipated”. Moreover, “many innovations cause both positive and
negative consequences, and it is thus erroneous to assume that the desirable
impacts can be achieved without also experiencing the undesirable effects”

2.4 Organizational characteristics, value chain, HR
Concerning new product development process as a project Trott ‎(29) considers
different issues:
 “Business opportunity recognition – a possible technical or commercial
idea that may be transformed into a revenue-generating product
 Product concept development – a physical form or a technology plus a
clear statement of benefit
 Screening – a series of evaluations, including technical, commercial and
business assessments of the concept
 Specifications – precise details about the product, including features,
characteristics and standards
 Prototype/pilot – tentative physical product or system procedure,
including features and benefits
 Production – the product produced by the scale-up manufacturing
process
 Launch – the product actually marketed, in either market test or launch
 Cojoint analysis – a method for deriving the utility values that consumers
attach to varying levels of product’s attributes
 Commercialization – a more descriptive label would be market
introduction, the phase when the product is launched and hopefully
begins to generate sales revenue
 Commercial success – the end product that meets the goals set for it,
usually profit”

Afuah ‎(1) considers also how an organizational structure affects the innovation
process. According to Afuah ‎(1) “organizational structures are some variation of
two major types: functional and project. Each one of the types has its
advantages and disadvantages. In order to overcome the weak points of these
structure types, a matrix organizational structure was suggested. It is more
complex structure combining both the approaches and demands more
resources to be coordinated:
“Individuals from different functional areas are
assigned to a project, but rather than reporting only
to the project manager, they report to both their
functional managers and the project manager”
Evans ‎(10) claims that adapting innovational technology can be beneficial on
different stages across value chain. Talking about computer technologies he
says that “benefits of real time computing include competitive advantage,
improved responsiveness and customer satisfaction, increased revenues,
increased productivity, and cost reduction”
Concerning the R&D activity Trott ‎(29) considers different types of operations:
 Basic research – it usually conducted in “laboratories of universities and
large organizations. Outputs from this activity will result in scientific
papers for journals”
 Applied research – “this activity involves the use of existing scientific
principles for the solution of a particular problem.” Such research is
usually conducted by “large companies and university departments”
 Development – this activity is related to a product. “Usually the activity
will involve overcoming a technical problem associated with a new
producr”
 Technical service – such activity “focuses on providing a service to
existing products and processes”
Afuah ‎(1) suggests there are six innovation strategies that a firm can pursue:
offensive, defensive, imitative, dependent, traditional, opportunistic. Using the
offensive strategy a firm is the first to introduce new products. When using the
defensive strategy a firm is waiting for a pioneer to come up with a new product

first, and then it can introduce its own product with improved features. Afuah ‎(1)
argues that no matter which innovation strategy is used by a firm, R&D activity
should be performed to more or less extent in order to be effective.
Kotelnikov ‎(16) states then that “innovation can result from technology transfer
or through development of new business models and concepts”
Marciniak ‎(20) considers different ways to effectively encourage creativity in an
organization:
 “Actively respect an employees' ideas
 Give fair consideration and timely feedback
 Encourage free information flow
 Assign tasks requiring creativity to those employees who show creative
behaviour
 Provide time for creative employees to engage in creative work
 Provide constructive feedback for creative ideas and strategies
 Expect and participate in reasonable risk-taking”
Considering the effect of R&D investment on products Trott ‎(29) suggests it can
contribute to profit generation in several ways:
 Development of existing products – here the role of R&D activity is “to
extend the life of the product by continually searching for products
improvements” According to Trott ‎(29) the most common ways of
extending the life of a product are “capturing a larger market share and
improving profit margins through lowering production costs”
 Early introduction of a new product – this can help a firm to become a
technological leader in its industry. The aim of such company is “to
introduce innovative products into the market before the competition to
gain a competitive advantage”
 Long term projects – “developing products that the public do not yet
realize they require”. It can be also starting new areas of research.

Among HRM issues in innovative projects Trott ‎(29) considers the interface
between marketing and R&D staff. Trott ‎(29) points to certain difficulties in
communication, so there is a “need to manage communication flows across the
marketing and R&D boundaries”
Trott ‎(29) also considers how R&D activity is usually linked with business
strategy and should be planned accordingly.
According to Trott ‎(29), shortening of product life cycle and rapidly changing
technology, as well as rising costs of R&D activity have forced many companies
to implement technology transfer process. Trott ‎(29) considers the increasing
importance and popularity of technology transfer in innovation management: “it
is the process by which technology developed for one purpose is employed
either in a different application or by a new user.”
Afuah ‎(1) considers three properties of knowledge underpinning activities of an
organization – newness, quantity and tecitness. Knowledge is said to be radical
or competence destroying if it is very different from existing knowledge, or it is
said to be incremental or competence enhancing if it relies on existing
knowledge. Quantity considers how much of new knowledge is used.
Afuah ‎(1) considers two types of innovation sources: functional and
circumstantial sources.
Among the functional sources that were considered there are internal value
chain functions, external value-added chain of suppliers, customers, and
complementary innovators, university, government, and private laboratories,
competitors and related industries, and other nations or regions. Talking about
the internal value chain Afuah ‎(1) claims that innovations do not necessary
come from R&D activity. Other activities such as manufacturing or marketing
can also innovate.
Circumstantial sources are more about when or in what circumstances we can
expect innovations. Afuah ‎(1) considers three circumstances: planned firm
activities, unexpected occurrences and creative destruction.
Similar to Afuah ‎(1), Drucker ‎(8) claims there could be sources of innovation
inside or outside the company. According to Drucker ‎(8) some innovations can
“spring from a flash of genius”, but most of the successful innovations result

“from a conscious, purposeful search for innovation opportunities, which are
found in only a few situations”.
Drucker ‎(8) considers then seven sources of opportunity:
 Internal areas within a company or industry
Unexpected occurrences
Incongruities
Process needs
Industry and market changes
 External areas from the social and intellectual environment
Demographic changes
Changes in perception
New knowledge
Drucker ‎(8) claims then that these areas can overlap.
According to Afuah ‎(1) there are five kinds of people involved in the innovation
research process: “idea generators, gatekeepers and boundary spanners,
champions, sponsors, and project managers”.
Generally speaking about diffusion of innovation Clarke ‎(3) also considers the
most important roles in the innovation process:
 “opinion leaders (who have relatively frequent informal influence over
the behavior of others);
 change agents (who positively influence innovation decisions, by
mediating between the change agency and the relevant social system);
 change aides (who complement the change agent, by having more
intensive contact with clients, and who have less competence credibility
but more safety or trustworthiness credibility)”
Discussing the ways to deal with disruptive change Christensen ‎(4) considers
three major factors determining a company’s ability to change – resources,
processes, and values. Christensen ‎(4) claims then that all those factors are

equally important when facing a need for disruptive change: “to succeed
consistently, good managers need to be skilled not just in assessing people but
also in assessing the abilities and disabilities of their organization as a whole”
Christensen ‎(4) argues that sustaining innovation can be carried out relatively
easy by a big organization, while disruptive innovation is often performed
better by smaller disruptive companies. Christensen ‎(4), however, suggests
three possibilities how managers of big companies can successfully manage
disruptive innovation:
 “Create new organizational structures within corporate boundaries in
which new processes can be developed,
 Spin out an independent organization from the existing organization and
develop within it the new processes and values required to solve the new
problem,
 Acquire a different organization whose processes and values closely
match the requirements of the new task”
2.5 Finance
Afuah ‎(1) considers two main possibilities of financing innovation – using firm’s
own existing assets or raising money from external sources through debt or
equity. According to Afuah ‎(1) a firm faces three major problems while obtaining
financing for an innovation: uncertainty, adverse selection and moral hazard.
Afuah ‎(1) suggests several methods to determine whether a radical innovation
is worth investing. Afuah ‎(1) argues that an option oriented approach is better
for many innovations.
Considering the possibilities of innovation financing in different countries Hertog
‎(14) claims the situation can often be different: “there are differences between
countries in ways of financing innovation, for example investing in innovation
through for example regular science budgets or through dedicated innovation
schemes.”

According to Afuah ‎(1), once the potential of an innovation has been
recognized, a firm has to decide how to better implement the decision to adopt
it. There are a number of economic and organizational barriers faced by a firm
implementing an innovation:
“Fear of the loss of the revenues, lack of incentive to
invest in the innovation, fear of being stranded in a
smaller network, large exit costs, obsolescence of
existing capabilities, the firm’s dominant logic,
political power coalitions, emotional attachment to
the old innovation, and fear of losing a competence
builder in the old technology”
Afuah ‎(1) argues that appropriate innovation strategies, organizational structure,
systems, processes and people can be helpful in order to overcome these
problems.
Different forms of financing can be used in order to successfully finance an
innovation according to Stolpe ‎(26) - call option, early-stage venture, Initial
public offering, private equity
2.6 Environment & Competition
Discussing new technology and innovation Narayanan ‎(21) reminds that
technological environment is not the only one facing an organization. There
have been a number of other interdependent environments in open systems,
such as task environment, industrial environment, macroenvironment, social
environment, political environment etc. According to Narayanan ‎(21) a change
in one environment can stimulate a certain change in another one.
Concerning the major trends in the technological environment Narayanan ‎(21)
considers globalization, time compression, and technology integration.
According to Narayanan ‎(21) technological change can occur at two levels – at
the level of an individual firm or at the level of the technology (industrial level).
Narayanan ‎(21) describes technological change at a firm level as a problem
solving process. During technological change at an industrial level more than
one firm are involved.

Trott ‎(29) considers then different models of technology transfer such as
licensing, science park model, directory model, Ferret model, teaching company
scheme model, hiring skilled employees. A receptive environment should be
built for technology transfer, while external technology is identified through the
process of scanning and networking. Trott ‎(29) claims then that “it is necessary
to match technology with market need in order to produce a potential
opportunity for the business”
Trott ‎(29) considers “the area of intellectual property and the different forms of
protection available to a firm”. It can be patents, copyright, registered designs,
registered trademarks etc.
Blackburn ‎(2) also considers different practices of intellectual property
protection in different industries. Considering different means and relying on
results of telephone survey Blackburn ‎(2) suggests that business owners still
prefer using informal protection practices: “nearly all respondents reporting that
their products relied on specialist or confidential knowledge (98 per cent)
reported at least one informal practice for protecting knowledge, and 87 per
cent reported at least one legal method”
One of the reasons for that mentioned by Blackburn‎(2) is time consuming and
costly legal protection process: “the costs of obtaining, maintaining and
enforcing registrable rights in terms of money, time and effort were often
perceived by business owners prohibitively high”
Considering timing of the impact of new technology on economy Evans ‎(10)
claims that “new technology effects the economy only when it has been broadly
adopted and utilized”. Moreover according to Evans ‎(10), a business might have
to be like a pioneer in adopting new technology in order to reach competitive
advantage. At the same time this can be quite risky: “adoption of emerging and
disruptive technologies is a high risk, high reward proposition”
Afuah ‎(1) claims then that “a firm’s ability to profit from its competences is a
function how core the competences are (coreness) and the extent to which
competitors can quickly acquire such competences (imitability)”.
According to Afuah ‎(1) it is important to understand the process of transferring
the innovation across functional, organizational, and national boundaries.
Among the major factors affecting the process of innovation transfer Afuah ‎(1)

considers absorptive and transmission capacities, difference in cultures, nature
of innovation (incremental or radical), timing.
According to Afuah ‎(1) a firm’s ability to recognize the potential of an innovation
also depends on the local environment, when supportive environment has the
following attributes: “a system that provides financial support and rewards for
innovation, a culture that tolerates failure, the presence of related industries,
universities and other research institutions, and government policies”.
Considering sustaining profits from innovation Afuah ‎(1) suggests a combination
of three strategies – block, run, and team up: “they vary from one stage of the
value chain to the other, and from one phase of the innovation life cycle to the
other, as well as with the type of capabilities that a firm possesses.”
Afuah ‎(1) argues then that a multinational corporation’s “ optimum strategies are
a function of its information needs, that is, of the technological and market
uncertainties that it faces”. Afuah ‎(1) also argues that “in protecting profits, the
global arrangement is best for the team-up, block, and run strategies, while
multidomestic is worst. For example, considering the innovations with high
technological uncertainty, Afuah ‎(1) argues that “a nation with financial support
and rewards, for innovation in the form of initial public offerings (IPOs) and
venture capital, a culture that tolerates failure, certain related industries, and
emphasis on basic research at universities and other research institutions can
be conductive to recognizing the potential of innovations and exploiting them”
Trott ‎(29) considers the globalization of technology: “Countries on the Pacific
Rim have demonstrated an ability to acquire and assimilate technology into new
products. This has resulted in a substantial increase in technology transfer in
the form of licensing and strategic alliances.”
Afuah ‎(1) considers the role of government in the innovation process, and how
best a firm can exploit the opportunities and threats that government actions
offer. Certain innovations cannot be carried out without intervention by the
government, whether it is because the amount of time and money needed to
see any results, or certain political issues have to be solved.
2.7 Managing uncertainty and risk
Generally speaking about the difficulties in recognizing the technological and
market rationale behind an innovation and its applications Afuah ‎(1) suggests

two sources for such difficulties: ”the firm itself, especially the way it collects and
processes information, and uncertainty”.
Discussing the uncertainty issue restraining the innovation process Afuah ‎(1)
considers three kinds of uncertainty: technological, market and business.
Technological uncertainty is “how to make a new product and how to make it
work”. Market uncertainty is “how to sell the new product and make it a
commercial success”. According to Afuah ‎(1) business uncertainty “refers to the
general economic climate that is largely influenced by such macroeconomic
features as interest rates and government policies and that can be diversified
away”.
Afuah ‎(1) argues then that three major factors can reduce uncertainty:
“Technological trajectories, in particular sibling S curves; market regularities;
and the firm’s innovation strategy”
Afuah ‎(1) claims that a good time for new technology to replace an existing
technology is when it reaches its physical limits according to the S curve model:
“In particular, rather than monitor its own S-curve, a
firm may be better of monitoring sibling S-curves –
the S-curves of related industries”
A firm’s innovation strategy can also reduce technological and market
uncertainties according to Afuah ‎(1). Summing up those three approaches
Afuah ‎(1) claims that the best is to combine them.
One of the ways of reducing market uncertainty is also considered by Fontana
‎(12): “The habit of introducing into the market product samples to test
consumers’ reactions is a way to reduce market uncertainty”
Afuah ‎(1) considers the question of profit site, i.e. where in the innovation value-
added chain should the firm position itself in order to gain a profit from an
innovation. To make a better decision Afuah ‎(1) suggests that a firm “must
explore the attractiveness of the industry as well as the extent to which its
competences match those that are required to offer the product”. Afuah ‎(1)
suggests Porter’s five forces analysis to be used in order to determine the
industry attractiveness and industry dynamism through considering the
environments interacted by a firm resolving uncertainties.

2.8 Chapter Summary
The existing knowledge in the area of innovation management has been
observed in this chapter. The literature review has a number of chapters. Each
chapter reflects a certain area of product development and innovation
commercialization as follows.
 Customer needs and positioning. The importance of customer needs
and different ways of predicting the rate of innovation adoption have
been considered here. Market entry timing is another important factor
reflected in the chapter.
 Marketing and innovation strategy, diffusion of innovation.
Innovation commercialization and diffusion is a very important task,
which has to be carried out in order to succeed.
 HR & value chain, organizational characteristics. Different activities
across the value chain have been considered, as well as the
corresponding HR issues on different stages such as recognizing the
potential of innovation and idea generation, product/service
development, supplier and customer relations. Product life cycle is also
considered here.
 Finance. Different ways of financing innovation and investor relations are
described in this chapter.
 Environment & Competition. The role of the environment and different
issues associated with it are reflected here, as well as uncertainty
management and innovation protection.
The information discussed in the literature review will serve as a foundation for
identifying the key variables, and development of the research questions in later
chapters.

Dissertation Theoretical Framework
Chapter 3. Theoretical Framework
3.1 Introduction
The aim of this chapter is to build a theoretical framework for further research.
According to Sekaran ‎(24) theoretical framework is “the foundation on which the
entire research project is based”.
Sekaran ‎(24) defines theoretical framework as following:
“The theoretical framework discusses the
interrelationships among the variables that are
deemed to be integral to the dynamics of the
situation being investigated”
3.2 Dependent Variable
The main concern of the research is the dependant variable. Sekaran ‎(24)
defines dependent variable as “the main variable that lends itself for
investigation as a viable factor”. The dependent variable for this research can
be stated as following: Investigation into factors affecting Commercial Success
of Technological Innovation. In order to address the issue the variability in the
dependent variable should be explained. This can be done via the variability in
the independent variables having an impact on the dependent variable.
3.3 Independent Variables
According to Sekaran ‎(24) “an independent variable is one that influences the
dependent variable in either a positive or negative way”.
As the result of the work done in the literature review the key independent
variables have been identified. They can be classified into a number of groups
as reflected below.
3.3.1 Marketing, Product/Service Strategy
The group contains a number of variables considering the commercialization
process in the market. This looks like one of the most critical factors affecting
the dependent variable. One of the questions here is whether customer value is
offered through customer needs satisfaction and how is it related to the rate
of adoption of the innovation. Another point here is how important
product/service positioning in the market is, choosing the right profit site in

order to acquire competitive advantage through offering low-cost or
differentiated product/service. Market entry timing can be quite an important
factor related to the commercial success of innovation. This is related to the
product life cycle of competing products in the market and dynamics of
adoption (S curve). How does the environment affect the dependent variable
is one more question. Technology push or market pull marketing strategy can
be employed, and this can influence the success of innovation as well.
3.3.2 Attributes of Innovation
Different characteristics of innovation can also have a certain affect on
variability of the dependent variable. Different attributes of underlying
technology and technology intelligence gathering ways can influence on that.
Another important question about the innovation is whether it is incremental or
radical, this can influence the commercialization process and entire commercial
success of innovation. Relative advantage of the innovative product can also
bring a greater market share, which can allow the innovation to succeed. As it
can also be observed in the literature review there is a number of innovation
attributes that can effect the adoption of innovation and the process of diffusion:
compatibility, complexity, trialability, observability, imitability.
3.3.3 Organizational Characteristics
The following factors comprising the organizational characteristics are also
considered to be quite important ones when talking about success of
innovation. Corporate culture can be one of the most significant factors among
the organizational characteristics. This is often related to the variables from
other groups (such as marketing and human resource management). Tacit
knowledge as a part of organizational culture can be used for more efficiency
and productivity. Also different problem solving strategies can be adopted
within an organization in order to overcome different obstacles. An innovation
can appear anywhere along the value chain in the organization, so it can bring
a competitive advantage to the existing products through cost reduction and
differentiation. The management can utilize different assets and competences
within the organization. R&D activity effectiveness is quite a significant factor for
the success of innovation. Dominant managerial logic can affect the ability to
recognize the potential of innovation. The new knowledge acquired during the

process of innovation can be competence enhancing or destroying (depending
on how this relates to the experience existing in the organization).
3.3.4 Human Resources
Employees of an organization involved in different activities, their capabilities
and motivation can have a very serious affect as well. Highly educated
employees are often required for different activities in organization. The success
of the innovation may be dependent on recruitment process effectiveness,
which is quite related to the situation on the labour market. Creative workers
cooperating between themselves can generate new ideas in terms of both
technology and marketing. Original ideas generated are very useful for
innovation especially on early stages. The success of innovation can be reliant
on the degree of motivation among the staff.
3.3.5 Financing Innovation
It might be very difficult to succeed in the market without proper financing.
Different activities demand certain amount of finance on different stages. This
can have a strong effect on the success of innovation. Different forms of
financing can be used to acquire the budget; both internal and external
resources may be useful. So investor relations should be maintained and
developed properly. The development of business plan is quite critical for
attracting investment. Venture partnership often may bring additional financial
support. The government can be another source of finance that can contribute
to the success of innovation.
3.3.6 Managing Uncertainty and Risk
There is often a high degree of uncertainty and risk when dealing with
innovation. Different activities can be undertaken for risk management. There
can be both market and technological uncertainty that should be managed.
Technological discontinuity, for example, can be one of the risks that should
be predicted. The innovation should be protected from competitors using legal
and other means.
3.4 Relationships and Associations between Key Variables
The schematic diagram below reflects theorized relationships between the
variables.

The main concern is how the dependent variable is affected by the independent
variables. The independent variables, however, may be interdependent
between themselves as well.
Commercial
Success of
Technological
Innovation
Marketing Strategy
 Customer Needs Satisfaction
 Competitive Advantage
 Market Entry Timing
 Dynamics of adoption (S curve)
 Product Life Cycle
 Technology Push Vs Market Pull
 Environment
Attributes of Innovation
 Incremental/Radical
 Relative Advantage
 Compatibility
 Trialability
 Observability
 Imitability
 Technology intelligence
gathering
 Disruptive technology
Organizational Characteristics
 Value chain & cost reduction
 R&D activity
 Corporate culture
 Assets
 Core Competences
 Dominant Managerial Logic
 Problem Solving Strategies
Financing Innovation
 Investor Relations
 Business Plan
 Return on Investment
 Government Financing
Managing Uncertainty and Risk
 Market uncertainty
 Technological uncertainty
 Technological discontinuity
 Innovation protection
 Intellectual Property Protection
Human Resources
 Idea Generation, Creativity
 Staff Motivation
 Specialists on the Labor Market
 Education
Dep. V
Indep. V

The diagram below concentrates on the variables of major concern and the
relationships among them. They will be considered during the following
investigation.
As shown on the diagram above one of the most critical key factors affecting the
commercial success of innovation is the marketing strategy. In order to succeed
in the market the innovation has to turn into a product/service which will be
adopted by customers. This can be achieved through the effective marketing
strategy providing customer needs satisfaction and having competitive
advantage as a result of successful positioning.
Afuah ‎(1) claims that “the process of innovation cannot be separated from a
firm’s strategic and competitive context”. Afuah ‎(1) also stresses the importance
of customer needs: “generating good ideas or adopting a new one, in and of
itself, is only a start. To be an innovation, an idea must be converted into a
product or service that customers want”
In other words, innovation process involves both invention and
commercialization. Afuah ‎(1) argues then that capability of a firm to generate
profits and reach competitive advantage depends on two important factors
(HR related) – assets and competences, which in turn depend on the
technological and market knowledge. Technological knowledge is “knowledge
of components, linkages between components, methods, processes, and
Commercial
Success of
Technological
Innovation
Marketing
Strategy
Financing
Human
Resources
Dep. V
Indep. V

techniques that go into a product or service”. Market knowledge, on another
hand, is “knowledge of distribution channels, product applications, and
customer expectation, preferences, needs, and wants”.
Drucker ‎(8) also claims that “careful analysis of the needs – and, above all, the
capabilities – of the intended user is also essential. ”
Moreover Drucker ‎(8) states that a particular attention should be paid to
customer when bringing new ideas into market:
“Because innovation is both conceptual and
perceptual, would-be innovators must go out and
look, ask and listen. Successful innovators use both
the right and left sides of their brains… Then they go
out and look at potential users to study their
expectations, their values, and their needs.”
Another important HR factor leading to commercial success may be availability
of experienced and highly motivated staff on different levels and in different
activities.
Concerning R&D process management Trott ‎(29) considers one of the most
important dilemmas – how to encourage creativity and at the same time
improve efficiency. Kotelnikov ‎(16) reflects this dilemma as follows: “without
order nothing can exist – without chaos nothing can evolve”
Good specialists in the marketing department can also contribute to effective
marketing, so relation between independent variables can be observed as well.
Sometimes financing can be quite critical in order to implement successful
commercialization of the innovation. At the same time proper financing can
contribute to both employing good specialists and developing and implementing
effective marketing strategy.
Therefore, all of the three independent variables have a considerable impact on
the variance in the dependent variable. Those dependencies will be considered
in the next chapter when developing research question.

3.5 Development of Research Questions
Research questions are considered at this stage. They are built basing on the
interrelationships among the key variables identified earlier.
3.5.1 Research Question No 1
In what way do customer needs impact the commercial success and diffusion of
the innovation?
What are the main HR issues that contribute to successful innovation entering
the market place?
How financial resources should be allocated and managed in innovative
organization?
3.6 Summary
The dependent and independent variables and the relationship among them
have been identified in this chapter. As a result the research questions have
been developed. They will be investigated then as described in the next
chapter.

Dissertation Description of Investigation
Chapter 4. Description of Investigation
The aim of this chapter is to describe the investigation and research design
Once the research questions have been developed in the previous chapter it is
possible to carry out the investigation.
The research process is carried out using Sekaran’ s ‎(24) model. The purpose
of the research is considered as a descriptive study.
According to Sekaran’s ‎(24) definitions the investigation is correlational since
“the important factors associated with a problem” are identified. This
correlational study is conducted in the natural environment “with minimum
interference by the researcher with the normal flow of work”.
Certain projects within organizations are considered as units of analysis in the
study, since a commercial success of certain innovative products/services is
investigated.
This study is cross-sectional since the data is gathered only once during the
research. This research is undertaken in the natural environment so it can be
defined as noncontrived.
This research is designed in phenomenological manner. The study’s issue looks
rather like a soft problem, so it will be using qualitative data for further analysis,
which will be collected using semi structured interviews.
A deductive data analysis has been carried out through “arriving at conclusions
by interpreting the meaning of the results”. ‎(24)
In the Appendix the interview questions are attached. They were presented to
the interviewees during face to face conversation. The investigation has been
conducted in Latvia. According to the innovation survey by European
Commission ‎(31) there is “the major share of innovative enterprises in the
manufacturing of communications equipment and apparatuses, chemicals and
electrical and optical equipment...despite the fact that over the last years Latvia
has demonstrated rather good progress in various indicators of innovation
performance, it is still considerably behind the levels achieved by the old and in
many instances even new EU member states. There is a lack of knowledge-

intensive industries in Latvia and weakened research in institutes and higher
education establishments.”
Latvian companies as well as companies from Lithuania, Scandinavia, USA and
Israel are presented in the investigation. Seven managers have been
interviewed during the investigation. They represent different sectors:
telecommunication industry providing products to either operators or end users,
IT sector in financial area, brewing industry, and chemical products
development. IT sector is considered to be quite innovative in Latvia and other
countries. Telecommunication and chemical industries are constantly
developing and adopting many innovative technologies. Brewing sector
innovate less but there is still quite a strong competition bringing many
innovative products.
Profile of the interviewees:
1. Director of a Lithuanian company which developed a special way of
connecting cables. This is mostly used by phone operators in order to
supply the end users with a more efficient and reliable quality of service.
Five people are working for the company.
2. Director managing a Latvian company with 40 employees. The project
considered is in the area of IT. The company is offering a software
product providing banks with a system of automatic financial reports
generation.
3. One of the leading local brew houses is presented by the production
manager. The staff is about 700 employees.
4. R&D team leader represents an Israeli company working in the
telecommunication industry and employing 120 people. Innovative
equipment is offered by the company to the telecom operators.
5. Sales manager working for a Finish company producing innovative glue
for factories. There are about 700 employees in the organization.
6. One of the local leading TV operators is represented by the financial
manager. About 200 employees are working in the company. Innovative
TV services are offered by the company to the users at home.

7. An American company employing about 170 people is represented by
the marketing and technical support manager. Innovative communication
equipment is offered by the company.
The managers on different levels from different departments have been
interviewed. They can describe the situation in their company in general, at the
same time each one of them is involved in particular activity – whether in
marketing, R&D or finance management. Those areas are related to the
research questions of the study developed in the previous chapter. Three
research questions proposed in the theoretical framework present three
important independent variables among the key variables identified.
The interviews with the managers allow analysing the dependence of the
dependent variable on the three key factors. The interview questions are
designed appropriately. This will explain the variability in the dependent variable
presenting the aim of the study – identifying factors that impact on the
commercial success of technological innovation. The minor objectives have
been considered during the interviews as well.

Dissertation Analysis and Interpretation of Data
Chapter 5. Analysis and Interpretation of Data
The aim of this chapter is to present the analysis and interpretation of data.
Once the data has been collected it is possible to analyse it and determine the
variability in the dependent variable. The interviewees present different cases of
either successful or not successful projects implemented in their organizations.
Below are the results of the interviews carried out.
5.1.1 In what way do customer needs impact the commercial success
and diffusion of the innovation?
All of the candidates consider marketing activity and product concept
development to be the most critical factor for commercial success of the
innovation. There is a risk of underestimation of the importance of customer
needs research, as a result the company can be unable to come up with a
product that customers want.
Marketing and sales as well as technical support departments are expected by
the interviewees to contribute more to successful product development. The
manager from (‎4) claims that the reason of failure was inability to dedicate
enough resources to effective marketing. The company (‎4) has developed a
revolutionary technology in communications more than ten years ago, but it did
not succeed to turn this technology into successful product adopted in the
market. The manager claims that the market research was carried out
spontaneously by the company, customer needs were not identified, and the
users were not ready to adopt the innovation due to early market entry timing.
There are a number of successful companies using that technology today. On
the other hand, the manager from (‎3) states that the importance of marketing
has been realized recently by the management, so much more resources is
currently dedicated to the marketing activity. As a result, the market share has
been doubled by the company during the last few years.
One of the producers of series of successful products (‎5) always considers
customer needs and undertakes the market research before the product
concept is developed. Customer feedback is appreciated and considered to be
very useful for improving existing product. Customers, however, not always
know what they need. Moreover, competition and corruption are considered to

be one of the obstacles for product sales. The company does not believe
communication among customers is good, since competitors may have agents
inside some of the customer companies. So, direct customer contacts are
perceived to be safer. On the other hand, the company always watches the
customers of competitors, and that is what all producers do.
The company (‎6) is a leader on the local market offering new services.
However, the innovative services are not derived from the customer. This is
rather stimulated by the political environment, so the company has to follow the
EU regulations and adopt European experience. Despite the leading position
the company keeps in touch with the clients through letters and advertisements
in order to make their advantage sustainable. The managers also follow the
competitors and their customer relations. This allows the company to keep the
leading position in the market.
Four managers believe customers always realize their needs, which have to be
considered carefully. Two companies had certain difficulties in identifying
customer needs. One of the managers (‎5) claims customers do not always
know what they need, and there is a certain degree of politics in customer
relations.
Two managers state they went ahead of the customer needs, so they had to
promote the new product and educate the customer. Such activity has an extra
cost, but in the case (‎6) a competitive advantage has been achieved as the
result of that.
In three companies market research is always carried out before the product
concept is developed. Such activity was not undertaken properly in
unsuccessful projects.
Customer feedback is perceived by all the interviewees as very useful for
improving an existing product/service. Two of the managers claim customers
usually have similar needs. Moreover, in the case (‎7) some clients had a role of
lead users.
Five interviewees agree that “a word of mouth” among the customers is very
important and can contribute a lot to diffusion of innovation. One of them claims
it is especially useful when working with big customers. One of the managers
tells this is not so useful in their case (‎6). Another company (‎5), in contrast,

believes communication among clients can damage sales since competitors
usually follow the new products appearing in the market. So in this case new
products are offered to the clients directly in order to protect the innovation.
Four managers believe they had good market entry timing; they acquired a
leading position due to the early entry. However, the manager from (‎4),
suggests it is never too late if you have something better to offer. Moreover, one
of the reasons for failure of (‎4) was a very early entry.
Four companies follow competitors and their relations with the customer
constantly, they also consider the rate of adoption of competing products. In the
case (‎7) it was used in order to estimate the sales potential. Two companies do
not consider that issue.
According to the results of the interviews customer needs satisfaction have a
great impact on the success of innovation.
5.1.2 What are the main HR issues that contribute to successful
innovation entering the market place?
Talking about workers’ contribution to the successful product development the
candidates agree that new ideas come from top management, mostly in
marketing and support departments. In other words, customer needs are always
a better source of new ideas, so the company has to stay close to customers in
order to recognize potential of innovation.
At the same time all the candidates suppose it can be useful if the employees
can be like lead users to some extent, when they use the products existing in
the market and understand what is good and what is bad about them. This can
be helpful for market needs understanding.
Six from the interviewees believe that employees’ motivation is quite important
when working on innovative products. There is usually a high cost of R&D, so
the employees should be satisfied in order to stay in the organization.
Moreover, they should not just stay – they should work effectively.
Different ways of motivation are used in the companies. In small firms there are
usually material means of motivation, as well as good atmosphere at work.
Promotion possibility is also one more way of motivation in big organizations.
Acceptable means of motivation may differ in different cultures. Marketing and

sales workers are often stimulated by some kinds of bonuses if they bring more
clients and sales. In (‎4) R&D specialists are offered a stock options program in
order to be a part of future product revenues. Four interviewees from the local
companies think it is not important to let the worker feel like a co-owner of the
future product, they claim such way of motivation is used in western companies
only. However when the employees enjoy from the stock options program such
practice of motivation created a real team spirit.
Three candidates believe that employees at any levels are equally important for
the success of innovation, since they are integral part of the product, and any
mistake can bring failure. Other two interviewees suppose most of the response
is on the top management connected with the corporate strategy. Summing up,
there is a certain degree of influence at each level, so qualified work by all the
employees along with effective communication among them can lead to
success.
Four of the interviewees claim that experience of the worker is often more
important than an education level. Some of them suggest that formal education
is not important, and experienced employees without education can be very
effective. The education and experience are considered to be equally important
in (‎6). The company (‎6) experiences a shortage of educated workers.
Communication skills, reliability and professionalism are appreciated a lot
among other qualities of employees.
In case (‎6) top management is the main source of new ideas, the rest are good
implementers. In two other companies the ability to make a decision is
appreciated on any level.
Five of the companies have good communication among the employees. They
believe it is very important in terms of motivation. There is, however, certain
competition among the employees in (‎5), which impacts the atmosphere in the
company.
According to the interviews among the HR issues having effect on success of
innovation there are level of motivation of the employees, as well as their
communication skills and working experience.

5.1.3 How financial resources should be allocated and managed in
innovative organization?
All of the interviewees claim it is critical to have a proper financing for success
of innovation. Without good financing it is a waste of time, so market entry may
be missed.
R&D is often perceived as a very costly activity. On the other hand, a weak
financing of marketing can lead to a failure in some cases. According to the
interviews the financing resources should be directed accurately to different
activities on different stages.
Both internal and external financing were used in different cases. In general the
reason of failure was not the shortage of finance resources, but the inability to
put finance into employing qualified people for key management roles in
marketing and other activities.
The interviewee (‎7) see government financing as a big success, since financing
from government can be perceived as a good sale. The managers of the local
companies claim it might be very useful but the official authorities do not do
their job appropriately and there is a lot of bureaucracy and corruption.
The western interviewees claim they prefer using equity financing rather than
debt, since there is often quite a high degree of risk when working on innovative
product. Private equity and different investment funds are likely to be used in
such cases. Bank debt financing is used by the local companies.
The importance of a properly developed business plan is always considered
when attracting new investment. According to the interviews the main fear of
investors is always market uncertainty and competition rather than technological
uncertainty.
According to the interviews proper financing is quite critical for the success of
innovation. Equity financing is quite popular for innovative projects since there is
a high degree of market uncertainty.
The analysis and interpretation of data has been presented in this chapter. The
results will be summed up in the next chapter.

Dissertation Conclusions and Future Work
Chapter 6. Conclusions and Future Work
6.1 Conclusions
The concern of this study was the question how the technological innovation
should be managed in order to succeed in the market. The key success factors
have been identified as a result of literature review and three research
questions have been developed.
The appropriate data has been collected in semi structured interviews
afterwards. As a result of analysis and investigation certain trends of innovation
commercialization practices have been identified in seven companies. Below
are the trends grouped according to three research questions:
A proper marketing with customer needs driven strategy along with
successful market entry timing are suggested to be the most critical factors
for success of an innovation. The customer needs and competitive environment
has been considered accurately in successful cases when market pull strategy
was used. The successful cases, however, reflect incremental innovations. For
such type of innovation the competitive environment along with customer needs
and other market forces were considered mostly. On the other hand radical
innovations discussed in the unsuccessful cases have not been followed by
effective promotion and education of the customer for successful diffusion.
Technology push strategy was not supported by aggressive promotion in order
to make the customer aware of new possibilities offered by the innovative
product. Nor the competitive environment including the complementary products
and services was available. Market entry timing was not considered seriously
for successful diffusion of innovation.
“A word of mouth” factor was very useful for innovation’s diffusion in most
cases. This is often the best promotion carried out naturally by satisfied
customers. It depends on different attributes of the innovation such as relative
advantage, compatibility, complexity, trialability, observability etc. Unsatisfied
customers, on the other hand, can quickly bring a bad reputation to the
innovation.

In most cases the motivation of employees is considered to be very important in
the innovative projects. Most of the interviewees believe that the contribution of
employees at all levels is an important factor since they are integral part of the
product, and mistake at any level can bring failure. There is a certain degree of
influence at each level, so qualified work by all the employees along with
effective communication among them can lead to success. In some other cases
most of the response was on the top management connected with the corporate
strategy, this was observed in successful projects as well.
There can be different ways to motivate the employees in organizations. Since
this issue looks like a soft problem there is no a single way of motivation. It
depends on perception, it can be country specific and related to culture.
In most cases experienced employees are valued more than formally educated,
however in some cases the education and experience are considered to be
equally important. There is always a need for reliable and professional
employees with good communication skills. The preference of education or
experience in terms of success of innovation has not been identified.
The interviewees agree that new ideas come from top management, mostly in
marketing and support departments. This means that customer needs are
always a better source of new ideas, so successful companies stay close to
customers in order to recognize potential of innovation.
According to the investigation it is critical to acquire enough finance for
innovation. R&D is quite costly activity, at the same time a significant budget
should be dedicated to marketing and corporate strategy development in order
to succeed in the market.
Market uncertainty is the main fear of potential investors when financing
innovation. Type of financing used is often country specific and related to the
culture – debt financing is mostly used in European countries, equity financing
is actively used in USA and Israel. Anyway, the dependence of success on the
type of financing was not revealed.

Government financing did not have a key role for success of innovation; it
cannot help when applying the wrong product strategy.
The importance of a properly developed business plan was always considered
when attracting new investment in both successful and unsuccessful projects.
Equity financing did help to reduce the financial risk but did not prevent the
failure of projects.
6.2 Research design
The aim of the research was to identify the critical factors for commercial
success of technological innovation. It has been achieved by means of literature
search followed by qualitative data collection and analysis. This descriptive
study was carried out using Sekaran’ s ‎(24) model. In this study the variability in
the dependent variable was described using the independent variables.
6.3 Limitations
There have been certain limitations in this study, such as time constrains,
confidence obligation and small research sample. Moreover, managers from
one level only have been interviewed in each case. This does not reflect the
situation completely since managers from other levels might have another
opinion. Nor type of innovation was considered during the investigation.
However, it can be observed that there have been incremental innovations only
among the successful ones, while radical innovations using technology push
strategy failed due to lack of effective promotion and customer awareness,
consideration of environment, complementary products and services, and
unsuccessful market entry timing.
6.4 Further Work
Further work can be undertaken in order to study in more depth the possible
ways to stay aligned with customer requirements and expectations, and
possibly to predict future needs. Managers from different levels in each
company might be interviewed in order to get the full picture. More exhaustive
investigation can be conducted as a result of quantitative data collection.
Effective strategy of disruptive innovation commercialization can be investigated
in more depth as well.

Dissertation Appendix
Chapter 7. Appendix
7.1 The interview questions
The questions are grouped according to the independent variables investigated.
 Did you adopt customer needs driven marketing strategy in order to
succeed in the market?
 Do customers always know what they need?
 Did you supply customers with the exact match of their expectations or a
company went ahead of them and educated the customer?
 Did you undertake customer needs market research before the product
concept is developed?
 How close do you keep in touch with existing customers?
 How useful is customer feedback for improving an existing
product/service?
 Do you believe “a word of mouth” among customers was important for
innovation diffusion?
 Did you have any ideas from lead users when developing product/service
concept?
 How important is entry timing? How is it related to the life cycle of the
products offered in the market? How successful was your entry timing?
 Did you consider the rate of adoption of competing products?
 Did you follow competitors and their relations with the customer?
 Do you expect from workers to participate in product development and
come up with new ideas?

 Do you think the workers should be rather like lead users of the future
product in order to contribute to the success of the innovation?
 Did you let the worker feel like a co-owner of the future product?
 How do you usually motivate the employees? Possible promotion? Offer
product equity?
 At what levels of the hierarchy the employees contributed to the success
of the innovation?
 Employees of which departments mostly contributed to product
development? R&D? Production? Customer relations? Sales? Finance?
 Which employees are usually more to come up with new ideas?
Educated? Experienced?
 Did you experience a shortage of educated workers?
 What is more important for you when assessing candidates for new
positions? Education? Previous experience? Creativity? Confidence?
 What type of worker do you usually need? Idea generator? Implementer?
 How good was communication among the employees from different
departments?
 How critical it was to have good finance sources in order to succeed in
the market?
 Is it possible to succeed in the market without large finance reserves?
 For which activity it is more critical to acquire proper financing? On which
stage?
 Where did you acquire financing? From internal or external sources?
 How useful was government financing and other structural funds?
 Which type of innovation financing do you prefer? Debt? Equity?

 What financing sources are more convenient for you? Private? Banks?
Government? Why?
 How important is a proper business plan with clearly stated return on
investment when attracting new finance?
 What was usually the main fear of potential investors? Market
uncertainty? Technological uncertainty?
 Did you consider venture partnership? How useful it is for innovation
financing?

Dissertation Bibliography
Chapter 8. Bibliography
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“Six Keys to Creating New-Growth Businesses”
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“The Discipline of Innovation”
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Business Innovation and Disruptive Technology
Financial Times Prentice Hall, 2003
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http://www.1000ventures.com/business_guide/innovation.html
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Research methods for business
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