This document discusses different sources of innovation. It states that innovation can come from individuals, universities, government laboratories, private non-profit organizations, and firms. Firms are well-suited for innovation because they have greater resources than individuals and a system to direct those resources. The document also discusses how creativity and research are transformed into innovative outcomes through different components of the innovation system, including individuals, firms, universities, government-funded research, and private non-profits.

1. CHAPTER 2
Sources of innovation
By: YOKI SUDARMA

2. SOURCES OF
INNOVATION
Innovation The practical Implementation of an idea into a
new device or process.
Innovation can arise from many different sources. It can originate
with individuals, as in the familiar image of the lone inventor or users
who design solutions for their own needs. Innovation can also come
from the research efforts of universities, government laboratories and
incubators, or private nonprofit organizations. One primary engine of
innovation is firms. Firms are well suited to innovation activities
because they typically have greater resources than individuals and a
management system to marshal those resources toward a collective
purpose. Firms also face strong incentives to develop differentiating
new products and services, which may give them an advantage over
nonprofit or government-funded entities.

3. SOURCES OF INNOVATION
In the sections that follow, we will first consider the
role of creativity as the underlying process for the generation
of novel and useful ideas. We will then consider how creativity
is transformed into innovative outcomes by the separate
components of the innovation system (individuals, firms,
individualis, Private Nonprofit Organizations, goverment
funded research and universities ).

4. SOURCES OF INNOVATION
Individual Creativity An individual’s creative ability is a
function of his or her intellectual abilities, knowledge,
style of thinking, personality, motivation, and
environment.
Individual Creativity An individual’s creative ability is a
function of his or her intellectual abilities, knowledge
style of thinking, personality, motivation, and
environment.
Organizational Creativity The creativity of the
organization is a function of creativity of the individuals
within the organization and a variety of social processes
and contextual factors that shape the way those
individuals interact and behave.9 An organization’s
overall creativity level is thus not a simple aggregate of
the creativity of the individuals it employs. The
organization’s structure, routines, and incentives could
thwart individual creativity or amplify it.

5. SOURCES OF INNOVATION
Research and Development by Firms
Basicresearch is effort directed at increasing understanding of a topic or field
with out a specific immediate commercial application in mind. This research advances
scientific knowledge, which may (or may not) turn out to have long-run commercial
implications.
Applied research is directed at increasing understanding of a topic to meet a
specific need. In industry, this research typically has specific commercial objectives.
Development refers to activities that apply knowledge to produce useful
devices, materials, or processes. Thus, the term research and development refers to a
range of activities that extend from early exploration of a domain to specific
commercial implementations.
Universities Universities in the United States performed $63.1 billion worth of R&D in
2011, making them the second largest performer of R&D in the United States after
industry (see Figure 2.5 below).
Government-Funded Research Governments of many countries actively invest in
research through their own laboratories, the formation of science parks and
incubators, and grants for other public or private research entities
Private Nonprofit Organizations Private nonprofit organizations, such as private

6. INNOVATION IN
COLLABORATIVE NETWORKS
Technology Clusters Sometimes geographical proximity appears to play a role in the
formation and innovative activity of collaborative networks. Well-known regional
clusters such as Silicon Valley’s semiconductor firms, lower Manhattan’s multimedia
cluster, and the Modena, Italy, knitwear district aptly illustrate this point. This has
spurred considerable interest in the factors that lead to the emergence of a cluster. City
and state governments, for example, might like to know how to foster the creation of a
technology cluster in their region in order to increase employment, tax revenues, and
other economic benefits. For firms, understanding the drivers and benefits of
clustering is useful for developing a strategy that ensures the firm is well positioned to
benefit from clustering.
Technology clusters may span a region as narrow as a city or as wide as a
group of neighboring countries.45 Clusters often encompass an array of industries that
are linked through relationships between suppliers, buyers, and producers of
complements. One primary reason for the emergence of regional clusters is the benefit
of proximity in knowledge exchange. Though advances in information technology have
made it easier, faster, and cheaper to transmit information great distances, several
studies indicate that knowledge does not always transfer readily via such mechanisms.

7. INNOVATION IN
COLLABORATIVE NETWORKS
Technological SpilloversWhile the work on technology clusters has
tended to emphasize the “stickiness” of knowledge, a related body of
research has focused on explaining the spread of knowledge across
organizational or regional boundaries.
This topic is known as technological spillovers.
Technological spillovers occur when the benefits from the research
activities of one firm (or nation or other entity) spill over to other
firms (or nations or other entities). Spillovers are thus a positive
externality of research and development efforts. Evidence suggests
that technology spillovers are a significant influence on innovative
activity. For example, in a series of studies conducted in the 1980s and
1990s, Adam Jaffe and his coauthors found that both a firm’s patenting
activities and profits were influenced by the R&D spending of other
firms and universities in its geographical region.