1. Creativity is the underlying process that enables innovation through generating new ideas. Innovation can originate from individuals, firms, universities, government research, and nonprofit organizations. 2. A key source of innovation is collaborative networks that leverage resources across multiple organizations and individuals. These networks are especially important in high-technology sectors due to the wide range of expertise required. 3. While individual organizations contribute to innovation, the most significant source may be the linkages between different components of the innovation system through collaborative relationships and networks.

2. Sources of
Innovation
Research
and
Developme
nt by Firms
OVERVIEW
Innovation
In
Collaborati
ve
Networks
Summary of
Chapter
Penutup

3. Getting an Inside Look: Given Imaging’s Camera Pilla
Gavriel Iddan was an electro-optical engineer at Israel’s Rafael Armament Development Authority,
the Israeli authority for development of weapons and military technology. One of Iddan’s projects
was to develop the “eye” of a guided missile, which leads the missile to its target. In 1981, Iddan
traveled to Boston on sabbatical to work for a company that produced X-ray tubes and ultrasonic
probes. While there, he befriended a gastroenterologist (a physician who focuses on digestive
diseases) named Eitan Scapa. During long conversations in which each would discuss his
respective field, Scapa taught Iddan about the technologies used to
view the interior lining of the digestive system. Scapa pointed out that the existing technologies had
a number of significant limitations, particularly with respect to viewing the small intestine.b The
small intestine is the locale of a number of serious disorders. In the United States alone,
approximately 19 million people suffer from disorders in the small intestine (including bleeding,
Crohn’s disease, celiac disease, chronic diarrhea, irritable bowel syndrome, and small bowel
cancer)

4.  Furthermore, the nature of the small intestine makes it a difficult place to diagnose and treat such
disorders. The small intestine (or “small bowel”) is about 5 to 6 meters long in a typical person and is
full of twists and turns. X-rays do not enable the physician to view the lining of the intestine, and
endoscopes (small cameras attached to long, thin, flexible poles) can reach only the first third of the
small intestine and can be quite uncomfortable for the patient. The remaining option, surgery, is very
invasive and can be impractical if the physician does not know which part of the small intestine is
affected. Scapa thus urged Iddan to try to come up with a better way to view the small intestine, but at
that time Iddan had no idea how to do it. Ten years later, Iddan visited the United States again, and his
old friend Scapa again inquired whether there was a technological solution that would provide a better
solution for viewing the small intestine. By this time, very small image sensors— charge-coupled
devices (CCDs)—had been developed in the quest to build small video cameras. Iddan wondered if
perhaps it would be possible to create a very small missile-like device that could travel through the
intestine without a lifeline leading to the outside of the body. Like the missiles Iddan developed at
Rafael, this device would have a camera “eye.” If the device were designed well, the body’s natural
peristaltic action would propel the camera through the length of the intestine.
 A View to the Future . . .
 Colonoscopy was the largest category of the endoscopy market—in the United States alone, 14 million
patients undergo colonoscopy a year, and it was believed that even more people would undergo
screening if screening were more comfortable. Given thus had the potential of growing market. As of
2015, the U.S. approval for the Pillcam COLON was limited to “patients who had undergone
incomplete colonoscopies,” citing some results that indicated that the pictures from the camera pill
were less clear than traditional colonoscopy. Many in the industry, however, suspected that the camera
pill would eventually supplant all traditional colonoscopy. In February of 2014, Dublin-based medical
device maker Covidien had acquired Given Imaging for roughly $860 millioni, and then in early 2015,
medical equipment giant Medtronic acquired Covidien for $49.9 billion.j Given would now have
access to much greater capital resources and larger (and more geographically distributed) salesforces—
if it could continue to get its Pillcams approved for more applications and in more countries, it was
positioned to transform the market for gastrointestinal endoscopy.

5. 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. An even more important source of innovation, however,
does not arise from any one of these sources, but rather the linkages between them. Networks of innovators that
leverage knowledge and other resources from multiple sources are one of the most powerful agents of
technological advance.1 We can thus think of sources of innovation as composing a complex system wherein any
particular innovation may emerge primarily from one or more components of the system or the linkages between
them
(see Figure 2.1). 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, etc.), and through the linkages
between different components (firms’ relationships with their customers, technology transfer from universities to
firms, etc.).
CREATIVITY
Innovation begins with the generation of new ideas. The ability to generate new and useful ideas is termed
creativity. Creativity is defined as the ability to produce work that is useful and novel. Novel work must be
different from work that has been previously produced and surprising in that it is not simply the next logical step
in a series
of known solutions.2 The degree to which a product is novel is a function both of how different it is from prior
work (e.g., a minor deviation versus a major leap) and of the audience’s prior experiences.3 A product could be
novel to the person who made it, but known to most everyone else. In this case, we would call it reinvention. A
product could be novel to its immediate audience, yet be well known somewhere else in the world. The most
creative works are novel at the individual producer level, the local audience level, and the broader societal level.4

6. .
As the previous sections indicate, there is a growing recognition of the importance of collaborative research and development networks for successful
innovation.40 Such collaborations include (but are not limited to) joint ventures, licensing and secondsourcing agreements, research associations, government-
sponsored joint research programs, value-added networks for technical and scientific interchange, and informal networks.41 Collaborative research is especially
important in high-technology sectors, where it is unlikely that a single individual or organization will possess all of the resources and capabilities necessary to
develop and implement a significant innovation.42 As firms forge collaborative relationships, they weave a network of paths between them that can act as conduits
for information and other resources. By providing member firms access to a wider range of information (and other resources) than individual firms possess,
interfirm networks can enable firms to achieve much more than they could achieve individually.43 Thus, interfirm networks are an important engine of innovation.
Furthermore, the structure of the network is likely to influence the flow of information and other resources through the network. For example, in a dense network
where there are many potential paths for information to travel between any pair of firms, information diffusion should be fairly rapid and widespread.
Figure 2.6 provides pictures of the worldwide technology alliance network in 1995 and in 2000.44 The mid-1990s saw record peaks in alliance
activity as firms scrambled to respond to rapid change in information technologies. This resulted in a very large and dense web of connected firms. The network
shown here connects 3,856 organizations, predominantly from North America, Japan, and Europe. However, there was a subsequent decline in alliance activity
toward the end of the decade that caused the web to diminish in size and splinter apart into two large components and many small components. The large
component on the left is primarily made up of organizations in the chemical and medical industries. The large component on the right is primarily made up of
organizations in electronics-based industries. If the size
and density of the collaboration network influences the amount of information available to organizations that are connected via the network, then the difference
between the network shown for 1995 and the network shown for 2000 could have resulted in a substantial change in the amount of information that was
transmitted between firms. (The strategic implications for a firm’s position within the network are discussed in
Chapter Eight.)

7. 1. Creativity is the underlying process for innovation. Creativity enables individuals and
organizations to generate new and useful ideas. Creativity is considered a function of intellectual
abilities, knowledge, thinking styles, personality traits, intrinsic motivation, and environment.
2. Innovation sometimes originates with individual inventors. The most prolific
inventors tend to be trained in multiple fields, be highly curious, question previously made
assumptions, and view all knowledge as unified. The most wellknown inventors tend to have both
inventive and entrepreneurial traits.
3. Innovation can also originate with users who create solutions to their own needs. The rise of the
snowboarding industry provides a rich example.
4. Firms’ research and development is considered a primary driver of innovation. In the United
States, firms spend significantly more on R&D than government institutions spend on R&D, and
firms consider their in-house R&D their most important source of innovation.
5. Firms often collaborate with a number of external organizations (or individuals) in their
innovation activities. Firms are most likely to collaborate with customers, suppliers, and
universities, though they also may collaborate with competitors, producers of complements,
government laboratories, nonprofit organizations, and other research institutions.
6. Many universities have a research mission, and in recent years universities have become more
active in setting up technology transfer activities to directly commercialize the inventions of
faculty. Universities also contribute to innovation through the publication of research findings.

8. 7. Government also plays an active role in conducting research and
development (in its own laboratories), funding the R&D of other
organizations, and creating institutions to foster collaboration networks and
to nurture start-ups (e.g., science parks and incubators). In some countries,
government-funded research and development exceeds that of industry-
funded research.
8. Private nonprofit organizations (such as research institutes and nonprofit
hospitals) are another source of innovation. These organizations both
perform their own R&D and fund R&D conducted by others.
9. Probably the most significant source of innovation does not come from
individual organizations or people, but from the collaborative networks that
leverage resources and capabilities across multiple organizations or
individuals. Collaborative networks are particularly important in high-
technology sectors.
10. Collaboration is often facilitated by geographical proximity, which can
lead to regional technology clusters.
11. Technology spillovers are positive externality benefits of R&D, such as
when the knowledge acquired through R&D spreads to other organizations.