Competitive Advantage in Technology Industries

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Competitive Advantage in Technology-intensive industries

The principal link between technology and competitive advantage is innovation: this is responsible for new industries coning into being and for some firms dominate their industries. The innovation process: while invention is the creation of new products or processes through the development of new knowledge or a combination of existing ones, innovation refers to the commercialization of a single or of many inventions. Not all inventions lead to innovations, because sometimes they are not commercially viable. Sometimes innovation is introduced in absence of new technologies, rather simply with changes in design. The profitability of Innovation: the profitability of innovation to the innovator depends on the value created by the innovation and the share of that value that the innovator is able to appropriate. The value is typically shared by innovators with customers, suppliers, imitators/followers. The regime of appropriability describes the conditions that influence the distribution of returns to innovation. In a strong regime, the innovator captures substantial shares of the value, in a weak regime, the value is kept mostly by the others. Property Rights in Innovation: appropriating value depends greatly on the ability to establish property rights; they include Patents, Copyrights, Trademarks, Trade secrets The disadvantage of establishing property rights is that they make information public, hence companies may prefer secrecy to patents. Tacitness and Complexity of the Technology: the extent to which innovation can be imitated depends by the ease with which the technology can be comprehended and replicated. This depends by: •The level of codifiable knowledge (that can be “written down”); the highest information is codified, the easiest is copying it; •Complexity of the technology: the simplest the technology, the easiest is to copy it.

Lead Time: after introducing an innovation, the innovator has...
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