Innovation Offshoring:Asia's Emerging Role in Global Innovation Networks

Most analysts agree that critical ingredients for economic growth, competitiveness, and welfare in the United States have been policies that encourage strong investment in research and development (R&D) and innovation. In addition, there is a general perception that technological innovation must be based in the United States to remain a pillar of the American economy. Over the past decade, however, the rise of Asia as an important location for "innovation offshoring" has begun to challenge these familiar notions. Based on original research, this report demonstrates that innovation offshoring is driven by profound changes in corporate innovation management as well as by the globalization of markets for technology and knowledge workers. U.S. companies are at the forefront of this trend, but Asian governments and firms are playing an increasingly active role as promoters and new sources of innovation. Innovation offshoring has created a competitive challenge of historic proportions for the United States, requiring the nation to respond with a new national strategy. This report recommends that such a strategy include the following elements: output forecasting techniques ... Improve access to and collection of innovation-related data to inform the national policy debate; Address "home-made" causes of innovation offshoring by sustaining and building upon existing strengths of the U.S. innovation system; Support corporate innovation by (1) providing tax incentives to spur early-state investments in innovation start-ups and (2) reforming the U.S. patent system so it is more accessible to smaller inventors and innovators; and Upgrade the U.S. talent pool of knowledge workers by (1) providing incentives to study science and engineering, (2) encouraging the development of management, interpretive, cross-cultural, and other "soft" capabilities, and (3) encouraging immigration of highly skilled workers.Innovation Networks, Innovation Offshoring, Asia

Complex City Systems

Information and communications technology (ICT) is being exploited within cities to enable them to better compete in a global knowledge-based service-led economy. In the nineteenth and twentieth centuries, cities exploited large technical systems (LTSs) such as the telegraph, telephony, electrical networks, and other technologies to enhance their social and economic position. This paper examines how the LTS model applies to ICT deployments, including broadband network, municipal wireless, and related services, and how cities and city planners in the twenty-first century are using or planning to use these technologies. This paper also examines their motivations and expectations, the contribution to date, and the factors affecting outcomes. The findings extend the LTS model by proposing an increased role for organizations with respect to an individual agency. The findings show how organizations form themselves into networks that interact and influence the outcome of the system at the level of the city. The extension to LTS, in the context of city infrastructure, is referred to as the complex city system framework. This proposed framework integrates the role of these stakeholder networks, as well as that of the socioeconomic, technical, and spatial factors within a city, and shows how together they shape the technical system and its socioeconomic contribution. The CCS framework has been presented at Digital Cities Conferences in Eindhoven, Barcelona, Taiwan, London and at IBM’s Global Smart Cities Conference in Shanghai between 2010 and 2012. Its finding are timely in the context of major policy decisions on investments at regional, national and international level on ICT infrastructure and related service transformation, as well as the governance of such projects, their planning and their deployment

Challenges of open innovation: the paradox of firm investment in open-source software

Open innovation is a powerful framework encompassing the generation, capture, and employment of intellectual property at the firm level. We identify three fundamental challenges for firms in applying the concept of open innovation: finding creative ways to exploit internal innovation, incorporating external innovation into internal development, and motivating outsiders to supply an ongoing stream of external innovations. This latter challenge involves a paradox, why would firms spend money on R&D efforts if the results of these efforts are available to rival firms? To explore these challenges, we examine the activity of firms in opensource software to support their innovation strategies. Firms involved in open-source software often make investments that will be shared with real and potential rivals. We identify four strategies firms employ – pooled R&D/product development, spinouts, selling complements and attracting donated complements – and discuss how they address the three key challenges of open innovation. We conclude with suggestions for how similar strategies may apply in other industries and offer some possible avenues for future research on open innovation

Organisational Responses to Discontinuous Innovation: A Case Study Approach

Research that examines entrant-incumbent dynamics often points to the organisational limitations that constrain incumbents from successfully pursuing new technologies or fending off new entrants. Some incumbents are nevertheless able to successfully implement organisational structures and develop routines that overcome these institutional constraints. We provide a case-study analysis of how three firms - Motorola, IBM and Kodak - responded to discontinuous innovations and the associated structural and organisational limitations that are typical to incumbent organisations. Each firm was able to capture gains from new technologies and develop profitable products in emerging markets, although their abilities to sustain these gains varied due to subsequent organisational changes. Drawing from these case studies, we synthesise how firms can institute organisational strategies to continue to capture gains from disruptive innovations. A schema suggests that particular organisational strategies are comparatively optimal for corresponding points along an innovation lifecycle

Placing the Networks on the Web: Challenges and Opportunities for Managing in Developing Asia

Placing the networks on the Web poses a fundamental challenge, but also provides new opportunities for managing in Developing Asia. There is a huge efficiency gap between the region's manufacturing systems and the management of complementary, knowledge-intensive support services. The challenge is to reduce this gap as quickly as possible by embracing the Internet as a core business function, despite a weak base of accumulated knowledge of how to manage IT-based information systems. Asian companies, even the best, lag substantially behind their American and European counterparts. There is a potential vicious circle that needs to be broken: a belated transition to IT-based information systems has prevented the accumulation of knowledge, through trial-and-error, of how to design and implement an appropriate IT organization that reflects the peculiar strengths and weaknesses of diverse Asian management systems. Limited resources prevent any attempt to address these problems in a big leap forward. This implies that in-house efforts need to be supplemented with outsourcing of IT services. There is also a need for strategic partnering with major suppliers of Internet software and networking equipment. The opportunity is that the Internet provides almost unlimited opportunities for the outsourcing of mission-critical support services, such as ERP (enterprise resource planning), HRM (human resource management). Furthermore, fierce competition among major producers of Internet software and networking equipment has created a buyers' market - placing Asian firms in a reasonably strong bargaining position. These developments are generally not well covered by existing studies, which are primarily focused on developments in the U.S. and Europe. The paper tries to fill this gap, and explores how placing global production networks on the Web affects managing in Developing Asia. A conceptual framework is introduced in parts 1 to 3. That framework is then applied to one of the role models of managing in Asia, Taiwan's Acer Group. Part 1 introduces a taxonomy of expected benefits from Internet-enabled transformations of business organization. In part 2, we argue that the real issue is to analyze how the Internet reshapes the organization of global production networks. In part3, we access conflicting claims on how an increased use of the Internet to manage global production networks affects international knowledge diffusion. In part 4, the example of Taiwan's Acer Group is used to describe the challenge for Asian firms to embrace the Internet as a key management function. And in part 5, we ask what Acer's experience tells us about Developing Asia's opportunities.

Limits to Modularity: A Review of the Literature and Evidence from Chip Design

This working paper has been prepared as part of the East-West Center's research project on Globalization of Knowledge Work: Why is Chip Design Moving to Asia. In this paper, Dieter assesses what we know about the limits to modularity and their impact on firm organization and industry structure. He focuses on evidence form chip design, drawing on interview on 2002 and 2003 with a sample of 60 companies and 15 research institutions that are involved in chip design in the US, Taiwan, Korea, China and Malaysia. It is summarized "stylized" propositions of the modularity literature that are well-established, as well as predictions that are controversial. In addition, important limits to modularity and relevant management responses were reviewed.

Innovating global value chains : creation of the netbook market by Taiwanese firms

This paper explores the process of creation of the netbook market by Taiwanese firms as an example of a disruptive innovation by latecomer firms. As an analytical framework, I employ the global value chain perspective to capture the dynamics of vertical inter-firm relationships that drive some firms in the chain to change the status quo of the industry. I then divide the process of the emergence of the netbook market into three consecutive stages, i.e. (1) the launch of the first-generation netbook by a Taiwanese firm named ASUSTeK, (2) the response of the two powerful platform leaders of the industry, Intel and Microsoft Intel, to ASUSTeK’s innovation, and (3) the market entry by another powerful Taiwanese firm, Acer, and explain how Taiwanese firms broke the Intel-centric market and tapped into the market-creating innovation opportunities that had been suppressed by the two powerful platform leaders. I also show that the creation of the netbook industry was an evolutionary process in which a series of responses by different industry players led to changes in the status quo of the industry.Taiwan, Information services industry, Computer, Industrial technology, Marketing, Market share, Industrial management, Disruptive innovation, Latecomer firms, Global value chains, The PC industry

Internationalisation of Innovation: Why Chip Design Moving to Asia

This paper will appear in International Journal of Innovation Management, special issue in honor of Keith Pavitt, (Peter Augsdoerfer, Jonathan Sapsed, and James Utterback, guest editors), forthcoming. Among Keith Pavitt's many contributions to the study of innovation is the proposition that physical proximity is advantageous for innovative activities that involve highly complex technological knowledge But chip design, a process that creates the greatest value in the electronics industry and that requires highly complex knowledge, is experiencing a massive dispersion to leading Asian electronics exporting countries. To explain why chip design is moving to Asia, the paper draws on interviews with 60 companies and 15 research institutions that are doing leading-edge chip design in Asia. I demonstrate that "pull" and "policy" factors explain what attracts design to particular locations. But to get to the root causes that shift the balance in favor of geographical decentralization, I examine "push" factors, i.e. changes in design methodology ("system-on-chip design") and organization ("vertical specialization" within global design networks). The resultant increase in knowledge mobility explains why chip design - that, in Pavitt's framework is not supposed to move - is moving from the traditional centers to a few new specialized design clusters in Asia. A completely revised and updated version has been published as: " Complexity and Internationalisation of Innovation: Why is Chip Design Moving to Asia?," in International Journal of Innovation Management, special issue in honour of Keith Pavitt, Vol. 9,1: 47-73.

Creating First-Mover Advantages: The Case of Samsung Electronics

This paper analyzes the sources of first-mover advantages by examining the case of Samsung Electronics, a firm which has maintained and strengthened the technological leadership in the DRAM industry since 1992. The focus is on endogeneity of first-mover advantages under changing technological and competitive environments, part of which are also shaped by the technology leader. The paper also discusses general implications of this case study for strategy and organization for innovation.First-mover advantages, innovation, firm growth, Samsung Electronics, semiconductors