Innovation is becoming a concept
that nations hope to foster as their financial situations become more dire. Research
in national innovation helps to highlight how the concepts of regional hubs can
help further this development by creating hives of innovative knowledge
sharing. Companies don’t work within isolation and often share knowledge,
people, and ideas throughout a region. Research into the development of the pharmaceutical
industry furthers this concept of demographic influence.
Innovation is a necessary
component of organizational growth and development. Theoretical and empirical literature
helps establish an understanding that innovation responds to consumer demand
(Schmookler, 1966). In other words, that as customers have needs they desire to
be fulfilled, organizations will often develop products and services to meet
those needs. The stronger the feedback loop the more likely such customer to
company interaction will lead to new innovative insights.
All innovation requires knowledge. This knowledge comes
from past experiences, sharing information, new research, education, market
needs, and communication. The knowledge that is derived from market and
consumer demand and is often difficult to codify in concise terms that can be
applied appropriately (Polanyi, 1966). Without strong analysis and customer
research it is difficult to determine what consumers are looking for in order
to develop these new products and services.
This difficulty in codifying needs into concise
terms means that such understandings often are derived from multiple pathways
as a result of local communication. It seeps into the organizations in an
amebic fashion. Those firms that operate on a local level have a better
understanding of the tacit needs of their customers (Kogut, 1993). It is
through constant communication with customers and the local market that such
needs and solutions finally become crystallized.
In innovation there is also a pull and push strategy
in much the same manner as there is in marketing. Demand pull from the market
helps to shape innovative investments (Schmookler, 1966). As customers create
needs, organizations will naturally respond to those needs. Furthermore, there
is also technology push that comes from the science, learning, research,
knowledge, manufacturing and production. Such inventions create a frontier by
which new products and services can create markets (Griliches, 1995).
To see how this push and pull strategy, combined
with local knowledge, creates innovation it is possible to look at those cities
and counties that have a disproportionate amount of new market offerings.
Technology organizations create a spillover influence in their regions that
offers an opportunity for shared development (Feldman, 2000). In essence, the
transferring of people, information, culture, and knowledge among a hub of
businesses creates innovative synergy in the area.
The research conducted by Fabrizio & Thomas
(2012) helps solidify this understanding of innovative locality. The research used
a panel dataset of new molecule innovation from the 56 largest pharmaceutical firms
in nine different countries between 1992 and 2001. The study focused on
analysis of the parent and sub-firms that reside in local markets even though
they have international presence for their products. They reviewed 1,085 new
market offerings from 1980 to 2001 trying to canvas innovation within the
industry. They analyzed these findings with technology data and local
information to come to a pattern of innovative development.
Results:
-Accumulated technical knowledge by measuring organizations
patents determines innovation.
-Knowledge of the market also determines the pattern
of innovations created.
-Systems of organizations, culture, and similarity
of industries in local regions impact innovation.
-The use of open innovation, networks, and knowledge
sharing processes encourages innovation.
-There are no international pharmaceutical innovations
only national ones that make their products available on the international
markets.
-The local and national culture has an impact on the
likelihood of innovation.
-It is recommended that innovative organizations
establish themselves with the local market to understand consumer needs and
develop new products.
The results shed light on the overall development of
innovation within nations. Organizations that are innovative work best when
located in a hub of like companies. The knowledge sharing among market members
furthers the development of new ideas and concepts. Nations can foster this
innovative process by developing such hubs similar to technology organizations in
Silicon Valley or automotive manufacturing in the Detroit area. Furthermore,
the national and regional culture also impacts the success of developing new
innovative products for global market presence.
Fabrizio, K. & Thomas, L. (2012). The impact of
local demand on innovation in a global industry. Strategic Management Journal, 33.
Feldman MP. (2000). Location and
innovation: the new economic geography of innovation, spillovers, and agglomeration.
In Oxford Handbook of Economic Geography, Clark G, Feldman M, Gertler M
(eds). Oxford University Press: Oxford, UK; 373–394.
Griliches Z. 1995. R&D and
productivity: econometric results and measurement issues. In Handbook of the
Economics of Innovation and Technological Change, Stoneman P (ed).
Blackwell: Oxford, UK; 52–89.
Kogut B. 1993. Country
Competitiveness: Technology and the Organizing of Work . Oxford University
Press: New York.
Polanyi M. 1966. The Tacit
Dimension. Doubleday: Garden City, NY.
Schmookler J. 1966. Invention
and Economic Growth Development. Harvard University Press: Cambridge, MA.
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