Conceiving and Marketing Products in the Networking Age
Chapter 1: An Increasing Need for Innovation
1. 1.1 An increasing need for innovation INTRODUCTION Almost a century ago, Joseph Schumpeter (1991), a heterodox Austrian economist, argued that economics needs to do more than simply be the science that studies the allocation of scarce resources. If this were the case, the economic problems would simply be a matter of algorithms and equations. Schumpeter believed that economics should focus on the dynamics of change stimulated by innovation. Innovation promotes growth and generates imitation. In so doing, it causes repeated cycles where equilibria are formed and then destroyed. Economics has, in its very nature, the force that sustains but also destroys. Therefore, it is a science that must also study innovation, progress and the evolution of social systems. As Schumpeter points out, the diﬀerent forms of innovation, including new products, new processes, organizational innovations and new kinds of markets, represent a signiﬁcant driver of capitalist systems and the economies of diﬀerent countries. Innovation does not happen by serendipity or chance. It is a systematic process that needs to be managed. Indeed, Schumpeter (1943), in highlighting the strategic and organizational implications of innovation, suggested that innovation can be a managerial process in a large enterprise. Large ﬁrms can systematically create innovation through their research and development (R&D) eﬀorts, and they can harness the proﬁts generated by innovations to protect themselves from the competitive forces of their markets. While Schumpeter understood the principal dynamics of innovation at the industrial level, as well as the entrepreneurial...
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