Management and Economics of Innovation

Julia Bodner (JB), Assistant Professor
Carmelo Cennamo (CC), Professor (mso)
Christoph Grimpe (CG), Professor
Karin Hoisl (KH), Professor
Paul Hünermund (PH), Assistant professor
Keld Laursen (KL), Professor
Johannes Luger (JL), Assistant Professor
Marion Pötz (MP), Associate Professor
Thomas Rønde (TR), Professor
Valentina Tartari (VT), Associate Professor

Basic knowledge of theories related to economics, management, technology, innovation, and organizations. It is a requirement for receiving the course diploma that the students attend the entire course.

The course aims to provide a set of advanced insights into the field of Management and Economics of Innovation spanning from foundational themes to the most recent developments of the field.

Both the competitiveness of firms and welfare in general depend on the ability to introduce innovative products, processes and services. Interest in management of innovation has traditionally centered on firm-internal aspects of processes such as, for instance, how collaboration and interaction among specialized professionals take place in the creation of innovation; how to deal with unavoidable uncertainty involved; and the path dependency in skills and resources. In recent years, there has been a surge in interest among scholars and practitioners in methods that allow the firm systematically to source its inputs externally. Innovation that originates from sources external to the firm has emerged as an important phenomenon and has been associated with labels such as open innovation, user innovation, crowd sourcing, and open source. These trends have also given rise to novel and so far immature research agendas that promise to enhance our understanding of the processes and sources of innovation in the years to come. With respect to the economics of innovation the course will cover modern economic theories related to innovation and intellectual property rights. In that regard, the course will particularly cover licensing on markets for technology as well as networks and network effects.

Lectures, class discussion, exercises, student presentations, and a 4-hours written exam (all aids allowed).
The course will be offered in a hybrid mode, i.e. participation will be possible both at CBS and online on Zoom.

Session 1: Introduction to the management of innovation (CG)

Literature

• Anderson, P., & Tushman, M. L. 1990. Technological discontinuities and dominant designs: A cyclical model of technological change. Administrative Science Quarterly, 35 (4): 604-633.
• Dosi, G. 1982. Technological Paradigms and Technological Trajectories: A Suggested Interpretation of the Determinants and Directions of Technical Change. Research Policy, 11: 147-162.
• Henderson, R., & Clark, K. B. 1990. Architectural innovation: The reconfiguration of existing product technologies and the failure of established firms. Administrative Science Quarterly, 35 (1): 9-30.
• Pavitt, K. L. R. 1984. Sectoral patterns of technical change: towards a taxonomy and a theory. Research Policy, 13 (6): 343-373.

Session 2: Introduction to the economics of innovation (THR)

Literature

• Scotchmer, S. 2004. Innovation and Incentives, Cambridge, Massachusetts: MIT Press, chapters 2, 4 and 6.
• Choi, J. P. 2002. A Dynamic Analysis of Licensing: The ‘‘Boomerang'’ Effect and Grant-Back Clauses, International Economic Review, 43: 1468-2354.
• Laursen, K., S. Moreira, T. Reichstein, and M. I. Leone. Evading the Boomerang Effect: Using the Grant-Back Clause to Further Generative Appropriability from Technology Licensing Deals. Organization Science, 28: 514-530.

Session 3: Open approaches to innovation (MP)

Literature

• Dahlander, L., Gann, D.M. 2010. How open is innovation? Research Policy, 39(6): 699-709
• Felin, T., Zenger, R.R. 2014. Closed or open innovation? Problem solving and the governance choice. Research Policy, 43: 914-925.
• Gambardella, A., Raasch, C., von Hippel, E. 2016. The user innovation paradigm: impacts on markets and welfare. Management Science, 63(5): 1450-1468
• Laursen, K., Salter, A. J. 2006. Open for Innovation: The role of openness in explaining innovative performance among UK manufacturing firms. Strategic Management Journal, 27(2): 131-150.

Session 4: Networks, collaboration and alliances (KL)

Literature

• Teece, D.J. 1986. Profiting from technological innovation: Implications for integration, collaboration, licensing, and public policy. Research Policy 15: 285-305.
• Mowery, D., Oxley, J., Silverman, B. 1996. Strategic Alliances and Interfirm Knowledge Transfers. Strategic Management Journal, 17 (Winter 96 special issue): 77-91.
• Ahuja, G. 2000. Collaboration networks, structural holes and innovation: a longitudinal study, Administrative Science Quarterly, 45 (3): 425-455.
• Tortoriello, M. 2015. The social underpinnings of absorptive capacity: The moderating effects of structural holes on innovation generation based on external knowledge. Strategic Management Journal, 36(4): 586-597.

Background literature:

• Cohen, W. M., & Levinthal, D. A. 1990. Absorptive capacity: A new perspective of learning and innovation. Administrative Science Quarterly, 35(1): 128-152.

Session 5: Platform-based innovation and innovation ecosystems (CC)

Literature

• Rochet J-C, Tirole J. 2006. Two-sided markets: A progress report. Rand Journal of Economics 37: 645-667
• Cennamo C., Santaló J. 2013. Platform Competition: Strategic Tradeoffs in Platform Markets, Strategic Management Journal, 34: 1331–1350
• Adner, R., & Kapoor, R. (2010). Value creation in innovation ecosystems: How the structure of technological interdependence affects firm performance in new technology generations. Strategic Management Journal, 31(3), 306–333.
• Jacobides M, Cennamo C, Gawer A (2018) Toward a theory of ecosystems. Strategic Management Journal. 39(8): 2255–2276.

Session 6: Appropriability and innovation strategy (KH)

Literature

• Ceccagnoli, M., & Rothaermel, F. T. (2008). Appropriating the returns from innovation. In Technological innovation: Generating economic results. Emerald Group Publishing Limited.
• Cohen, W. M., Nelson, R., & Walsh, J. P. (2000). Protecting their intellectual assets: Appropriability conditions and why US manufacturing firms patent (or not), NBER Working Paper No. 7552.
• Teece, D. (1986). Profiting from technological innovation: implications for integration, collaboration, licensing, and public policy. Research Policy, 15 (6): 285-305

Session 7: University-industry linkages (VT)

Literature

• Pavitt, K. 1991. What Makes Basic Research Economically Useful? Research Policy, 20: 109-119.
• Jaffe, A. 1989. Real Effects of Academic Research. American Economic Review, 79(5): 957-970.
• Agrawal, A., & Henderson, R. 2002. Putting Patents in Context: Exploring Knowledge Transfer from MIT. Management Science, 48(1), 44-60.
• Bercovitz, J., Feldman, M. 2008. Academic Entrepreneurs: Organizational Change at the Individual Level, Organization Science, 19(1): 69-89.

Background literature:

• Stephan, P. 1996. The Economics of Science, Journal of Economic Literature, 34(3): 1199-1235.
• Aghion, P., Dewatripont, M., Stein, J.C. 2008. Academic Freedom, Private-Sector Focus, and the Process of Innovation, The RAND Journal of Economics, 39(3): 617-635.

Session 8: Science, technology, and innovation policy evaluation (PH)

Literature

• Hünermund, P., Czarnitzki, D. (2019). Innovation Policy and Causality. ifo DICE Report 4 / 2019 (Winter): Innovation Policy, 3–6. https://www.ifo.de/en/publikationen/2020/journal-complete-issue/ifo-dice-report-4-2019-winter-innovation-policy
• Czarnitzki, D., Hünermund, P., and Moshgbar, N. (2020). Public Procurement of Innovation: Evidence from a German Legislative Reform. International Journal of Industrial Organization 71. https://doi.org/10.1016/j.ijindorg.2020.102620
• Einiö, E. (2014). R&D subsidies and company performance: evidence from geographic variation in government funding based on the ERDF population-density rule. Review of Economics and Statistics, 96(4): 710–728. https://www.mitpressjournals.org/doi/abs/10.1162/REST_a_00410
• Dechezleprêtre, A., Einiö, E., Martin, R. Nguyen, K., and Van Reenen, J. (2017). Do tax incentives for research increase firm innovation? An RD Design for R&D. Working Paper. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2810915

Session 9: Organizational learning (JL)

Literature

• Brauer, M., Mammen, J., & Luger, J. (2017). Sell-offs and firm performance: A matter of experience? Journal of Management, 43(5), 1359-1387.
• Madsen, P. M., & Desai, V. (2010). Failing to learn? The effects of failure and success on organizational learning in the global orbital launch vehicle industry. Academy of Management Journal, 53(3), 451-476.
• Posen, H. E., & Levinthal, D. A. (2012). Chasing a moving target: Exploitation and exploration in dynamic environments. Management Science, 58(3), 587-601.
• Zollo, M. (2009). Superstitious learning with rare strategic decisions: Theory and evidence from corporate acquisitions. Organization Science, 20(5), 894-908.

Session 10: Employee mobility (JB)

Literature

• Choudhury, P. (2022). Geographic Mobility, Immobility, and Geographic Flexibility–A Review and Agenda for Research on the Changing Geography of Work. Academy of Management Annals, 16(1), 258-296.
• Kacperczyk, A., & Balachandran, C. (2018). Vertical and horizontal wage dispersion and mobility outcomes: Evidence from the Swedish microdata. Organization Science, 29(1), 17-38.
• Groysberg, B., Lee, L. E., & Nanda, A. (2008). Can they take it with them? The portability of star knowledge workers' performance. Management Science, 54(7), 1213-1230.
• Stadler, C., Helfat, C. E., & Verona, G. (2022). Transferring knowledge by transferring individuals: Innovative technology use and organizational performance in multiunit firms. Organization Science, 33(1), 253-274.