Technology and Innovation, Vol. 19, pp. 461-480, 2017 ISSN 1949-8241 • E-ISSN 1949-825X Printed in the USA. All rights reserved. http://dx.doi.org/10.21300/19.2.2017.461 Copyright © 2017 National Academy of Inventors. www.technologyandinnovation.org

THE EMERGENCE OF TECHNOLOGY AND INNOVATION MANAGEMENT

Klaus Brockhoff

WHU Foundation, Vallendar, Germany

Technology and innovation management (TIM) has a history of some 400 years. The present paper describes this history. TIM grew to become a sub-discipline both in engineering sciences and in business administration during the 1960s and 1970s. Empirical research developed a deeper understanding of the discipline as well as enough material for a curriculum and knowl- edge domain foundation. At the same time, the scope of the field broadened substantially by interaction with major societal trends. The field has become increasingly professionalized, moving from the early eclectic approaches to a broadly developed discipline.

Key words: Technology; Innovation; Research; Development; Technology and innovation management; R&D management; History of ideas

INTRODUCTION on the developments. The focus is more on empiri- This paper contributes in several ways to a better cal research and relies less on underlying theoretical understanding of the field of technology and inno- models. A basic assumption of modern economists is that vation management (TIM) and its development. innovation can be a driver of growth. This, however, For the first time, it presents the long history of this assumes that TIM is managed properly. We explain field, from its unsystematic beginnings to its current reasons for managerial problems as well as major status as a research-based discipline. This histori- academic contributions that have been devised to cal presentation does not adopt models of dividing deal with these issues. TIM development into successive chronological Furthermore, this paper demonstrates how the “generations” (1-5). There are two major reasons discipline widened its focus beyond a narrow view for this. Firstly, the present exposition begins much on contributions from research and development earlier than that of the proponents of generational (R&D) to corporate or national growth. On the one approaches. Secondly, many concepts occurring at hand, the scope was widened to overlap with the the same time are attributed to different TIM gen- newly developing field of knowledge management. erations. With respect to the more recent history On the other hand, six major international trends of the field, we refer to other contributions in this were adopted and, to some extent, were shaped by present issue. This allows us to concentrate on a few TIM. These trends are human resource development, authors who appear to have left a marked impression co-operations to develop new knowledge and to foster

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Accepted: July 3, 2017. Address correspondence to Prof. Dr. Klaus Brockhoff, WHU Foundation, Burgplatz 2, D 56179 Vallendar. E-mail: [email protected]

461 462 BROCKHOFF innovation, internationalization, care for environ- support inventive activities were developed (8). At mental issues, extension of TIM from manufacturing that time, no special reference was made to industrial industries to services, and strategic uses of intellec- R&D as a valuable resource to be used in the pro- tual property rights. cess of invention. This had to wait for some time. In In the second section, I sketch the emergence of practice, however, it was demonstrated that inven- the idea of innovation as a driver of growth. Major tion, innovation, and investment “are necessary and steps involved in this process have become part of complementary functions in the advance of technol- what today is known as knowledge management. ogy” (9, p. 186). At the beginning of the 19th century, The section ends with a systematic overview of the Jean-Baptiste Say (10) suggests that it is far better to concepts under this heading. Many attempts were use resources for R&D than for leisure or amusement made to measure the contribution of technological (fireworks are a classic item in this respect), and men progress to growth at national and firm levels. In the who follow this advice should be greatly honored. The third section, we argue that the earlier approaches of states and their rulers should not alone be respon- time-dependent technological progress had no rele- sible for conducting R&D, but this should also be a vance for management, while that of resource-driven task for companies. However, states should provide technological progress had only little relevance. This an environment conducive to inventions, for instance, leads to the question answered in the fourth sec- by introducing patent laws. In this respect, Say (10) tion: What are the major managerial tasks of TIM, finds that Great Britain, where such laws were intro- and when could managers begin to draw on insti- duced in 1791 and 1792, serves as a model nation to tutions to support this type of management? In the his home country, France. Half a century later, John fifth and penultimate section, we sketch develop- Stuart Mill (11) follows this line of argumentation by ments that indicate the broadening of the original requesting individual incentives for designers, who, topic in response to new trends in the environment if broadly interpreted, could be inventors in today’s of the classical industrial R&D laboratories. A short understanding. The use of resources for inventions and innovations is not yet seen as an investment but sixth section concludes the paper. as a special type of advantageous consumption by INNOVATION AS A DRIVER OF GROWTH— the latter two authors. In 1623, Francis Bacon (12) A LONG HISTORY prescribed an ideal organizational model for pub- lic R&D. It was published after his death in 1638. In Historical Review this model, R&D should adopt a division of labor. At a surprisingly early date, we observe business The dividing lines between the specialized activities models that explicitly address innovation. As early as are defined by functions or stages to be performed in 1675, Jacques Savary (6) clearly saw the necessity of the process of R&D. These include the international satisfying customers in the long run. Furthermore, acquisition of new knowledge (taking care that pro- he advised young businessmen on their careers, sug- prietary knowledge is not distributed internationally), gesting that they consider the type of business they R&D, the control of the R&D process, and the local want to start. Namely, they should decide whether dissemination of the new findings (12,13). they intend to (a) imitate a business already known Inventions are not transformed automatically into in another country, (b) attempt an invention as a successful innovations for two reasons. Charles Bab- basis for an innovation in a new type of business, or bage (14) describes both reasons at an early stage: (c) enter a competitive industry with known prod- • “Most frequently” it is discovered that the use of ucts. In developing his advice, Savary draws heavily the invention requires “a greater expense than on his experiences as an entrepreneur and manager. that at which it (the use, K.B.) can be made by During the Age of Enlightenment, the development other methods” (14); this means that the mar- of technologies in different types of manufacturing ket for this invention has not been studied. organizations was taught (7). Furthermore, funda- • “The man who aspires to fortune or to fame by mental personal and philosophical conditions to new discoveries, must be content to examine EMERGENCE OF TIM 463

with care the knowledge of his contemporar- namely the search for an economic equilibrium, is ies, or to exhaust his efforts inventing again fundamentally false. Rather, entrepreneurs using what he will most probably find has been bet- the outcomes of their laboratories are constantly ter executed before” (14); this indicates a lack searching for “new combinations” that destabilize of technological analysis. any equilibrium. These new combinations, which he later calls “innovations” (22), can be new products, These problems have been overcome in more modern new manufacturing processes, new models of organi- times by obtaining competitor technological intelli- zation, or new markets for sales or for procurement. gence (15) and, within a company, by using systems and information technologies to better document and Two ideas are very illuminative: the shift of focus retrieve earlier technological knowledge. from inventive activities to the use of the inventions During the second half of the 19th century, in innovations and the broadening of the scope of fast-growing companies in the mechanical, electri- innovation from physical products to processes and cal, and chemical industries seem to have understood organizations. Furthermore, Schumpeter (21) argues such ideas very well. They sought close relationships that every company that can afford it would be well with university departments that might provide them advised to set up its own laboratories. Now, R&D is with valuable research results as a basis for new prod- considered an investment. ucts, and they installed their own laboratories to Summarizing, we observe that, through the last develop proprietary new knowledge. In looking back 400 years, major elements of an encompassing system at his life as an industrialist, Werner von Siemens (the of technology and innovation (TI) were developed. Its co-founder of the company known today as Siemens basic ideas are shown in Figure 1. Resources invested Corp.) says: “In my view, a major reason for the fast in industrial R&D departments promise to lead to growth of our factories is the fact that our products inventions, which, in turn, could be marketed as in their great majority result from our own inven- innovations. These would lead to growth by pro- tions. Although these were not protected by patents ductivity gains in firms and, consequently, in their in most cases, they offered an advantage over those home countries. These processes have to observe cer- products of our competitors; usually, this lasted long tain societal and firm-specific constraints, which, in enough until we could develop further improve- turn, could be pushed aside to a certain degree by the ments” (16; translated by the author). The following proceeds resulting from the innovations. The feed- examples exhibit more of this thinking. Thomas A. back arrows in Figure 1 illustrate this. Edison asked for a continuous stream of inventions This view, however, has a number of severe (17). In the lamp industry, a “more methodologi- limitations. None of the arrows shown in Figure 1 rep- cal” approach to research was considered necessary resents a static, linear, and deterministic relationship, to come up with “important discoveries” (18, p. 157 and some relationships might even be discontinu- et seq.). General Electric and DuPont initiated lab- ous. Furthermore, other influential variables are not oratories as a response to competitive pressure from considered. This includes major societal trends. The mostly European firms in their industries (19,20). model represents a technology-driven approach to The company laboratories could serve three innovation. As shown below, during the late 20th cen- purposes: to reduce the necessity of using outside tury, this was found to be a risky strategy if compared inventions, to influence the stream of proprietary with strategies that give a substantial weight to mar- inventions, and to accumulate proprietary knowl- keting ideas in defining the choice of R&D programs edge to be used to barter for external knowledge. and projects. The use of the inventions resulting from industrial In a widely neglected landmark study, Friedrich R&D is intended to strengthen the competitiveness von Gottl-Ottlilienfeld (23) offers two important of the respective firm vis-à-vis its competitors. thoughts: (a) Systematic R&D reduces the depen- Joseph A. Schumpeter (21) observes the spread dency on chance events in developing inventions, and expansion of company R&D laboratories. He and (b) new techniques are developed to meet eco- argues that one of the leading economic theories, nomic objectives, but economic objectives only can 464 BROCKHOFF

Level of knowledge

Societal and Business resources and governmental constraints; norms, resources Business plans

Research and Development leading to invention

Innovation

Company competitiveness and growth

Economy’s competitiveness and growth

re A simple conceptual model of relationships between R&D and competitiveness. be realized by using technologies. Thus, an eco- that U.S. managers are more readily willing to accept nomic objective for R&D is conceptualized. Yet, market imperatives to guide their R&D than Ger- the weight given to this type of objective remained man managers (26). Biographies of managers in both largely unclear. Based on a tedious manual collection countries support this finding. For instance, in the of patent data, it was argued that more successful automobile industry of the 20th century, Alfred P. inventive activities follow market demand (i.e., they Sloan of General Motors (27) tells us how frequently were demand-pulled rather than being technolo- market forces determine strategic decisions on new gy-pushed) (24). A large program on exploring the product developments. Alternatively, the biogra- relations among R&D, patenting, and productivity phy of Heinz Nordhoff, even during his later time growth at various levels of aggregation was later ini- at Volkswagen after World War II, demonstrates his tiated and headed by Zvi Griliches (25). The degree preference for a more technology-driven strategy to which the idea of demand-pull innovative activ- (28). This reflects the economic background of Ger- ities finds acceptance among industrialists seems to many during the wars and the interwar period (29). depend very much on the economic conditions in These were the learning years for Nordhoff. He joined their respective home countries. Indeed, it is argued General Motor’s Opel Corporation in Germany in EMERGENCE OF TIM 465

1929, and he was promoted to a board membership made by individuals not employed by big companies, in 1942. such as the motor vehicle invented by Carl Benz. This A market-oriented technology strategy can fall idea is well-accepted today (40). More specifically, it into the trap of listening to an “average” type of cus- is common practice for large corporations to support tomer. This neglects the demands arising in the incubators and start-up companies. smaller niches inhabited by more “advanced” cus- The opposite feedforward direction of this arrow tomers who could initiate “disruption” of an industry is thought to be necessary because research (and, to (30). A technology-oriented strategy has its own pit- a lesser degree, development) seems to burden com- falls. In the automobile industry, Henry Ford directed panies with risk levels that only few of them might his company with a one model strategy and extreme be able to shoulder. This could lead to an underin- process innovation into a so-called “systemic state,” vestment of funds to generate inventions. Therefore, from which it could escape only after a shutdown governmental research or governmental support of his factory for almost a year to organize a model for private research appears to be necessary (41,42). change. This allowed General Motors to acquire mar- Empirical research on this argument in the 1960s ket share (31). focuses on invention and not on innovation. This Behavioral constraints can further limit technol- may be explained by the paucity of data on innova- ogy push inventions. In the telegraph industry, Elisha tion. Even data on R&D expenditures and on patents Grey overlooked the market potential in Alexan- as indicators of inventive activities (43) has become der Graham Bell’s inventions (32). This behavior is available only gradually. known as the not-invented-here syndrome, whereby More feedback arrows are possible but are only externally developed technologies are not well-ac- explored much later when TIM begins to be devel- cepted. It took quite some time for this behavior oped systematically. For instance, company objectives to be empirically studied along with its alternative with respect to innovation defined by long-range behavioral restrictions (33-35). The syndrome can planning influence the level and type of R&D. also be described as a mental blockade or a lack of Turning to innovation, it is again Schumpeter absorptive capacity (36). In fact, few people seem to (21) who observes that economic decisions that leave be specially gifted to identify, absorb, and commu- aside conventional norms or thinking face severe nicate outside knowledge within their organizations. opposition. The innovations have to find acceptance. These individuals are called gatekeepers (37). A diffusion process describes acceptance within a Returning to Figure 1, the feedback-arrow from community of potential buyers. However, diffu- innovation to societal as well as firm-specific eco- sion of innovations is neither guaranteed nor is it nomic conditions reflects a view widely held for many simply time-dependent as was assumed in the orig- years. Socialist writers argue that the expropriation of inal diffusion models. In these models, one group of workers and of smaller capitalists by larger capitalists “innovative” consumers is ready to adopt an innova- employs—among other instruments—a conscious tion upon its presentation. By using the innovative use of science for technical purposes (38,39). From product, consumers “infect” others, who then follow a different point of view, it is argued that only large their example (44). It was soon discovered that there enterprises have the resources to invest in ever more were more than two groups of consumers with respect advancing machinery and in R&D (only they can to readiness to use an innovation and that the whole “afford it,” as mentioned above), thus leading to the marketing mix can be applied to influence the share of establishment of more and more monopolies (21). “innovative” early adopters as well as their followers Even those who argued this could have observed that (45-47). Furthermore, considering competitor’s abil- new technologies invented by start-up entrepreneurs ities to innovate or to imitate led to a more realistic did not support their view. There are two reasons for formulation of innovation strategies. Imitation and this: (a) Inventions do not necessarily support econ- its success criteria are recognized as a strategic alter- omies of scale, like the electric motor as compared native to innovation (48). This reminds us of Savary’s with the steam engine, and (b) inventions could be (6) business models mentioned at the beginning of 466 BROCKHOFF this section. Imitation business models are different property rights or securing secrecy are chosen. from those suggested to support innovation. • The interaction among specialized departments It is not surprising in the historical perspective that within a firm is necessary to bring about suc- many of the more recent and differentiated contri- cessful innovations. It may require specific butions of new technologies to productivity growth attempts to bridge the interfaces among the are not addressed explicitly, such as cost reduction, departments (50,51). This extends from the quality improvement, and early availability of new departmental to the project level (52). products or new processes. • Modern innovative activities reach beyond the “classical” boundaries of a single organization A Systematic Ordering of Terms both in acquiring and in dispersing new tech- Most of the elements of an innovation process in nological knowledge. a broader sense have now been addressed. As shown • Company activities leading to successful above, the concepts were developed in an unsystem- innovations interact with internal and exter- atic and stepwise search for a better understanding of nal parties via both feedforward and feedback TI. The elements involve new knowledge and innova- loops. tion. Thus, they are part of the overarching concept of knowledge management (5). In Figure 2, the dif- SIMPLISTIC EXPLANATIONS OF ferent elements and many of their related activities PRODUCTIVITY INCREASE are put into a systematic perspective. The basic idea of productivity gains from inven- A look at Figure 2 lets us understand a few import- tive activities sketched above is strongly reflected in ant things: the economic and business models of the third quar- • There is not one well-defined vision of what ter of the 20th century. Beyond the conceptual view innovation is about. It can have narrow or that led to Figure 1, one wants to measure the degree broad interpretations. of the contributions of inventive activities to econo- • The term technology is used in a particular mies. At first, measurement was attempted by using sense. Originally, it refers to providing a knowl- simple production-theoretic econometric models. In edge base or, even more, a theoretical basis (7) these models, technological progress for a long time for techniques that may or may not be applied is modeled simply by assuming it is time-dependent. to innovations. The distinction between tech- Whatever output cannot be explained by explicit nology and technique was in common use in inputs from capital or labor in a production function languages such as French or German. How- is attributed to technological progress and to an error ever, this distinction has been eroded under term, which should ideally be randomly distributed. the influence of English in everyday life as well Calendar time is used to capture the non-random as in science. In this language, the distinction productivity advances assumed to be due to techno- is not really made (49). The differences are not logical progress (53). Results can be interesting, but trivial because terms and their meaning are ele- they cannot be managerially activating. This means ments of thinking. Only if technology is used that whatever the measured rate of technical prog- in the way described here can one exclude from ress is, managers cannot learn from the results how technology management the standardized and to influence it. Furthermore, such models of con- well-known techniques applied in manufactur- tinuous growth are far away from the observation ing, services, etc. of pulsing growth patterns in firms, which—among • While invention is an important prerequisite other influences—result from the non-continuous for many innovations, it needs to be comple- introduction of innovations (54,55). However, if tech- mented by many other activities to achieve nological progress is neglected at all, this can lead to productivity growth. To protect new knowl- strongly misleading forecasts and strategies. This is edge from imitation, at least for some time, demonstrated by failures from omitting technolog- approaches such as acquiring intellectual ical progress in early world models (56). EMERGENCE OF TIM 467

Knowledge management Innovation management in a broad sense Other types of Management of technology knowledge Management of Management of management innovation in a Crossing Company internal diffusion (for instance in company limits narrow sense human resource management, in Acquisition of Acquisition of First time market Diffusion of marketing new knowledge: new knowledge: introduction of a innovations; research, etc.). by market by R&D; new product; acceptance of transactions by collecting introduction of a innovations by (including mergers suggestions for new manufacturing individual users and acquisitions improvements; process; (=adoption). of companies or of learning by doing; introduction of a successful teams); from chance new model of by cooperation events. organization: with universities or companies; Storage of new within an by learning; knowledge for organization or by imitation; later use and within a region non-legal forms management of (globally in of acquisition. its accessibility extreme). (retrieval).

Protection of new proprietary knowledge: Secrecy; Acquiring intellection property rights; Built-in protection mechanisms (self-deployable products). Use of new Use of new knowledge: by knowledge: in offering own innovations. intellectual property rights; by cooperation.

re A classi cation of knowledge management activities with special reference to innovation management.

Alternatively, operationalizing knowledge by using R&D is larger than that of other factors of produc- the resource input of time-lagged R&D expendi- tion (57,58). In managerial terms, this should lead to tures instead of calendar time becomes the favorite relatively increased investments in R&D. The man- approach as soon as the relevant data and the statisti- agement of DuPont in the 1930s offers a historical cal estimation methodologies (distributed lag models, illustration for this point of view. After the research in particular) become available. At the business level, director Wallace Hume Carothers had presented the most frequently used dependent variables are nylon, more resources were shifted from develop- sales growth and, alternatively, value added. In gen- ment to research in an attempt to create “another eral, it is shown that the marginal productivity of nylon.” When this failed, the allocation of resources 468 BROCKHOFF was reversed (20). This suggests that mechanically With rising competitive pressures, they had to find increasing resources is not sufficient to bring about better responses. This began to happen massively in an increased output of innovations. the 1960s and the early 1970s. With the availability of more data, research is Most top-level representatives of TIM had not separated from development in the econometric anal- been trained to look at the efficiency and effectiveness yses (59). This leads to an interesting idea to justify imperatives in a highly competitive, profit-seeking company research as a resource saving input to com- environment. Their management was based on four pany development. Also, beyond, or instead of, using types of knowledge: classical factors of production, a number of studies • The R&D managers were mostly academics. use activities such as marketing (represented by its They had observed the management of aca- expenditures) in combination with R&D in a pro- demic research institutions. However, when duction-theoretic framework to explain sales growth these observations are transferred to indus- (60). The factors are related by multiplication, such try, this might cause two problems. At first, that a zero input of one of the factors leads to zero managers favor research over development, output. This makes it immediately clear that one fac- which did not satisfy the mostly impatient tor cannot be successful without the other, and an business managers in more short-term ori- optimal combination of resource inputs has to be ented fields like marketing. Secondly, it was found. In managerial terms, the elasticities of the fac- preferred to organize laboratories according to tors indicate to which one more resources should be disciplinary specializations. This could lead to allocated. severe communication problems and to inter- We recognize from the above that the simplistic face problems, both among the disciplines as approaches to explaining technological progress do well as with other functional areas involved in not lead far. Rather, increasing demands are put on innovation processes. TIM. In particular, managers need to know what they • Learning-by-doing was of little help because it can do to raise the efficiency and the effectiveness of would continue the biases mentioned above. In their TIM operations. These topics will be addressed addition, one could often see that those who in the following sections. performed outstandingly in their science or engineering disciplines were raised to higher MANAGERIAL IMPERATIVES managerial ranks. This could aggravate the problems mentioned. Outstanding scientists General Problems might not be outstanding managers with a The presently described state of TIM does not focus on business. mean that managers did not understand the value • Even if such managers shared their experiences of innovative activities over and beyond inventive with each other, they often remained among th activities. Beginning in the last quarter of the 19 their own peer group. Examples of this isolation century, internal R&D was started in many industrial include the working groups of the European firms with the aim of coming up with new products Industrial Research Association (started in or processes. It is even more interesting that Bayer 1966) or the Industrial Research Institute (IRI), Corp. began with systematic technological compet- which was started in 1938 by U.S. TI managers. itor intelligence in 1886, ten years before organizing Neither managers from other functional areas its own patent department (61). These activities nor university scientists could be found in these leave largely unanswered the questions about how groups during the first years of their existence. TI could be managed to meet efficiency and effec- • Fourthly, the levels of control and autonomy tiveness imperatives within firms. For a long time, experienced in many of the academic research R&D directors took recourse to unusual levels of environments had to be adapted to the business uncertainty in their operations to protect themselves environments. This adaptation is illustrated from more scrutinizing analyses of their decisions. by a remark from the former R&D head of EMERGENCE OF TIM 469

Hitachi Corp. Yasutsugu Takeda, who said that, or, alternatively, in a defensive mode) or disharmo- rather than performing “blue sky research” in nious combinations (for instance, a defensive R&D the company laboratories, he preferred “north strategy being complemented by an aggressive mar- star research”: the latter type reaching as far as keting strategy or vice versa)? As yet, we have not the former but having a direction that is deter- found that these questions can be answered in a sat- mined by overall company goals and strategies. isfactory way. One of the reasons is that companies while under scrutiny of the external researchers do To illustrate the challenges of efficient and effec- not stick to a chosen strategy but change their strate- tive TIM, we offer some examples. An efficient response to uneven demand for devel- gies based on recent experiences, behavioral fashions, opment capacities in a laboratory might be to draw etc. Another reason is that specific cultural differences on external help. This could mean employing techno- among functional units establish interface problems logical consulting institutions, which offer contract that cannot be easily overcome. For instance, the per- “research.” In most cases, this is actually “develop- ception of time to completion or time to market for ment.” For instance, Arthur D. Little Inc. has existed a specific project might be quite different in an R&D since 1886 in the U.S., and Battelle Memorial Insti- unit as compared with a marketing unit (51). Fur- tute started in 1934, both offering contract research. thermore, the demands on the cooperation of various Similar developments could be observed in Great departments can change while product development Britain. After World War II, some of the contract is passing through its various stages (63). research institutions also entered German markets. Interface management has been broadened to However, they did not have a lasting effect. Instead, address the harmonization of overall company strat- since 1949, the Fraunhofer Society with its institutes egy with TIM strategies. At the strategic level, the offered applied contract research. It grew to substan- melting of different matrix approaches to support tial size and breadth. In addition, for-profit contract strategic management (market matrices or technol- research firms entered the market, such as Bertrandt ogy matrices, for instance) established one of the Corp in 1974, which specially catered to the auto- fields of interest to deal with this task. mobile industry and later to the aircraft industry. A Efficiency and effectiveness problems might over- later development was the offering of development lap. The discontinuation of effective projects is one capacity by industrial development units, such as such example. These projects were originally planned Porsche Engineering Services Ltd. The use of con- to support company objectives, and they continue to tract development is complemented by the relations meet these objectives. However, due to the uncer- between universities and industry, which are par- tainty involved in the production of new knowledge, ticularly cultivated in the natural sciences and in they may have to be discontinued once it becomes engineering. In German technical universities, many obvious that spending further funds on these proj- new professors were hired from industry (62). Thus, ects is less advantageous than using the same funds experiences gained in firms could flow back to aca- for other effective projects. A substantial number demia. There, this knowledge can initiate ideas for of studies went into exploring and clarifying these further research. Whatever type of institution is used issues (64-66). Broadening this context, one observes to raise efficiency, the resulting decisions regarding that project management attracted a lot of interest in division of labor, communication, property rights, TIM. In particular, cost and time overruns of proj- etc., are very complex. ects had to be analyzed to be better understood and An example of effectiveness problems at a strategic eventually reduced. level is given by the search for an optimal combina- These, and other TIM problems, can benefit tion of functional strategies, especially marketing and from solutions offered by institutions that research R&D strategies. Such strategies might be described the problem areas. Systematic research by such simply as aggressive or defensive. Given that, is it institutions can be more advantageous than the learn- better to achieve harmonious strategy combina- ing-by-doing of TI managers. tions (both functional areas being in an aggressive 470 BROCKHOFF

Institutional Contributions for Problem Solving Product Innovation Management in 1984, the Jour- from Academia nal of High Technology Management Research in 1989, Institutionalization of TIM occurs by installing and Creativity and Innovation in 1992. Specialized business and governmental laboratories, professional conferences drew increasing numbers of participants, associations, and academic organizations. Here, we such as the Portland International Conference on concentrate on the latter. Management of Engineering and Technology, which Company managers were not left alone to solve has been organized by Dundar Kocaoglu and his team their TIM problems. Engineering schools and busi- since 1991, or the innovation management confer- ness faculties have studied issues of managing TI ences organized by the International Association for since the 1960s. In some cases, specific professor- Management of Technology (started in 1992). ships in TIM were installed. Albert H. Rubenstein In 1990, Klaus Brockhoff and Alan W. Pearson at Northwestern University, Don Marquis at Mas- started a European Doctoral Summer School on sachusetts Institute of Technology (MIT), and Alan Management of Technology with the help of the W. Pearson at Manchester Business School, where, Volkswagen Foundation. It serves to make network- in 1967, a Research and Development Management ing among young researchers located in different Association had been started, were among the first (mostly) European countries easier, to speed up the generation of TIM professors. In Germany, Klaus exchange of new ideas, and to strengthen the qual- Brockhoff and Juergen Hauschildt started a private ity of doctoral research by collecting advice from an TIM research group in 1984 at the University of Kiel. international faculty. An immediate contribution to After three years, this group became a university TIM results from the fact that, in many European institute offering a specialization in TIM for manage- countries, doctoral students choose a career in indus- ment and economics students, and a strong doctoral try. After its beginning years at the University of Kiel program was later added. Since then, the number of and Manchester Business School, the annual summer TIM researchers in many countries has grown. In school has migrated through a number of European 1988, the German Academic Association for Business nations, thus strengthening its original objectives. Research set up a chapter on Technology, Innovation Many of the newly established research chairs, cen- and Entrepreneurship. Today, it has about 300 mem- ters, and institutes conduct empirical TIM research. bers. In 1957, the Industrial Research Institute (IRI) This type of research has risen sharply during the launched its own journal, Research-Technology Man- past 25 years, with a large portion of it being based agement, to reach practicing managers. on primary data (67). This type of research requires Once academics had started their research, they intense contacts with industry. These contacts help were looking for outlets where they could publish the laboratory managers to understand the value of their results. Either the focus on TIM could be forced business research in basic areas, such as manage- on an existing journal (such as IEEE Transactions rial accounting to control their costs or in capital on Engineering Management, formerly IRE Trans- budgeting to evaluate projects. They learn to for- actions, from 1953 on) or new journals were started mulate planning memos for the boardroom with a (such as R&D Management, which was launched in reduced use of technical terms and details that few 1970). In 1966, Christopher Freeman at the Univer- of the other board members appreciate (68). Opera- sity of Sussex in Brighton set up the Science Policy tions research helped to devise R&D programs and to Research Unit. The euphoria surrounding govern- select R&D projects in a more or less rational man- ment intervention in markets and governmentally ner. New theoretical concepts were tried on R&D financed research and development in the 1960s projects, such as to consider them as options (69-71). and 1970s may have contributed to the launching of Options may be described briefly as present values Research Policy in 1971. In the following years, many of future choice opportunities. Organizational issues more journals started as the research community could be discussed to overcome disciplinary models, widened and became more specialized. For exam- to understand the value of communication among ple, Technovation was started in 1981, the Journal of scientists and to respond to it by, for instance, using EMERGENCE OF TIM 471 communication-enhancing laboratory architecture ADAPTING TO AND SHAPING TRENDS (72), or to address the problems of interface man- Six of the demanding societal questions that agement. The latter is of particular relevance in TIM have arisen since the 1970s, and have become more because it cuts through many different organizational pressing in the 1990s and later, are briefly addressed units. Interface management is particularly delicate below. Methodological advances do not determine because it attempts to achieve coordination with- the choice of these questions in the first place. Rather, out employing hierarchical approaches (52,73-76). their selection starts from trends that became clearly Marketing came into play to explain why the most visible during this period. technologically advanced solution may not always be the one that customers appreciate. Human Resource Management As early as 1919, the Royal Swedish Academy of At about the turn of the century, it became obvi- Engineering Sciences was founded. The National ous at first in the highly developed countries that Academy of Engineering started in 1964. In 1976, creative expertise is a very scarce resource. Compet- the Royal Academy of Engineering began its work ing for this resource as a necessary ingredient to the in Great Britain. After re-unification of Germany, a innovation process is fierce. A “war for talent” (79) national academy of technology came into being in was identified. Recently, implications of this type of 1997 under the name of “acatech” (77). These and competition are related to the opportunities for less other academies with core memberships from the developed countries to make major advances (80). natural or engineering sciences have elected members Some of the battlefields of the war for talent are the from managerial disciplines, which makes cross-dis- identification of lead inventors, the improvement of ciplinary discussions and projects easier. the conditions for their creative work, and the reten- However, the introduction of management tools tion of lead inventors in case of major changes of and arguments into TI had a difficult start (78). Some control in companies, such as mergers and acquisi- of the tools did not meet the constraints that had to be tions (81,82). Key inventors are mobile and thus can observed by the TIM processes in reality. Incorporat- leave a company easily if not taken care of. In more ing more realistic dynamic and non-linear relations general terms, it is a multi-faceted and difficult task had to wait for further methodological developments. to manage creativity in organizations (83). At the Some of the behavioral and disciplinary traditions national level, the flow of inventors from one coun- in laboratories and among their management could try to another is documented in a mapping exercise hardly be challenged by rational arguments. In the by the World Intellectual Property Organization (84). 1960s, at Crown Zellerbach Corp., the head of R&D The report of this organization builds on information hired two MBA graduates to develop a program for extracted from patent documents to describe and to the optimal choice of R&D projects within an R&D analyze “brain drains.” program. While this was done at state-of-the-art level, Another battlefield is that of determining the most the director did not accept the solution. The origi- efficient division of labor in the innovation process nators of the solution learned from an old hand that and consequently the unification of the results of their solution had not included the two pet projects dispersed activities. This applies even at the level of of the director into the optimal solution. The full individual projects. Alok Chakrabarti and Juergen value of the new managerial technologies could only Hauschildt (85) present a critical overview of the be realized when both their potential users and their different roles to be assumed by specialists within a developers were ready to make further advances. project structure and at different hierarchical levels In conclusion, it is obvious that the field of TIM surrounding a major innovation project. The power became professionalized, particularly during the exercised by the representatives of the different roles 1970s. Thus, a reliable foundation for TIM was cre- can be critical for project success, and it is critical ated to face the even more demanding questions that to choose different power structures depending, for arose in the 1990s and beyond. instance, on the radicalness of an innovation. 472 BROCKHOFF

Co-operations better acceptance and thus are less risky (95). Some Co-operations can be studied either from a marketing authors are more critical of successful cus- supply-side perspective or from a demand-side per- tomer-supplier interactions (96). It has been made spective. These perspectives are sketched in turn. clear that the downside of customer integration into innovation processes (in a broad sense) can lead to Supply-side co-operations additional costs or delays. These downsides should In the 1970s, it had been made clear that products not be overlooked (97). may be produced within hierarchies (organizations) or markets (86). Settled in between those extremes, Internationalization numbers of hybrid organizational arrangements are International trade statistics illustrate a trend possible. These include co-operations between firms towards more exchange of goods and services among along the value chain or among competitors. The companies of different nations or between compa- same ideas are attractive to the production of knowl- nies and their customers in different nations. These edge in R&D laboratories (87). Various theoretical developments are not restricted to highly developed backgrounds, such as game theory, social exchange countries, where a close affinity to science and high theory, and theory of teams, to name a few, have been technology could be expected (98,99). With respect used to analyze and model these co-operations. A to R&D, internationalization raises the question of further type of co-operation is that between com- whether this activity should be more or less head- pany R&D and not-for-profit knowledge generating quarters-centered or could be dispersed to other organizations, such as universities (88). Substantial locations. Closeness to customers, tapping external research went into clarifying these issues, establish- knowledge resources in other countries (100), close- ing success criteria, measuring success, etc. It appears ness to co-operating partners, and cost reduction are that technological capital is becoming ever more reasons for internationally dispersed R&D activities important for the success of co-operations (89). As (101,102). These considerations need to be embed- mentioned above, a necessary condition for com- ded into overall company strategies (5,103). All of panies to profit from external knowledge is the this could be relevant within a larger nation as well. development of an absorptive capacity (36). However, the cultural, political, geophysical, and eco- Demand-side co-operations nomic differences among countries introduce more Demand-side co-operations in the development of variance than within one country into the decision innovations have quite some history. When products parameters and processes of TI. were mostly manufactured to order, customers were Further questions refer to the organization of dis- intensively involved in their development. Much of persed laboratories or the type of specialization in this was lost in the era of mass-produced goods. In which they should engage. It is of interest here to dif- capital goods industries, customer involvement con- ferentiate between the locus of decision-making and tinues to be present, as can be observed, for instance, the locus of performance of the R&D tasks (104). in the aerospace industry. By broadening this type Substantial freedom of decision making for dispersed of interaction, the concept of “lead users” was dis- R&D units typically strengthens their ability to con- covered early and was intensively researched (90). sider local supply and demand specifics. At the same Customer integration necessitates a delicate type of time, this makes the company-wide coordination of management (91). Co-operations with individual the activities much more difficult. Furthermore, dif- customers is further propelled by the opportunities ferentiating between R-units and D-units as well as offered by communication via the internet (92,93). quantity vs. quality of communication is of impor- Even tool kits to support product development and tance in explaining the success of such units (105). design are offered (94). It was assumed (and observed These short hints indicate that management of in some industries) that customers would voluntarily international R&D is extremely complex and not offer advice to product developers, and it is hypoth- automatically successful (100). This becomes even esized that the resulting product innovations find more complicated if further steps towards successful EMERGENCE OF TIM 473 innovation have to be considered and organized. activities for themselves. Beyond trade statistics, it is plausible that cul- • ‘Dormants’ perceive their manufacturing and tural norms at a national level affect TI. Cultural market environments not to be affected, or they differences relate to creativity and commitment, to serve only small markets that are potentially exchange of information, to the relative importance affected. of competition and cooperation, to the acceptance Not only are these strategies of interest by themselves, of risk, and to educational systems. A great report but they also have implications for dealing with gov- (106) presents findings on these topics collected by ernmental agencies (108). an interdisciplinary and international working group In the short run, the individual compensation with respect to company, regional, and national levels. for using the environment reduces the productivity of the operations. In the long run, the expenditures Environmental Issues might well lead to increased competitiveness, once Awareness of the use of environmental resources care for the environment becomes either a demand from the global to the local levels has put demand criterion or a standard. pressure or initiated legal action on the development In addition, environmental issues can also involve of new products and processes with the objective to ethical questions. The so-called Diesel Scandal of save the environment. Although this was already many auto producers make this visible. Here, we do anticipated in 1973 by the European Industrial Man- not mention ethical issues as a specific category of agement Association (107), the heightened interest recent interest to TIM. In particular, the possibilities in environmental issues in the 1990s initiated more of radical new technologies have at all times raised research. Environmental concerns can be raised questions of whether these possibilities should be through the whole life cycle of a product or a man- realized and whether the resulting inventions should ufacturing process. Because the environment is a be permitted to be introduced as innovations. The public good, private investment in its protection answers to such questions are not universally identi- requires some form of internalization of the conse- cal, and the questions do affect some industries more quences of using the environment or pressure from than others. product users. The first strategy can be observed in legislation by many governments. These set standards Importance of Service Industries or ultimately prohibit the use of goods or factors of The growth of service industries outpaced in the production. It also leads to environmental research long run that of traditional industrial production or, conducted by government institutions. Firms should even more so, rural production. Jean Fourastié (109) develop a capacity to foresee governmental regula- analyzed and forecasted this trend. Responding to this tions and their impact on their own production. Once trend, TIM became an ever more important issue in users request certain environmental standards, their service industries. This was recognized early by Ian observation can lead to competitive advantages. Four D. Miles (110). A particular aspect in this develop- strategic responses to environmental constraints have ment refers to networked service industries, such been identified: as telecommunication services. Potential benefits of larger user networks put particular time pressure • ‘Activists’ are responsive to current and antic- on innovative activities to become the first entrant ipated regulations; they seek to find new into a market. Therefore, R&D in these industries markets, which makes it easier to quit select did not only have to do with developing advanced environmentally dangerous products in their technologies in a short time but also with studying established markets. user behaviors, including feedback from users to • ‘Defenders’ act much like the activists; how- the developers. The topic was considered import- ever, they do not seek new markets. ant enough for the United Nations to edit a report, • ‘Escapists’ develop strategies to quit their estab- which summarizes major findings and suggestions lished fields of activity and find new areas of (111). In the meantime, a substantial number of 474 BROCKHOFF contributions shed light on the conditions of suc- is important to link IPR in a strategic sense to other cess of service innovations. Jana Boss (112) nicely business functions. This is a particular sub-problem reviews and expands upon this issue. of interface management (114). Ernst deals with the problem areas in this issue in more detail. The man- Intellectual Property Rights as a Strategic agement of intellectual capital as a scarce resource Resource can also be treated from an economic point of view, The spectrum of intellectual property rights (IPR) which reflects the relations between the corporate has greatly expanded over time, for instance, with world and its legal and societal environment (115). respect to their applicability to services or business models. Their use was made easier by international The Broadening Spectrum agreements, although national regulations remain The six major trends influencing TIM point at a strong (113). In a company, the full spectrum of much broader field of activities than was perceived intellectual property rights can be used as a strategic in the early days. In Figure 3, we sketch this enlarge- resource. Making use of the interactions among types ment of TIM activity fields, such as its extension of IPR can greatly expand their protective power. beyond traditional fields of industry. The figure could They serve to defend one’s own technologies, to keep be further expanded to include aspects such as the competitors away from one’s own market areas, or to internationalization of R&D. Beyond the aspects serve as a source of funds either by selling, licensing, mentioned thus far, the figure shows the necessity or bartering the rights to enhance one’s own compet- of using the toolboxes of other disciplines, such as itive position. The strategic importance of IPR was the social and economic sciences, to improve TIM. discovered relatively recently. Earlier, patent depart- This should help to define more clearly its tasks and ments were most often a part of the legal departments to better understand the behavioral aspects that inter- of a company, where the strategic implications of play with development processes and influence the acquiring and using the IPR were frequently over- acceptance of the development results. looked. The discovery of the advanced uses of IPR Figure 3 centers on TIM activities in and for prof- is substantially spurred by the availability of patent it-seeking companies, which produce for a public and other data in electronic databases. The different market. This is not meant as a limit to the scope of stages of a patenting process, from application to TIM research. In fact, issues such as the influence granting of property rights, as well as legal actions of regulatory bodies on innovation in particular taken against them, are documented, citations serve industries, the management and the relevance of as one of the indicators of patent value, and infringe- defense-related R&D and innovation, and the social ments are more easily discovered. Furthermore, the impact of innovations have been studied. It is obvi- valuation of patents made great progress, and their ous that discussions on such topics need to reflect strategic relevance could be analyzed. This can be of very specific organizational and societal objectives. key importance in analyzing the technological posi- It would go too far to introduce particular publica- tion of a company vis-à-vis its competitors (15). It tions at this point.

Industry focus Major scientific background of innovation projects Natural sciences and Social sciences, economics, engineering sciences management sciences Manufacturing Traditional fields of innovation Support of traditional fields management Traditional services New fields of innovation management, integrating many scientific backgrounds Knowledge-based and networked service industries

re Enlarging the focus of innovation management with respect to application areas and to scienti c backgrounds. EMERGENCE OF TIM 475

CONCLUSIONS respect, the field of TIM is neither worse nor better The overview presented here describes the than other fields of academic research. development from eclectic ideas on R&D to the TIM goes far beyond dealing with inventions or theory-based and much-broadened scope of TIM. inventive activities. Inventors—primarily those who Explicitly, innovation management extends to more work in business firms—need to recognize that their and more fields of application. Recently, even the activities are imbedded in a multi-disciplinary envi- innovation of business models became an issue of ronment. This defines constraints for their work, but innovation research (116,117; a special issue of Long this environment also communicates fresh ideas, Range Planning was devoted to the topic in 2013). It yet unnoticed alternatives for solving problems, and is further shown that successful TIM makes use of opportunities for co-operation to enhance one’s own the division of labor to cope with the ever-increas- capacities by using division of labor in creative work. ing complexity and complications of its tasks. At the TIM interacts with societal trends. Six import- same time, this division of labor requires bridging ant trends were outlined above. The trends might the resulting interface gaps, for instance by inte- interact with each other. For instance, international- grating knowledge on customer preferences from ization interacts with human resource management marketing and other divisions that facilitate product or with intellectual property rights. We have limited adoption and on diffusion processes. On top of this, this exposition to a sketch of the trends themselves six relatively new trends were outlined, which further without mentioning interactive effects. complicates the management tasks of TIM-manag- Innovation and innovation success cannot be ers. This shows that TIM research has developed achieved quite as simply as Ralph Waldo Emerson into a fascinating and multi-disciplinary spectrum (1803-1882) had thought. He is assumed to be the of activities. originator of the sentence, “If a man can write a bet- Unlike the early years of R&D management, the ter book, preach a better sermon, or make a better managers are not left alone with the experiences they mousetrap than his neighbor, though he built his had acquired over time and their exchange among house in the woods, the world will make a beaten themselves. The field of TIM began to be institution- path to his door.” Think about the hidden assump- alized as an academic research and teaching discipline tions in this quotation! If Emerson were right, would from the late 1960s onwards. Today, a rich spectrum TIM be necessary at all? of TIM research institutions, associations, confer- ences, and journals helps to exchange ideas and to ACKNOWLEDGMENTS develop them further in critical dialogues. TI man- Helpful hints by Professors James Conley and Hol- agers can achieve a higher level of professionalism ger Ernst are gratefully acknowledged. Many thanks as compared with earlier years. go to Kimberly Macuare for greatly improving the The research of TIM institutions was generally text. The author apologizes to an uncounted num- theory-based. Much of it involved empirically testing ber of TIM researchers whose valuable contributions hypotheses on the interplay of variables that might to the field could not be mentioned in an exposi- ultimately influence the success of the operations. tion of this limited size. This includes the authors of This was made possible by the availability of more academic textbooks, who contribute substantially and more data (although Zvi Griliches (118) com- to spreading the ideas of TIM beyond disciplinary plained that the tasks grew faster than the data that domains. became available to analyze them) and a much refined and enlarged toolbox of methodologies. Occasional REFERENCES reviews of the state of the art of particular subfields of TIM, such as the analysis of new product suc- 1. Roussel PA, Saad KN, Erickson TJ. Third gen- cess, unravels the preliminary and often unreliable eration R&D: managing the link to corporate character of much of the earlier research by apply- strategy. Boston (MA): Harvard Business School ing more advanced methods (119). However, in this Press; 2000. 476 BROCKHOFF

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