The technological innovation system is a concept developed within the scientific field of innovation studies which serves to explain the nature and rate of technological change. A Technological Innovation System can be defined as ‘a dynamic network of agents interacting in a specific economic/industrial area under a particular institutional infrastructure and involved in the generation, diffusion, and utilization of technology’.
The approach may be applied to at least three levels of analysis: to a technology in the sense of a knowledge field, to a product or an artifact, or to a set of related products and artifacts aimed at satisfying a particular (societal) function’. With respect to the latter, the approach has especially proven itself in explaining why and how sustainable (energy) technologies have developed and diffused into a society, or have failed to do so.
The concept of a technological innovation system was introduced as part of a wider theoretical school, called the innovation system approach. The central idea behind this approach is that determinants of technological change are not (only) to be found in individual firms or in research institutes, but (also) in a broad societal structure in which firms, as well as knowledge institutes, are embedded. Since the 1980s, innovation system studies have pointed out the influence of societal structures on technological change, and indirectly on long-term economic growth, within nations, sectors or technological fields.
The purpose of analyzing a Technological Innovation System is to analyze and evaluate the development of a particular technological field in terms of the structures and processes that support or hamper it. Besides its particular focus, there are two, more analytical, features that set the Technological Innovation System approach apart from other innovation system approaches.
Firstly, the Technological Innovation System concept emphasizes that stimulating knowledge flows is not sufficient to induce technological change and economic performance. There is a need to exploit this knowledge in order to create new business opportunities. This stresses the importance of individuals as sources of innovation, something which is sometimes overseen in the, more macro-oriented, nationally or sectorally oriented innovation system approaches.
Secondly, the Technological Innovation System approach often focuses on system dynamics. The focus on entrepreneurial action has encouraged scholars to consider a Technological Innovation System as something to be built up over time. This was already put forward by Carlsson and Stankiewicz:
‘[T]echnological Innovation Systems are defined in terms of knowledge/competence flows rather than flows of ordinary goods and services. They consist of dynamic knowledge and competence networks. In the presence of an entrepreneur and sufficient critical mass, such networks can be transformed into development blocks, i.e. synergistic clusters of firms and technologies within an industry or a group of industries.’
This means that a Technological Innovation System may be analyzed in terms of its system components and/or in terms of its dynamics. Both perspectives will be explained below.
The system components of a Technological Innovation System are called structures. These represent the static aspect of the system, as they are relatively stable over time. Three basic categories are distinguished:
The structural factors are merely the elements that make up the system. In an actual system, these factors are all linked to each other. If they form dense configurations they are called networks. An example would be a coalition of firms jointly working on the application of a fuel cell, guided by a set of problem-solving routines and supported by a subsidy program. Likewise, industry associations, research communities, policy networks, user-supplier relations etc. are all examples of networks.
An analysis of structures typically yields insight into systemic features - complementarities and conflicts - that constitute drivers and barriers for technology diffusion at a certain moment or within a given period in time.
Structures involve elements that are relatively stable over time. Nevertheless, for many technologies, especially newly emerging ones, these structures are not yet (fully) in place. For this reason, mostly, the scholars have recently enriched the literature on Technological Innovation Systems with studies that focus on the build-up of structures over time. The central idea of this approach is to consider all activities that contribute to the development, diffusion, and use of innovations as system functions. These system functions are to be understood as types of activities that influence the build-up of a Technological Innovation System. Each system function may be ‘fulfilled’ in a variety of ways. The premise is that, in order to properly develop, the system should positively fulfil all system functions. Various ‘lists’ of system functions have been constructed. Authors like Bergek et al., Hekkert et al., Negro and Suurs give useful overviews. These lists show much overlap and differences reside mostly in the particular way of clustering activities. An example of such a list is provided below.
Note that it is also possible that activities negatively contribute to a system function. These negative contributions imply a (partial) breakdown of the system. In particular, domestic instability has been shown to exert downward pressure on innovation systems, while international threats and national security alliances have a significantly positive effect on national innovative performance.
As an example, the seven system functions defined by Hekkert are explained here:
Since Carlsson and Stankiewicz introduced the concept of a Technological Innovation System, an increasing number of scholars have started focusing on dynamics. A recurring theme within their studies has been the notion of cumulative causation, closely related to the idea of a virtuous circle or vicious circle, by Gunnar Myrdal.
In this context, cumulative causation is the phenomenon that the build-up of a Technological Innovation System accelerates due to system functions interacting and reinforcing each other over time. For example, the successful realization of a research project, contributing to Knowledge Development, may result in high expectations, contributing to Guidance of the Search, among policy makers, which may, subsequently, trigger the start-up of a subsidy program, contributing to Resource Mobilization, which induces even more research activities: Knowledge Development, Guidance of the Search, etc. System functions may also reinforce each other ‘downwards’. In that case interactions result in conflicting developments or a vicious circle! Recently scholars have increasingly paid attention to the question of how cumulative causation may be established, often with a particular focus on the development of sustainable energy technologies.
To improve competitiveness and retain sustainability, firms require new technologies and capabilities. In this age of rapid innovation and complexity, it is challenging for the firms to develop internally and remain competitive at the same time. Merger, acquisition and alliance are some of the ways to achieve this, but the primary driver is the desire to obtain valuable resources. Many acquisitions failed to achieve their objectives and resulted in poor performance because of improper implementation.
1. Improper documentation and changing implicit knowledge makes it difficult to share information during acquisition.
2. For acquired firm symbolic and cultural independence which is the base of technology and capabilities are more important than administrative independence.
3. Detailed knowledge exchange and integrations are difficult when the acquired firm is large and high performing.
4. Management of executives from acquired firm is critical in terms of promotions and pay incentives to utilize their talent and value their expertise.
5. Transfer of technologies and capabilities are most difficult task to manage because of complications of acquisition implementation. The risk of losing implicit knowledge is always associated with the fast pace acquisition.
Preservation of tacit knowledge, employees and literature are always delicate during and after acquisition. Strategic management of all these resources is a very important factor for a successful acquisition.
Increase in acquisitions in our global business environment has pushed us to evaluate the key stake holders of acquisition very carefully before implementation. It is imperative for the acquirer to understand this relationship and apply it to its advantage. Retention is only possible when resources are exchanged and managed without affecting their independence.