Technological innovation strategy in natural resource based industries

This thesis analyses innovation and technology strategy within a primary industry, notably the upstream oil and gas industry. Industries that exploit and produce finite natural resources are challenged by specific external risks that do not receive much attention from management literature otherwise, especially with regard to organizational innovation behaviour, and thus merit such research focus. On one hand, primary sector firms are confronted with exhaustible nature of finite natural resources. On the other hand, those finite natural resources are fixed to certain locations and companies have to operate in numerous countries in order to exploit resource deposits. In this context, they are often confronted with tremendous socio-political constraints that may have a negative impact on their businesses. This research work raises questions specific to natural resource based industries, notably (1) how can firms defend or even expand their competitive position when they are challenged by the depletion of their core resources? How can firms compensate for an exhaustible resource? (2) How do we evaluate contingencies like political risk for competitive advantage and what role does innovation play in this context? This dissertation takes the format of a "compilation thesis", in this case, three compiled articles. Within the first paper we focus on the resource based view (RBV), a central theoretical approach in management science, which explains how unique firm resources and capabilities contribute to value creation and lead to sustained competitive advantage. We1 apply the assumptions of RBV to the context of finite natural resources and ask if its analytical power is sufficient to explain competitive advantage of companies active in the primary sector, such as hydrocarbon and ore production. Paper 2 analyses how firms respond to geophysical constraints, such as natural resource depletion, and how these depletion issues affect organizational capability building and operational performance in terms of resource exploration and recovery. Paper 3 asks if political risk as external threat influences firm technology and innovation strategies. We find that time horizons of political risk play an important role and analyse why mid-and long term threats positively influence the development of technology and innovation strategies. The dissertation makes several important contributions. First, it contributes to our understanding of innovation and technology strategy within a natural resource based industry. Second, the idea that finite natural resources with their exhaustible nature are different than the "usual" resources investigated by RBV is novel. Third, the analysis also shows how RBV applies to natural resources extracting industries, and how RBV would gain in explicatory power if it was able to integrate factors like "geophysical constraints" and 'exposure to political risk' into the approach. Fourth, the thesis applies RBV and capability approaches to the specific context of primary industries, which is important as it helps to extend the frameworks' usefulness. Fifth, the current thesis combines political risk theory and research on innovation and technology management, and answers why political risk influences firm strategies, differentiation, and entry into new fields. ______________________________ 1 I am going to use the personal pronoun "we" to refer to first person's actions or opinions in this paper. I do so because I want to acknowledge the contributory effort of all who provided ideas and support. Nevertheless, any errors and omissions are completely my own responsibility.

Creative-Learning Innovation Cycle - CLIC

Vincent Nassar

WHY do certain leaders’ management of organizational resources encourage creative people engaged in New Product Development (NPD) to achieve high performance, on time, while other leaders’ practices foster frustration and delays? In this research project I attempt to understand the WHY and HOW of leaders’ management of organizational resources in the context of Csikszentmihalyi’s phenomenon of Flow. Flow is most likely to occur when people perceive a balance between the challenge of a situation and their professional abilities to deal with the challenge. “Being in the flow” increases peoples’ focus and attention, the latter being a prerequisite for high creativity, on the tasks and problems at hand and boosts their commitment to deliver their projects on time. Following the above-mentioned reasoning, I assume that if leaders manage organizational resources to create an optimal balance between challenging situations and the skills of their creative people, these managerial practices would likely result in enhancing the output of the NPD process, and decreasing the delays, or, in other words, accelerating the NPD cycle. To explore this research question, first, I developed a conceptual model called CLIC: “Creative-Learning Innovation Cycle”. The CLIC is characterized by its uniqueness in highlighting the impact of the feedback received from the commercialization process on the managerial practices of leadership for creativity of the components of the work environment. The work environment directly affects the state of flow of creative people, and, subsequently, both the quality and speed of their learning and creativity processes. The CLIC combines Sanchez’s model of an organization’s learning process, Amabile’s componential theory of creativity, and, Csikszentmihalyi and Bakker’s State of Flow concept. Second, I tested the CLIC through two main research methods. I conducted exploratory and action research with a successful global innovation manager and two companies wrestling to accelerate their NPD processes in a changing work environment. The two companies deal with components and technological innovations. They differ in size, continent and products. Both companies innovate products related to health issues in an industry where high regulatory requirements are imposed. I also conducted a lab experiment in which 27 Masters students (18 males, 9 females) who were enrolled in an “Innovation Management” course voluntarily participated. The mean age was 23.5 years. The academic language was English. The exploration of the CLIC model in the course of conducting the comparative studies among the successful global innovation manager, the two companies, and the results of the lab experiment led to the emergence of a new theory about flow in work situations and organizational resources management. The theory defines and prioritizes five organizational resources that have to be managed during the NPD stages to let creative people experience a “state of flow” during their work. The foundation of the theory is that, following the impacts of feedback received from the external world, leaders’ managerial practices of organizational resources affect the state of flow of the people involved in the NPD process in an inverted U shape. Based on this inverted U shape and, as per the CLIC model, this theory prioritized the following five organizational resources to manage flow during the NPD stages: v A. Planning stage 1. Involving creative people in early market feedback during the planning stage would enhance their work absorption and their attention on the problems they are facing. B. Development stage 2. Putting creative people in direct communication with all the people who interact with the product and bring meaning to it, 3. Extending on a rational basis the time lines proposed by creative people, 4. And integrating the customer in the NPD process, mainly during testing phases, are likely to positively influence the intrinsic motivation of the creative people during the development stage. Hence, creative people would be committed to reach their goals by deploying their expertise to its utmost level without counting their working hours. C. Commercialization stage 5. Allow creative people to directly solicit and experience feedback from the VOC during the commercialization stage. This could constitute an enriching and joyful experience for them. In sum, the prioritization of these organizational resources during the NPD stages might constitute a beneficial roadmap to the managerial practices that should be used by leaders. The application of this theory by the leaders would regulate the balance between a challenging situation and the skills of the creative people, so the latter might be in the “state of flow”. Probable effects may be a boosted and an accelerated outcome of the NPD process, leading the organization to thrive in this seldom static world. Some leaders knew WHAT to do and HOW to enhance the creativity of their collaborators. However the understanding of the WHY that drives these managerial practices needed additional elucidation. This research project attempted to provide a potential answer to “WHY” leaders’ practices might enhance or hinder their collaborators’ state of flow; and, in finding the answer, it was thought that leaders and their collaborators may simultaneously enjoy work and savor life.

EPFL2012

The link between innovation and finance

Cristiano Zazzara

This thesis comprises three essays on the relationship between innovation and finance. Although previous research has acknowledged the multi-faceted nature of innovation, this thesis unpacks its constituent elements, compares alternative drivers of innovation — focusing on the role of financial variables —, and explores when each of these drivers is important relative to the others. Evidence is based on survey data on Italian manufacturing firms over the years 1995-2003. The main contribution of this dissertation is to show how innovation at the firm level varies across different dimensions, documenting several robust empirical regularities, which must be accounted for. The first essay explores the determinants of various characteristics on the propensity to innovate in the Italian manufacturing sector. First, we concentrate on firms characteristics, and include in the study age of firm, size of firm, export shares of revenues and group membership. Second, we examine industry characteristics, such as type of industry in terms of technology level and market concentration. We also test the impact of characteristics of the firm's geographical area, including an indicator of financial development for the firm region. We finally extend our model including financial variables at the firm level in order to evaluate the association between profitability & risk and innovation. The second essay further examines the determinants of innovation, focusing on why firms develop product innovations rather than process innovation, or product and process innovations simultaneously. Empirical studies have highlighted the different impact of product and process innovation on various factors (such as, for example, international competitiveness, the level of employment and the types of skills used, and on the profit rate of firms). However, little is known from either a theoretical or an empirical point of view about the determinants of these different types of innovation. The third essay examines the question of whether access to credit is empirically more difficult for innovative firms than for those undertaking traditional investment projects. The idea that market financing of innovative projects is likely to encounter severe obstacles is not new. Indeed, it dates back at least to Schumpeter's defence of monopoly power since it not only guarantees that innovative firms can internalise the benefits of their innovations, but also provides funding for future innovative projects. Testing this proposition requires information on the innovative content of a given firm and on the limits to borrowing it encounters. Using the above mentioned survey data, we are able to identify credit constrained firms and use this information to make inferences on bank's lending strategies towards firms whose investment projects differ according to expected return and riskiness.

EPFL2008

Information Systems and Innovation Capacity - A Cross-industry Intepretive Study

Gianluigi Viscusi

Innovation is one of the many challenges raised by the digitalization of business and economy. In the current competitive environment, businesses are characterized by radical transformations through digitalization of services and products and their ability to innovate is increasingly linked to the exploration and exploitation of information and communication technologies (ICTs). This paper investigates the role of information systems (IS) as a key factor to innovation capacity through an interpretative study of the IS innovation practices as well as perceptions by managers within a sample of 7 French based companies from various industries. The interviews have been conducted on the basis of a framework on IS innovation capacity maturity. Consistently with the framework, the interview guide addresses process areas and practices related to three core categories: management, innovation engineering, and support. The study reveals 7 fundamental contradictions that can explain the main tendencies observed across the companies, out of which the most striking is a generalized lack of maturity when it comes to exploiting their Information Systems to foster innovation.