Value of Innovation

Business Model Innovation
Continuing studies of IT-enabled innovation in business models and their relation to firm strategy and performance. Case studies describe the specific business models of each company, their use of IT, and joint impacts on firm performance and competitiveness in the industry. New case studies are done on request of industry members or on the Center’s initiative. Completed cases include Acer, Apple, Cisco, Compaq, Dell, eMachines, Gateway, Google, Medion, and Sun. Includes comparison of market making models in the PC industry and analysis of the relative success of these models.

Product Innovation
Focuses on analysis of “who captures the value from innovation” within global supply chains at both the firm level and the country level using financial, jobs and wages measures of “value.” Examines the popular conception that the value from product innovations mainly accrues to firms in the Asia-Pacific rather than to U.S. firms, i.e., to firms that make the products rather than to firms that innovate and commercialize products. Compares radical and incremental innovations, using the iPod and notebook computers as cases for analysis. Studies the historical trajectory of who benefits from innovation by tracing products from basic scientific discovery through commercialization in products such as the hard disk drive.

Identifies, at the firm level, the key components of innovations, their cost, and their contribution to total cost of goods sold and computes the gross and net profit margins for lead firms and their suppliers across the supply chain for each product. Aggregates firm level information to the lead firm and supplier home countries to examine the distribution of benefits by country. Provides empirical support for theories about “who profits from innovation” and “firm competition.”

Develops a method for determining who captures the value from innovation in global supply chains based on value chain analysis. Value for firms is defined in terms of gross margins and operating margins. Value for countries is defined in terms of the margins captured by home-country firms, and also by the jobs, and the wages associated with jobs. Applies the financial value capture method to products such as the iPod, smart phones (including the iPod, RIM Blackberry, Motorola RAZR, Nokia 7710 and Palm Treo), the iPad and notebook computers. Applies the job and wages method to the iPod.

Jobs and Wages in the Wind Energy Industry
This project is to provide better understanding of the distribution of jobs and wages in the global value chain of the emerging wind industry, with rapid innovation and high growth potential. It will produce independent, fact-based information for policymakers and business executives about the nature of jobs associated with the wind energy industry in the U.S. The research question is “Who benefits in terms of jobs and wages from U.S. investment in wind energy?” It will (1) estimate the quantity, quality, wages and location of jobs associated with wind energy in the U.S., (2) compare jobs and wages created in the U.S. and elsewhere by domestic and foreign manufacturers, and (3) analyze the current wind industry and estimate future jobs and wages under different scenarios. It applies value chain analysis to wind turbine design, manufacturing, installation and operation using an innovative method that we pioneered in the electronics industry, and that is now being used by economists in the U.S., Europe and Asia.

The expected outcome is new knowledge about the number, type and quality of jobs associated with the wind energy industry in the U.S., and the distribution of those jobs by company and country. It is expected that the knowledge will enhance public understanding, influence executives in the industry, and improve public discussion and policymaking for wind energy and other alternative energy sources.

Globalization of Innovation and Production Networks

Global Competition
Study of the globalization of innovation in the computing industry, its causes and its impacts. Analyzes the nature of innovation in the industry, who captures the value in a global innovation system, how innovation is organized across the value chain, international trends in PC demand and production, the evolving global structure of the industry, factors driving globalization, and implications for firm strategy and national policy. Part of a National Academy of Sciences project examining the globalization of innovation in eleven industries.

Electronic Integration of a Greater China Supply Chain
Examines the technological and organizational factors shaping the effectiveness of the notebook industry supply chain, which extends from the U.S. to Taiwan and China. Shows the use of IT at four levels of the supply chain from PC maker, to OEM manufacturer, to the third and fourth tier suppliers. Also shows the important role of social relationships throughout the supply chain, but especially at the lower tiers where IT use is minimal. Study with the Center for Strategic Supply Research for the Institute for Supply Management.

Global Knowledge Networks
Focuses on the role of massive coordination in globally distributed knowledge networks for R&D and new product development. Compares and contrasts the knowledge networks that accompany physical production networks in the electronics industry. Uses case studies the PC, semiconductor, flat panel and printer industries to identify the nature of knowledge inputs and the innovation process, the degree of human interaction needed to capture the full value of an input, and the types of relationships that exist among the network members. Considers the implications of these factors for strategic decisions about where a firm can provide value or differentiate its products or services in the market.

Offshoring of Knowledge Work

Globalization of Knowledge Work
Study of the factors shaping the outsourcing and offshoring of new product development activities in the computer hardware, software and services sectors. Examines how different factors shape location decisions at each stage in product development (plan, build and run), resulting in a combination of “push” and “pull” forces. Uses firm case studies and a survey of 400 high-tech and non-high tech firms in manufacturing and services to identify factors and the level of offshore outsourcing associated with greater success. Includes a study for the National Academy of Engineering project examining the offshoring of engineering in different industries. Also includes a study of how manufacturing is pulling new product development to China.

Digital Divide
Analyses of the extent to which successive generations of information technology, from mainframes to PCs to the Internet, have worked to lessen the digital divide between developed and developing countries. Includes analyses of the factors such as telecommunications, education and government policy that are complements to these technologies.

Technology Use and Impact

The Digital Home
Study of community experiments with the integration of personal computing technologies in the home. Includes Ladera Ranch, California and Tecamac, Mexico (paper 1, paper 2). Ongoing study of the so-called $100 PC (paper 1, paper 2) and other efforts to bring personal computing to developing countries.

Market Potential
Development of a method for estimating the global PC market potential in both developed and developing countries at the region, country, industry and household levels. Application of the method to selected countries in each of the major world regions—the Americas, Europe, Africa and the Middle East and Asia-Pacific.

The role of standards in the adoption and use of computing technologies. Includes study of the facilitators and inhibitors to the use of open source software, the use of Rosetta Net in the PC industry supply chain, and the integration of technologies in the home.

National IT Policy

Study of the impacts of country and industry policies and investment on the production and use of computing and telecommunications. Includes developed and developing countries, and specific countries such as China, Mexico, Brazil, Singapore, Korea, Taiwan, Hong Kong and U.S.