UNIT-II: THE NATURE OF TECHNOLOGICAL CHANGE AND INNOVATION

2.1 Waves of change?

If you take the time to read the fairly wide range of literature devoted to examining and
analysing technology and technological change – or specific examples of it – it is unlikely that
you will not, at some point, come across a discussion of ‘technological paradigms’ or,
alternatively, ‘technological revolutions’.

Each paradigmatic period, or wave, is marked out by the features described in Table 2.1. Note
that the beginning and end dates for the periods do not signal that at that point the particular key
carriers and key industries disappear or even cease being important. Clearly railways and canals
developed in the 18th and 19th centuries still exist, and are to a greater or lesser degree still
important economic (and social) assets in many countries. Similarly, Fordist mass production
still maintains its importance, although the technologies that underpin it have, in many industries,
changed radically. The important point is that during each period there are key industries and
‘carrier’ sectors which are then superseded as the key industries/carriers over time. The timing
and speed of this change may vary, of course, from location to location.

Furthermore, despite the impression that the elements of Table 2.1 might give, these
developments are not solely determined by technology and technological development, as
Castells (1996) notes ‘many factors, including individual inventiveness and entrepreneurialism,
intervene in the process of scientific discovery, technological innovation, and social applications,
so that the final outcome depends on a complex pattern of interaction.’ He continues:

Thus, when in the 1970s a new technological paradigm, organised around information
technology, came to be constituted, mainly in the United States, it was specific segments of
American society, in interaction with the global economy and geopolitics, that materialised into a
new way of producing, communicating, managing, and living. (Castells, 1996, p. 5)

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Table 2.1 Waves of technological development (after Dodgson et al., 2008)

Dates Description Key ‘carrier’ sectors

1770s –1840s Early mechanisation Textiles

Water power

Canals
1840s –1890s Steam power and railways Steam engines

Machine tools

Railways

Steamships
1890s–1950s/ Electrical and heavy engineering Electrical and heavy
60s engineering

Synthetic dyes

Electricity
1920s –1990s Fordist mass production Autos

Airlines

Consumer durables

Petrochemicals

Process plant

Plastics

Highways

Armaments

Aluminium

1970s –? Information and communication Computers

technology
Telecommunications

Software

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 CIM

New materials

ISDN

IT services
2000s –? Life sciences Biotechnology

Space/satellites

Environmental
technologies

As you will note from Table 2.1 and the quotation from Castells (1996), the ICT paradigm was,
therefore, the fifth wave – or techno-economic paradigm. There is, however, an increasing belief
that we have already – or are on the cusp of entering – a sixth wave based around the life
sciences (Dodgson et al., 2008). To what extent, where and how rapidly the key industries and
carriers of the sixth wave supplant those of the fifth is something we can observe as we move
further into the 21st century.

2.2 ‘Generations’ of innovation

What Factors Drive Innovation?

Such is the perceived transformational power of technology that there has long been a tendency
to uncritically accept such claims. One of the most significant outcomes is the widespread belief
that there must be a technological ‘fix’ for almost any problem. Examples of this (sometimes
with the caveat ‘if only we throw enough money at it’, or something similar) are many and
varied, as Activity 2 should demonstrate. Consequently, we will only highlight one example,
here, but one where the nature of the problem it may fix has changed over time.

GM (genetically modified) crops/foodstuffs have long been regarded as a technological fix to the
real or potential problem of food shortages caused by population growth (by increasing crop
yields and/or for use on land not previously considered fertile enough to grow crops). However,
as climate change has become a more accepted and widely recognised issue so the potential use

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of GM crops as a technological fix for this problem has also developed. Consequently, it is
argued that we can probably lessen or compensate for the impact of climate change through the
development and use of GM crops that are able to withstand more extreme variations in
temperature.

Activity 2

Drawing on your current or past professional experience, note down an example that you are
familiar with of a technological fix to a problem/issue. Also note down the nature of the problem.
Now think of a solution for this problem or issue that would not involve technology.

The same deterministic logic that underpins the claim that there is a technological fix to almost
every problem is also evident in two of the most frequently cited and commonly discussed
models of what ‘drives’ innovation: technology push and market pull. Also known as research-
push and demand-pull, or first- and second-generation innovation (Rothwell, 1994), respectively,
a simplistic interpretation of these terms is that technology push is represented by a technology
searching for an application, and market pull as an industry response to observed market
demand. As we shall see, several more explanations of the innovation process have been
developed since the push and pull models appeared, but there are good reasons why these
concepts emerged when they did and what they tell us about innovation at that time.

2.2.1 Technology (research) push

The push model assumes that the source of technological innovation is through formal research
and development (R&D) and that when the outcome (whatever it may be) has been developed
and then produced/manufactured, it is then ‘pushed’ by marketing and sales out into ‘the
market’. This is basically a very simple linear innovation process (Figure 1).

Figure 1 The first-generation innovation process

In many ways it is unsurprising that the ‘push’ model of innovation became popular at a certain
point in time because it accurately reflects a process that became commonplace in the two

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decades after the Second World War (Dodgson et al., 2008). This was a period when a strongly
deterministic belief in technology (and science) was at its peak, with the dominant view being
that technological development was inevitable and almost always positive, and that scientific and
technological advances could solve most of the world’s problems. This led governments actively
to promote and support scientific and technological innovation, through direct support for R&D
programmes (often in government-owned centres) and through support to universities. This is the
basis for many of the government-run, -sponsored or -supported systems of innovation that still
operate in many countries.

Commercial organisations – particularly in manufacturing – also played a key role in R&D as

they sought to respond to the post-war boom in demand for consumer goods, such as fridges,
washing machines, electronics and cars. Government and industry came together to respond to
the ‘Cold War’ by pouring money into R&D in the defence industries (e.g. aircraft, ships,
vehicles, armaments, munitions and electronics) and, later, space programmes. As Rothwell
(1994) notes, the focus on scientific discovery and R&D as the primary drivers of innovation
over this period led to the ‘first generation, or technology push, concept of innovation [that]
assumed that “more R&D in” resulted in “more successful new products out”’ (Rothwell, 1994,
p. 8).

It is during this period that we begin to see the development of products with the potential for
domestic application being ‘spun out’ of industrial innovations and inventions. One well-known
example is Teflon, a trademarked brand name of PTFE, a highly ‘non-stick’ substance
discovered by accident in 1938. Its use in industrial and military settings was extended to
domestic applications in 1954 when it was used to provide a non-stick coating for cooking pans
and utensils – the Tefal brand still seen today.

2.2.2 Market (demand) pull

Market or demand pull is, as the term suggests, something of an opposite of the ‘push’ model.
‘The market’ – consumer/customer demand – ‘was the source of ideas for directing R&D,
which had a merely reactive role in the innovation process.’ (Rothwell, 1994, p. 8). The pull
process is, therefore, slightly more complex than the push example, and is still based on the same

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linear model (Figure 2), but with the addition of market/demand inputs at the R&D and
marketing stages.

This ‘second-generation’ model of the innovation process again very much reflects the context in
which technological innovation was taking place from the mid-1960s to early 1970s, and thus the
economic and social developments of the time. Demand for new products and services remained
strong but with intensifying competition between producers, and a change of emphasis in
investment in technology. As Rothwell (1994, p. 8) notes, ‘This was accompanied by growing
strategic emphasis on marketing, as large and highly efficient companies fought for market
share. Perceptions of the innovation process began to change with a marked shift towards
emphasising demand side factors, i.e., the market place.’

Figure 2 The second-generation innovation process

2.2.3 Third-generation innovation

The technology push and market pull models of technological change and innovation offer
simple – and therefore attractive – explanations of the innovation process with only a partial
explanation of the mechanisms or drivers that are significant for innovation. Indeed, following
the publication of a wide range of empirical studies of innovation in the mid to late 1970s, it was
argued by Mowery and Rosenberg in 1978 that:

Essentially, these empirical results indicated that the technology push and need [demand] pull
models of innovation were extreme and atypical examples of a more general process of
interaction between, on the one hand, technological capabilities and on the other, market
needs. (Mowery and Rosenberg (1978), cited in Rothwell, 1994, p. 9)

As a result a ‘third-generation’ model of innovation was proposed. In Figure 3 this model

‘couples’ together a range of functions, activities and ‘communication paths’:

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The emphasis in this model is on the feedback effects between downstream and upstream
phases of the earlier linear models. The stages in the process are seen as separate but
interactive. The management challenge of this process involves significant investment in cross-
organisational communications and integration. (Dodgson et al., 2008, p.62)

Figure 3 Third-generation innovation process (Source: Dodgson et al., 2008)

2.2.4 Fourth-generation innovation

The third-generation model of the innovation process may have contained challenges but as
Rothwell (1994, p. 10) notes, it ‘was seen by most western companies, certainly up until the mid-
1980s or so, as presenting best practice.’ Nevertheless, by the mid-1980s a further refinement of
the model was necessary as Western organisations increasingly realised that the key features of
the innovation process in leading Japanese companies – and thus one of the primary reasons for
the commercial success of Japanese companies – were integration and parallel development.
That involved integrating ‘suppliers into the new product development process at an early
stage while at the same time integrating the activities of the different in-house departments
involved, who work on the project simultaneously (in parallel) rather than sequentially (in
series).’ (Rothwell, 1994, p. 12). Therefore, integration and parallel development became the
basis of the fourth-generation model of the innovation process (Figure 4).

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Figure 4 Fourth-generation innovation process (Source: Dodgson et al., 2008)

2.2.5 Fifth-generation innovation

It is argued that by the early 1990s a new model of the innovation process began to emerge
(Rothwell, 1994; Dodgson et al., 2008), which, following Rothwell’s labelling convention,
became the fifth-generation innovation process. Figure 5 illustrates the key aspects of this model,
which requires managers to respond flexibly to deal with increasing level of risk and
uncertainty.

Within the firm we see increasing concern with organisational forms and practices and skill
balances that enable the maximum flexibility and responsiveness to deal with unpredictable and
turbulent markets. Research, development, design, and engineering take place in concurrent
iterations, supported by ‘innovation technology’ in a fluid model [that Dodgson et al. refer to as
‘Think, Play, Do’] … The value-creating activities of the firm are linked with suppliers and
customers, and all the technological activities in the firm are directed by increasingly coherent
and effective innovation strategies. (Dodgson et al., 2008, p. 64)

Some of the key features of the fifth-generation process – such as technology transfer and open
innovation – will be discussed in more detail later in the course.

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Figure 5 Fifth-generation innovation process (Source: Dodgson et al., 2008)

In suggesting (and discussing earlier in Section 2.1) that we are currently experiencing a
transition from the fifth (IT) to the sixth (life sciences) wave of technological development, there
has been a similar debate as to whether a further sixth-generation model of the innovation
process has emerged. Unfortunately there is not the space here to enter into that debate. There is,
however, one more variant of the innovation process that should be highlighted before
concluding this unit of the course and looking at innovation management specifically.

2.2.6 Market driving innovation

The rise of social science subjects, such as human and economic geography and the sociology of
consumption, generated new ideas about markets and demand, informing and advising
governments, which developed ‘predict and provide’ policies. It was also a time of growing
consumer awareness and movement, such as those demanding greater automobile safety. The
management challenge of this process is relatively simple: invest in marketing. (Dodgson et al.,
2008, p. 61)

Identifying consumer demand was a key feature of the second-generation model of innovation,
and marketing became a recognised feature of the third generation. There is, however, another
dimension to marketing/advertising activity that becomes increasingly evident. This is the extent
to which manufacturers and retailers try to create (and then maintain) demand for a product or
service, usually through clever, highly visible advertising, and other forms of marketing. In
some cases this has been a highly successful strategy. Indeed, by the early 2000s a study that
included in its research sample several commercial organisations that were, at that time,

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recognised as extremely successful concluded that firms are constantly exhorted to become more
market driven.

However, the study of 25 pioneering companies (e.g. Body Shop, IKEA, and Tetra Pak) whose
success has been based on radical business innovation indicates that such companies are better
described as market driving. While market driven processes are excellent in generating
incremental innovation, they rarely produce the type of radical innovation which underlies
market driving companies. Market driving companies, who are generally new entrants into an
industry, gain a more sustainable competitive advantage by delivering a leap in customer value
through a unique business system. Market driving strategies entail high risk, but also offer a
firm the potential to revolutionize an industry and reap vast rewards. (Kumar et al., 2000)

Legislation, regulation, funding, location, and even fashions or fads can also be causally
significant in driving innovation. However, we now want to turn our attention to a more in-depth
examination of the relationship between management and innovation in the next chapter.

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