Lecture 7 - Global innovation strategy

  • Created by: Michhell
  • Created on: 20-03-20 14:01

How do they innovate?

By a combination of internal and external sources. Examples of internal sources are: R&D, management, marketing etc... External sources include: capital goods, purchase of patents, proximity to universities and contracting out...

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Internal Innovations

By having internal and domestic staff, you can benefit from more loyalty, reactive to changing strategy and are closer to top/decision makers in the company. Whereas, getting staff from foreign sources are often within subsidiaries, require integration.

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External Innovations

  • Starting with their product domestically, they have better control over the process. They can then expand overseas by producing locally, then shipping it wherever they desire, or by licensing, or by actually moving a portion of the production abroad. (Highly seen in the tech industry, the flow of patents overseas).
  • They build a multinational, but intrafirm. Combining the activities of many subsidiaries into a single network of innovation. This includes R&D, physical sites, greenfield investments (creating a subsidiary in a foreign country, from scratch, a form of FDI)
  • Joint ventures for technologically innovative projects, exchanging information for technical information and/or equipment to complete a specific project.

MNEs own 1/4 of all sources of national tech, yet national firms tend to have a higher innovation intensity than MNE's. Japanese MNE's are loyal to Japan's geography, tending to innovate close to home, rather than overseas.

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4 types of innovation processes

By Goschal and Bartlett:

  • Centre for global - centre branching all over the place like an octopus, concentrated and controlling
  • Local for local - driven by local users needs, conglomerate
  • Local for global - getting the advantage from various national innovation systems, exploit coordination, but risks being unable to coordinate to deliver a product
  • Global for global - high coordination and managerial costs, but sacrifices specific local needs, standardised models for all markets.

Corporations can co-operate with rivals: sharing the risks, sharing the costs, acquiring complementary know-how, as well as ripe learning opportunities.

In the present day, firms are more likely to collaborate with rivals. Though, American firms tend to have stronger competitive advantages. The global South firms do not generally collaborate with other global South companies.

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What is a patent?

A patent consists of a set of exclusive rights:

  • granted by a sovereign state
  • to an inventor/applicant 
  • for a limited period of time 
  • in exchange for the public disclosure of an invention


  • Novelty
  • Non-obviousness
  • Useful
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Difficulty of patents

  • The owner of IPRs is less aware of the IPR violation
  • More difficult to assess the damage to the IPR owner
  • Will you find in jail more wallet thieves than CD thieves?
  • Are governments responsible? And, if so, are they to blame?
  • Not all inventions are patented
  • Not all innovations are patented
  • Not all inventions are patentable
  • Not all patents are inventions
  • Not all patents become innovations
  • More generally, not all knowledge generating activities are associated to IPRs

See the Sydney Winters multistage "conditions for effective patents" diagram on the lecture slides.

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