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ALFRED
P.
WORKING PAPER
SLOAN SCHOOL OF MANAGEMENT
PARTS SUPPLIERS AS INNOVATORS IN
WIRE TERMINATION EQUIPMENT
Pieter VanderWerf
WP
1289-82
March,
MASSACHUSETTS
INSTITUTE OF TECHNOLOGY
50 MEMORIAL DRIVE
CAMBRIDGE, MASSACHUSETTS 02139
1982
PARTS SUPPLIERS AS INNOVATORS IN
WIRE TERMINATION EQUIPMENT
Pieter VanderWerf
WP
1289-82
March,
1982
M.I.T. LIBI
JUL 2 9
RECEf
ABSTRACT
Past empirical studies of the functional sources of
process
innovations have concentrated on innovations by process users and
equipment
process
manufacturers.
This
identifies
paper
industry in which, according to existing theories
source,
firms
supplying
innovation
of
parts to the production process have an
especially high probability of being major innovators.
presents
sample
a
of
industry,
"suppliers" were
source of
finds
and
majority.
a
then
It
important process equipment
economically
innovations from the
the
an
that,
such
indeed,
There follows
a
test
of the theory that guided
selection of the industry -- the theory
of economic benefit -- as
a
individual innovations
in
also considers some of the
predictor
the
of
sample.
factors
that
the
sources
of
the
Qualitatively the paper
industry
interviewees
claimed were important additional influences on whether suppliers
introduce
a
particular innovation.
Q74
'
Page
1
INTRODUCTION
Past research has shown
that
innovations
industrial process
"functional"
the
significantly
differ
can
Studies of some industries
industry to industry.
source
Hippel 1977).
(Berger
Boyden
manufacturers
might
innovations in an industry.
physical inputs to
innovations
factors
process
the
in
I.e.,
if
likeliest
ways (according
it
to
should
source
of
production process are expected to introduce
a
relative
high
suppliers
to
do
other
manufacturers,
they
profits
from
predictable
roughly
structures, market sizes, and profit
market
be
of
profit from
more
potential
Since
it.
that
to
much
get
can
profit
potential
their
when
innovation to the different parties vary in
margins)
Hippel
particular, suppliers of variable
originating an innovation than can users or
are the
(von
greatest
the
be
In
("benefit") from doing so is
parties.
economic
that under certain conditions "suppliers" rather than
and
users or
von
hypothesized that these
It has been
1976).
variations can be explained with
1979),
1976;
other industries most came from manufacturers
In
1975;
from
revealed
have
users to be the source of most innovations (von Hippel
of
possible
to
locate
an
industry
of
document
and
especially high supplier benefit for further study.
This paper reports on an empirical
investigate
phenomenon
the
supplier
of
researcher chose an industry that seemed
conditions
suppliers:
termination.
theoretically
the
industry
From
conducive
of
this industry
study
a
to
electronic
a
to
innovation.
priori
to
have
innovation
wire
and
The
the
by
cable
sample was taken of important
Page
equipment innovations, which
Finally
sources.
patterns
evaluated
found.
presents
findings,
the
benefit hypothesis
considers
possible
begins
with
relative
the
promising
other
some
and
their
then outlines the study
It
and
to
some
paper
The
definitional and research background.
methods,
back
traced
then
researcher
the
explanations for the
were
explanatory
variables.
2
SUPPLIER INNOVATION DEFINED
Following von Hippel (1979,
a
process
1),
the functional source
innovation.
innovation.
which
activities
and developed by an
improve
to
automobile
them
manufacturer
auto body assembly line.
sells equipment that embodies the
"equipment
from
his
it
is
"user"
a
might be new welding equipment invented
example
An
own
benefits
innovator
the
the innovator implements the innovation into his
If
own production
manufacturer"
If
incorporation
instead the innovator-
innovation
"manufacturer"
or
for
it
is
termed
innovation.
would be the case if improved welding equipment were invented
an
of
innovation is here defined according to the functional
relationship through
into his
p.
industrial
for implementation
benefits because
in
the
t
heir
plants.
innovation
that
innovation.
it
would be
invented
welding
For example,
acetylene producer
by
And
the
if
innovator
promotes the use of some other
production process input
he
This
who then sold it to users
manufacturer
machinery
an
sells,
a
it
is
a
"supplier"
supplier innovation if an
equipment for use by firms
Page
that buy his fuel for their welding work.
In
the prototypical supplier innovation,
sells
that
firm
a
or
material
for
final
products.
The
component,
part,
some
the innovator is
incorporation by
customers
supplier invents
improved equipment for handling and/or applying
potential
users,
alternatives sold
innovator is
increase in sales.
recorded by this study of
parts,
its
leased the equipment (like
In
directly,
cases the supplier-innovator also
but
if the
In
a
few
in-house
equipment
the
its
from
only
proceeds from internal use were
relative to the effect on part sales it is reasonable
very small
to
But again,
used
still
however, when the firm
the sale of the companion parts.
user).
the
were
These
manufacturer).
a
promotional effect
a
for
the firm also manufactured and sold or
equipment
(like
from
application
inventing
made no profit on the
on
it
actuality, in every case
of supplier innovation,
unambiguous cases
to
result
The
supplier firm
a
switch
them
of
suppliers.
other
by
an
equipment for
some
and
attractive
more
This makes its brand
its brand of supply item.
to
their
into
classify the innovation "supplier."
An
illustrative
introduced
cable."
new
type
the
late
1960s
in
major
3M
a
bunch of discrete wires together in
a
ribbon
effect, of wires laid side by side and
fused
insulations.
A
In
like most existing multiple-wire cables,
cable consisted,
along their
the
is
electronic cable called "flat ribbon
of
Instead of holding
plastic tubing,
of wires.
Company.
Manufacturing
a
innovation
supplier
of
the pneumatic ribbon cable press by the Minnesota
development of
Mining and
example
They thus formed
potential
advantage
a
of
long,
the
flat "ribbon"
cable
was
Page
convenience of
(A
"terminating" (attaching) connectors to the ends.
connector is
sort
a
multiple-wire cable
for
electronic equipment.)
applied to
each
"electric
of
attaching
Previously
wire,
connector housing, one contact at
connector that
users
cable in one operation:
pierce the
and
Yet despite the ability
completely in
to
stroke,
one
terminate
ribbon
specific
The result
was
could place
a
So ribbon cable's labor-saving
In
engineer
1973 an
requests
such
for
Corporation
a
at
a
suggested
3M
higher production
Though
button,
3M
for
a
ribbon cable
machine,
to
develop
his
idea.
pneumatic assembly press into which an operator
connector and the end of
activation
the cable.
ribbon
availability
partly because of the
product managers encouraged the engineer
an
a
the older discrete-wire alternatives
pneumatic ribbon cable terminator with
no
a
connectors
cable
rate than the hand presses then in use might be feasible.
3M had
be
equipment to perform the individual terminations of
advantage was mitigated.
a
a
of
connector
the
in
into
designed
3M
over the end of
contacts
to
a
contact with the wires inside.
the separate wires at high speed.
that
But
of
piece
a
inserted
then
time.
a
make
were still often competitive,
of automated
were
"u"-shaped
insulation
to
end
separate contact had
a
terminate
could
the
on
cable
the
these
and
plug"
lent
cable;
a
then
he
pushed
and the press terminated the connector to
prototypes
field
the
to
testing,
Digital
the
sold
and
Equipment
machine
in
essentially its original form starting in 1975.
This example
innovation.
The
illustrates
innovator
—
commercially in-house, nor was
essentials
the
3M
it
—
of
supplier
did not use the machinery
sold at
a
significant
profit.
Page
Rather,
the innovator benefitted by lowering the relative cost to
users of applying one of his existing products.
3
PAST RESEARCH
innovation, but
instances
reported
Two previous studies have
one empirically documented
neither
supplier
of
pattern in
a
its occurrence or in how it might be related to the benefit
innovation
from
.
Detailed historical descriptions of innovative activities by
certain materials suppliers come from Corey (1956).
cases suppliers
labored
methods
develop
to
were
materials to make products that formerly
materials.
Corey's
accounts
extremely
are
for
made
using
their
from
other
informative of the
They
nature of supplier involvement in process innovation.
not intended,
however, to comprise
a
several
In
are
random sample of innovations
for statistical analysis.
In
a
survey of inventions in
during 1946-57,
Merton
Peck
U.S.
the
recorded
the
aluminum
industry
development of "new
processes in manuf acutur ing products from aluminum" by "producers
of aluminum ingot"
for the
(Peck
1962).
From
sample of
inventions
79
working of aluminum into finished products he attributes
eight (10.1%) to aluminum producers.
all
a
inventions
"finishing" (27).
in
the
These,
The figure of
operations
it
appears
of
"joining"
from
the
79
includes
(52)
paper,
and
were
operations not performed by aluminum producers themselves, but by
Page
their customers.
Of
seven are attributed to "primary
these 79,
aluminum producers," and one to "secondary
The analysis
journals
In
as
of
a
the author claims
addition,
source
his
inventions and determining
possibility
producers."
includes no empirical data on benefit nor any tests
of its influence.
trade
aluminum
their
bias
This
sample
toward
used
selecting
for
sources.
the
in
information
of
have
to
suggests
the
attributing
innovations to firms that had innovation-related products to sell
and the motivation to contact
replication of
such
4
a
a
journal.
indeed
And
a
partial
the study by von Hippel confirms the existence of
bias (von Hippel
1981).
STUDY DESIGN
Industry Selection
4.1
Since the goal of the study is
supplier innovation
sought an
industry
investigate
and
in
which
Theoretical characteristics
von Hippel
(1)
(2)
(1979,
pp.
was
it
of such an
show
the
its nature,
likely
to
existence
of
the researcher
be
present.
industry are suggested by
34-7):
a
large number of process users, no one of which accounts for
a
large fraction of total supply item use.
a
high rate of consumption in the users'
of supply
items
that
carry
for the suppliers that sell
(3)
to
a
production
process
relatively high profit margin
them.
total sales of supply items that greatly exceed sales of
companion application equipment.
the
Page
conditions supplier benefit from innovation relative
Under these
to
that of other parties should be especially high.
value and
volume
high
incentive
user can realize only small cost savings from innovation
(Remember,
each user is
the equipment
market).
small part of the total
a
And
manufacturers have much smaller markets to compete
.
Though any number of industries may appear
most of
In
influence
to
Compared to this potential profit,
how the process is performed.
for
profit
The
the parts consumed in the production
of
process gives suppliers strong economic
any one
7
very few promise to meet them all.
these specifications,
processes
particular, most high-volume production
many small
users (e.g., beverage bottling,
wire forming)
use inputs
sellers (e.g.,
with
margins
and zippers,
chosen for
study,
might
electronic
that
meet all the desired criteria,
though
researcher
the
their
for
structural wire).
Knowledge of the electronics industry suggested
wire preparation
have
that
clothing manufacture,
profit
slim
buttons
bottles,
meet
priori to
a
initially
so
it
had
was
no
knowledge of its major innovations or their origins.
Wire and cable termination is traditionally
of the manufacture of almost
equipment.
The
wires
and
the
controls on the cabinet,
another.
stripping
cables
circuitry
or
a
of
one
link
type
electronic
primarily
piece
the
necessary part
of
used
are
within
interconnect subassemblies
equipment, connect
common
every
a
to
electronic
of
subassemblies to the
piece
of
equipment
to
Preparing the wire/cable involves cutting it to length,
insulation
off
the
ends
displacement or insulation piercing
(except
techniques
when
are
insulation
used),
and
Page
attaching terminals
connectors
or
connectors are the metal
actually
parts
Terminals and
the ends.
to
8
plugged,
screwed,
or
clipped to the points to which the wires are meant to connect.
terminal attaches
the
to
end
of
single wire;
a
a
A
connector
attaches to the ends of several.
Table
gives some sales and
1
industry.
headings
primary
The
purchase
statistics
for
the
the major types of supply
are
Listed for each supply item are estimated
items in the industry.
sales and the fraction of the total purchased by its largest
1981
Below each item are the major categories of equipment used
user.
for
its preparation/application,
the
1981
sales
of
For an explanation of the
equipment.
this
of
estimate
and an upper bound
criteria used to select the supply item and equipment categories,
see section 4.2.
The users of wire termination are highly diffuse.
one of the major types of wire,
which data
sales,
many products
that
do
terminal, or connector for
cable,
available does any one firm buy over 5% of total
are
as seen
only
For
in
Table
there
that
manufacturers
aerospace equipment.
a
part
of
are probably thousands of U.S.
computers,
of
wire preparation,
Indeed, electronics is
Common
preparation.
wire
some
1.
There are even firms that
working on
a
firms
include
users
appliances,
automobiles,
do
so
nothing
and
but
contract basis for the electronic
products manufacturers.
The markets
for
termination parts
the
major
types
of
is
cable,
and
runs into the tens and hundreds of millions of
dollars per year, also shown in the table.
these items
wire,
supplied primarily by
a
The bulk of
each
of
handful of firms, many of
Max imum
WIRE AND CABLE
Discrete Hookup Wire
Cutting and stripping
Critical Applications Discrete Wire/a
Nickless stripping
Multiple Discrete Wire Cables
Discrete wire stripping
Ribbon Cable
Cutting and stripping
Flat Conductor Cable
Current Largest
Annual
Annual Single User Equip.
Sales
Consumption Sales
($mil
Share
($mil
.
195
)
.
)
which do
a
little
wire
preparation
several of
which
sell
or
thei
products
r
their
for
Page
10
customers,
and
lease some application equipment for
.
supply
Termination parts carry high profit margins, as bulk
According
items go.
firms,
on
to
within termination parts
interviewees
some larger companies regularly realize
sales
of
or more,
20%
as compared
with
a
return
pre-tax
a
more normal 1% for
wire and cable claimed by wire firm personnel.
The annual dollar sales of
the
application
equipment
for
these supply items are generally much lower than the sales of the
items themselves.
equipment sales
corresponding
glance
A
even
never
are
supply
at
Such
item.
tenth
of
the
comparisons
are
classified
can be used to handle others,
supply item
known
that
sales
the
pairwise
equipment
misleading because much of the
to
a
shows
table
the
one
under
but they do serve
too,
demonstrate the large difference in market sizes.
4.2 Classification of Firms
Complications
the
firms
coded
as
regularly
user
sold
termination parts, or any wire preparation
the firms
supply
None
minor.
classifying firms proved
in
cable,
wire,
equipment.
of
or
None
of
coded equipment manufacturer regularly sold any of the
items
prepared
or
wire
cable
or
resale.
for
Categorization was less clear-cut for the firms considered within
the industry
to
be
suppliers;
preparation in-house (like
equipment (like
a
a
some
user),
manufacturer).
perform
wire
and cable
many
sell
or
and
lease
However, their primary benefit
from innovating in equipment clearly came from an increased
sale
Page
activity (measured
equipment
preparation
in-house
of parts:
sales
suppliers,
4.3
compared
dollars)
in
were
marketing of parts.
was purportedly always
break-even
a
to
1
minor
a
part
sales,
and
to
support
the
activity
thus felt correct to call these firms
It was
industry participants.
as do actual
Sample Selection
The researcher sought
asking
simply
improvements in
that emerged
equipment
was
applicability
that
offers
and
within
innovation
"important"
users
was applicable
to
of
identified
they
previously available.
productivity
labor
a
equipment
any
productivity
labor
large
wide
has
major class of wire or cable (not merely
a
subtype thereof) and had
times that
The pattern
major.
considered
which
industry
the
Every piece of innovative equipment
increases.
The process
of the industry.
users
they
an
economically
complete sample of the
innovations
"important" equipment
was begun by
a
to
same
job
decided
therefore
was
It
the
do
least
at
to
1
a
2/5
that
was
use
the
following selection procedure:
(1)
Identify
the
commercially
five
most
often
used
electronics,
in
of
(Coaxial
sales.
electronics wire and cable, as measured by
cable,
types
important
was considered
a
supply
item for the communications industry and therefore omitted at
*
(2)
the outset
.
For each
type
)
preparation
have
that
innovations, where
introduction
wire/cable,
of
into
a
identify
experienced
"major
equipment
commercial
the
steps
major
equipment
is
the
operations
of
innovation"
production
of
Page
equipment with
1
2/3 times
sustainable
a
productivity
labor
least
at
of previously available methods.
that
(For the
methods and data used to calculate this "productivity
for each innovation,
For each
(3)
ratio"
see Appendix A.)
selected
the
of
12
process steps find all equipment
innovations that meet the criterion for being "major."
The choice of
as
a
cutoff
the lowest
a
2/3 multiplication of
1
somewhat arbitrary.
was
incremental
innovations identified
productivity
as
interviews.
When it was adopted
criterion,
it
was
found
manageable number of sample
Focusing exclusively
As noted
gain
important
tentatively
that
innovations,
on labor
so
1
any
the
round of
acceptance
an
adequate
an
it
2/3 was
of
initial
as
yielded
it
above,
of
the
in
productivity
labor
but
retained.
was
productivity admittedly leaves out
other considerations of user utility from
technological
change.
Multi-factor productivity
measures
the costs of the equipment
itself and of the energy and materials
consumed in the production process.
labor requirements
because
of
can
take into consideration
Measurement was
data availability.
limited
How much the
innovation list might have changed had acceptance been
the increase
In
in
to
based
on
multi-factor productivity is uncertain.
practice the researcher performed the steps of the sample
selection procedure by
extensive
telephone
interviewing.
The
list of wire and cable types was verified with marketing managers
of major
U.S.
wire
and
cable firms.
Production personnel
in
user firms were questioned to find the process steps experiencing
major innovation.
process
step,
To identify all the major innovations of
users,
manufacturers,
and
suppliers
were
each
all
Page
solicited for histories of
From
production rates.
equipment
development
13
data
and
on
this was derived the list of qualifying
innovations for each step, which the researcher read back to
the
interviewees for additions and amendments.
The results are summarized in Table 2.
types are
are the
Heading
innovations.
is
original
the
ratio of
innovation
the
list
were
not
production
counted
among
the
innovation's
commercial use, as calculated using the methods of Appendix
Many process operations can be performed on the
only
wire/cable headings
one
the
A.
types
These are
some
that
result
all of their relevant process
bear
not
do
with
type,
first
.
Determination of Innovation Sources
To determine the
first canvassed
introduced it
resposible for
people
commercially.
the
innovation
source of each
industry
development engineers
and
In
to
find
the
the
the
exceptional
firm that first
the
firm
identified
(where possible) the product managers
innovative
cases
researcher
the
equipment
were
interviewed
obtain first-hand accounts of the project, except in
In
same
for more than one type of wire or cable.
included under
4.4
the
per operator to that of the next
rate
best equipment available at the time of
steps
each
for
After each qualifying innovation is also listed the
its
of equipment
wire
5
method used to perform the step.
These "original practice" methods
innovations.
the
applicable process steps, and under each of these
the
process step
Under
it
a
to
few cases.
was only possible to have another
member of the firm ask the questions of these people
and
report
Productivity Ratio
DISCRETE HOOKUP WIRE
Cutting and Stripping
Hand tools
(1) Automatic cut and strip machine
(2) Linear feed cut and strip machine
Crimp Termination
Dikes
(3) Automatic lead-making machine
(4) Power crimp bench press
(5) Strip-fed crimp press
CRITICAL APPLICATIONS DISCRETE WIRE
Nickless Stripping
Calibrated mechanical strippers
(6) Thermal stripper
(7) Die-type hand stripper
(8) Semi-automatic die-type stripper
MULTIPLE DISCRETE WIRE CABLES AND ASSEMBLIES/a
Discrete Wire Stripping
Hand tools
Rotary stripper
(9)
Solder Connector Assembly/b
Hand
(10) Heat-shrink sleeve assembly racks
Discrete Wire Crimping
Hand tools
(11) Stripper-crimper
Crimp Connector Assembly
Hand
(12) Crimp connector assembly machine
Insulation Displacement Connector Assembly
Hand tool
(13) Semi-automatic insulation displacement terminator
(14) Automatic insulation displacement harness maker
RIBBON CABLE
Cutting and Stripping
Hand tools
(15) Automatic ribbon cable cutter
(16) Automatic ribbon cable cut and strip machine
Termination
Hand Press
(17) Pneumatic ribbon cable press
(18) Semi-automatic ribbon cable terminator
(19) Automatic ribbon cable harness maker
FLAT CONDUCTOR CABLE
Termi nation
Hand welding
(20) Flat conductor cable crimp stitcher
TABLE
2:
INNOVATION SAMPLE (Footnotes next page)
NA
1.8
15.
1
2.0
2.0
>2
2. 1
1 .9
NA
6.3
2.4
2.2
36.5
63.2
2
2
6.0
/a
"multiple discrete wire cables and assemblies"
category
includes some discrete hookup wire;
specifically, the hookup wire
wiring
construct
harnesses.
It was included
bought by users
to
the
under this category because
process equipment required
to
often
the
prepare it
is
same as that used for multiple discrete
wi re cables
There are three generic connector types,
each
requiring distinct
application equipment:
solder,
crimping (requiring the operations
and
wire
crimping and crimp connector assembly),
of discrete
insulation displacement.
All three were included because industry
interviewees claimed they were all in widespread use.
The
.
/b
Page
their responses.
individuals
firms or
researcher
contact
Any
then
was
during
contacted
development with outside
These
noted.
contributed design ideas to the effort.
origin the
outside
determine
to
16
parties
the
any
had
whether
As
check
final
a
on
researcher asked disinterested experts on the process
operation involved
existed anywhere
'
s
,
development
a
the
evidence
equipment
similar
that
before the commercial introduction.
else
any of this revealed
commerci al izer
any
for
procedure
project
that
begun
was
When
preceded
anew,
the
earlier
the
project being researched in the same manner.
The date and source of each innovation are listed
3.
An
inability
impossible to
to
collect
determine
innovation introduced
with
before
first-hand
information
confidence
a
completion
operations.
as narrow
5
5.1
a
of
a
unit
source
any
were
innovations
The
date
is
used
Where the exact date is unknown there
year
of
production
commercial
in
it
for
such
the
Table
made
so
1935,
excluded from statistical analysis.
first
in
is
presented
range of years as could be determined.
FINDINGS
Innovation Sources
As hypothesized,
innovations.
source,
suppliers
Omitting
the
two
were
a
innovations
56% are attributed to suppliers and
Of 20 innovations identified,
major
for
10
it
M%
was
of
to
a
source
of
undetermined
nonsuppl ier s
supplier
firm
INNOVATION
SOURCE/a
DATE
Termination Equipment
Automatic lead-making machine
Pneumatic crimp bench press
Strip-fed crimp press
Heat-shrink sleeve assembly racks
Stripper-crimper
Crimp connector assembly machine
Semi-automatic ID terminator
Automatic ID harness maker
Pneumatic RC press
Semi-automatic RC terminator
Automatic RC harness maker
Flat cable crimp stitcher
(3)
(4)
(5)
(10)
(11)
(12)
(13)
(M)
(17)
(18)
(19)
(20)
User-Manufacturer 1939
1942-43
Supplier
1946
Suppl ier
1971-73
Supplier
1951-52
Supplier
Suppl ier
197 7
1972
Suppl ier
Supplier
1978
1974
Supplier
1980
Suppl ier
1981
Manufacturer
1962
Supplier
Wire- and Cable-Handling Equipment
Automatic cut and strip machine
Linear feed cut and strip machine
Thermal stripper
Die-type hand stripper
Semi-automatic die-type stripper
Rotary str ipper
(15) Automatic RC cutter
(16) Automatic RC cut and strip machine
(1)
(2)
(6)
(7)
(8)
(9)
TABLE
/a
3:
NA
pre-1935
Manufacturer
1956
1940
User
1965-70
Manufacturer
1979
-manufacturer
User
pre-1935
NA
1977
Manufacturer
1977
Manufacturer
INNOVATION SOURCES AND COMMERCIALIZATION DATES
that
firm
category of the
the
The source of an innovation
is
equipment embodying the
of
unit
first
designed and built the
The
innovation that was used in commercial production operations.
the
from
benefitted
firm
categorization
depends on how the
it
selling
(user),
it
whether by using
innovative equipment,
(manufacturer), or
employing it to promote the sale of the supply
item used in it (supplier).
Page
designed
that
built
and
innovative function
operations.
In
any outside
party
used
be
embodying
commercial
in
the
production
none of these cases did the investigation uncover
typically limited
contributed significant design ideas or
that
project.
funds to the
equipment
to
machine
first
the
1
User
input,
indefinite
to
present
if
requests
more
for
was
all,
at
automated
.
Another
innovations
8
developed the
innovations
equipment
were
nonsupplier:
were
in
cases,
5
result
the
development projects.
The
2
user in
a
1
case,
and
2
user-manufacturer
joint
of
manufacturer
a
remaining innovations were too old
(pre-1935) for reliable determination of
source,
a
so
they
were
omitted from statistical analysis.
Examining the
suppliers and
those
from
This pattern
pattern.
between
differences
is
when
the
divided according to type of supply item handled:
processes
only
wire
termination parts.
As
or
cable
and
seen in Table
2,
from
revealed an interesting
nonsuppliers
apparent
innovations
the
innovations
are
equipment that
applies
equipment
that
suppliers
originated
10
innovations for handling termination parts, but none strictly for
wire and cable handling.
for termination
of the
while
12
n
and
6
Nonsuppliers, in contrast, originated
for conductors.
termination innovations were
the
work
of
10
suppliers,
one of the strictly conductor-handling innovations were --
nonsuppliers accounted for all
This is
alone.
Looked at differently,
2
that suppliers
of those.
stronger pattern than one would expect from chance
a
Using
6
a
Fisher Exact test, one can
test
the
hypothesis
were just as likely to have introduced one of the
Page
19
purely wire/cable innovations as they were one of the innovations
that handles termination parts.
hypothesis at
(Specifically, the
18
that the
are of the supplier source.
probability
source is
of
independent
above-mentioned data
of
conditions,
probability that as many as
and
of the
of
10
the
Now consider the hypothesis
of the supplier
being
innovation's
the
of
type,
innovation
an
significance.
innovations
12
of the wire/cable
6
rejection of the
a
statistical
of
consists
sample
termination type and
total
level
.005
the
The result is
Given
type.
the
the null hypothesis the
under
of the supplier-source innovations
10
are of the termination type is
.00151.)
Test of Source-Benefit Correlation
5.2
The researcher undertook to test
between
relationship
the
relative benefit and the sources of the innovations in the sample
on
a
of potential
benefit
equipment, and for
each of the
(1)
Data were solicited to enable estimates
case-by-case basis.
9,
for
each
of them the
9
of
the
attempt
18
pieces of innovative
was
successful.
For
three calculations were made:
Supplier benefit:
the total profit on all parts used in all
active units of the innovative equipment in the year
5
years
after its commercial release.
(1)
Manufacturer benefit:
placed with users during
release
(3)
potential
the
the
fifth
year
on
after
all units
commercial
.
User benefit:
the
cost
savings
single largest user during the fifth
release
profit
.
from the equipment to the
year
after
commercial
Page
Focus on
fifth
the
somewhat
was
year
arbitrary:
there were
insufficient data to perform complete time discounting of
streams, and
so
this was chosen as
20
profit
representative period.
a
For
the exact methods of calculation and consideration of some of the
simplifying assumptions, see Appendix
proprietary, revealed
Many of
B.
data
the
on condition of confidentiality.
are
They are
therefore not reproduced here.
Unfortunately, what is here called "supplier benefit"
overstatement.
The
explained that much or
most
gross
innovative equipment
interviewees
would
they
originated the equipment or not.
planned
used or
to
use
an
an
innovation
firms
through
put
whether
have
sold
Many
customers
their
they
we
supplier
would
need
estimate of the
an
business."
"new
Again unfortunately, no one felt qualified to estimate
number.
The new business fraction is highly uncertain,
retrospect.
To
predict
what
innovations released less than
had
supplier
a
been
had
already
that
So to estimate true
fraction of the total part consumption that was
a
a
innovating supplier's part would be
among those acquiring the machine.
benefit from
supplier
in
parts
the
of
is
will
it
5
be
years ago) or
even in
case
the
(in
such
been
have
would
of
innovator (in the case of innovations
the
originated by manufacturers or users) is high guesswork.
Nonetheless, to make it
theory was
modified:
possible
suppliers
will
to
perform
very
of the
high
9
defined
relative to the benefit of nonsuppl i er s
innovations
the
researcher
the
tend to be the source of
innovations for which the "supplier benefit", as
is
test
a
calculated
the
.
above,
For each
ratio
of
"supplier benefit" to the benefit of the actual innovator (in the
Page
case of
nonsupplier
a
innovation),
or
the benefit of the
to
nonsupplier party with the highest benefit, which was
alternative
the logical
The results were then
innovation).
Table
innovator
ordered
rank
considered
case of
the
(in
21
supplier
a
shown
as
in
4.
Informal inspection of the rank order list reveals no strong
relationship between
the
suppliers
to
relative
middle.
of
potential
the
nonsuppliers
and
of
source
the
procedure to
benefit ratios
of
of
an
the
top
list while supplier innovations dominate the
the
To test rigorously,
one
can
Mann-Whitney
the
use
U
test
the
null hypothesis that the distribution of
is
the
same
innovations against
for
supplier
distribution
nonsupplier
and
alternative hypothesis that the benefit
the
ratios for supplier innovations come from
than the
benefit
Manufacturer and user innovations are near
innovation.
and bottom
size
a
nonsupplier
for
higher
distribution
The
innovation ratios.
result is that the test cannot reject the null hypothesis at even
the 50% level of statistical significance.
for the nonsupplier group,
small or
smaller
(More precisely,
and the probability of
under the null hypothesis is
a
U =
U-value
.548.)
So
that
it was
not possible to offer evidence that supplier innovation tends
occur more
frequently
innovations
among
with
a
1
to
high relative
supplier benefit.
Conversely, the
against the
analysis
hypothesis.
The
simplifying assumptions that
accuracy (See
Appendix 3).
has
not
offered
strong
proof
measures of benefit utilized many
may
have
severely
reduced
their
Furthermore, the sample was so small
that the chance of accepting the no-relationship hypothesis
even
Page
were
if it
false (i.e., the probability of
a
23
type II error) was
probably very high.
6
ADDITIONAL EXPLANATORY FACTORS
directly
questioned
When they were
the
interviewees
had
several explanations for the pattern of innovation sources found.
In
particular,
forwarded reasons for why termination parts
they
equipment
suppliers might be expected to innovate in application
where wire
and
cable suppliers did not.
quantify these
hypotheses,
consideration.
But
first
but
as
an
they
was not possible to
It
outlined
are
here
introduction there is
of these people's observations on the
motivations
for
for
summary
a
supplier
innovation in general.
Supplier Innovation Strategy
6.1
Industry interviewees gave detailed explanations for why the
Suppliers gained nothing from
suppliers in the sample innovated.
all claimed to
the sale of the equipment itself:
their equipment
took
to
a
loss.
increase
just
to
of their parts,
price
to
Sometimes they even
break even on it.
innovative
They benefitted by using the
sales
try
equipment
though the mechanisms through
which this occurred varied.
When
as
3M
a
firm is the dominant supplier of
a
item,
particular
was in ribbon cable and ribbon cable connectors during the
early 1970s, it can benefit from the free
equipment to
lower
application
cost.
dissemination
of
any
The supply item becomes
Page
cheaper for users to incorporate into
switch to
it
the bulk of
products,
their
from the functional alternatives.
increase
sales
this
will
24
some
so
Chances are that
fall
dominant
the
to
supplier, whence comes his motivation to innovate.
The situation is more complex when the supplier has
minor share
of
market
the
for
a
circumstances it doesn't help as
market for
the
item.
It
supply
item.
to
increase
much
only
a
Under these
entire
the
can be easier to gain sales by luring
customers directly
from
market share.
practice suppliers accomplish this by leasing
In
competing
the
their innovative application equipment
their brand of part
making
and
condition of the lease.
a
leasing arrangements
will
consist
appropriating
brands,
a
supplier
not
There are
also
Japan and Europe
In
can sometimes require outright that users employ only
his parts in equipment he has leased
is
of
minimum required
a
monthly or annual purchase of parts per machine.
some legal sanctions available to suppliers.
use
some cases such
In
simply of
the
possible,
but
a
supplier
to them.
charge
can
this
the U.S.
In
a
"usage fee" on
equipment and make it applicable only when competitors' parts are
used in the machine.
economically unattractive.
And
equipment the supplier retains
users put
foreign
parts
of
competitive
lastly,
as
legal owner of the
responsibility
through
for
repair.
has not been treated
For some or all of
these
particular supplier's
parts for use in it
in
also.
When
grounds
accordance with recommendations.
reasons
equipment
If
machinery the suppliers'
the
repair staff can threaten to refuse to service it on the
that it
parts
use
This makes the
users
will
these
oe
that
want
to
use
a
influenced to buy his
users
are
firms
that
Page
25
have bought competing brands the supplier scores
otherwise would
increase in sales.
an
6.2 Differences Between Wire and Terminal Firms
Some of the respondents argued that wire suppliers simply do
not have
the
machinery.
expertise
This
manufacture
and
process
argument rests on the point that wire suppliers
are expert in metal
other operations
design
to
that
extrusion,
plastics
drawing,
prepare
them
various
and
poorly for mechanical
but
equipment innovation.
This argument is
First, wire
questionable
for
couple
a
reasons.
of
manufacturing firms do have some experience with the
process equipment.
Some of the largest claimed that they do wire
and cable preparation in-house on
the process
equipment
to
a
contract
basis,
modify
And in at least two
suit their needs.
cases of cable-handling innovation by
and
manufacturers,
the
major
suppliers of the cable also sold termination parts for which they
had originated application tooling innovations in the sample.
there clearly
existed
failed to innovate
Second,
in
the
innovated.
equipment
expertise
to
handle
their
cable.
originally either, and yet they
They acquired the necessary skills somehow.
Greater Standardization of Wire and Cable
Some maintained that if
a
machinery expertise that
with
the termination part suppliers allegedly did not all have
significant equipment
6.3
suppliers
So
a
supplier has no incentive to
for it.
supply item is highly standardized
introduce
application
equipment
Any firm's brand of item could be used in the equipment,
so
introducing
supplier.
machine
the
effect,
In
equipment innovation
undifferentiated.
would
supplier's
a
much
is
much
not
benefit
economic
lower
if
26
any
one
benefit
from
handled
item
the
Page
Since the types of wire and cable used in
high-volume equipment
listed
the
are highly standardized,
here
calculated benefit might have been
overly
large
is
our
wire
and
supply item
the
for
cable innovations.
It may
well be that the more standardized
more difficult
it
for
is
a
supplier to link use of his part to
use of his equipment.
However,
standardization rules
out
it
is
supplier
there exist counterexamples.
a
difficult
innovation
There were at least
to
accept
that
completely, for
two
cases
of
supplier innovation in which the machinery would accept competing
brands of
it
the
supply item directly, and at least one more where
could do so with minor adjustment.
these cases
insured
The
innovator
firms
in
that users would put their brand of part in
the equipment by leasing the equipment and
imposing the sorts
of
leasing controls mentioned previously.
6.4
Different Expectations
Some industry participants argued that
unlike suppliers
in
of termination parts,
application equipment
sounds circular
logic to
i
(
production.
suppliers
of
wire,
"just never got involved"
Initially
Why did they not get involved?)
this
response
but there is
a
t
For whatever reasons
—
greater economic incentive,
greater
expertise, greater differentiation of product -- termination part
Page
suppliers apparently
undertook
27
regular development of automated
application tooling before equipment manufacturers, whereas
suppliers did not.
a
Thus,
termination "everyone knows" that if
in
competitors
leapfrogs
supplier
in
application tooling he can
pirate away significant sales from them, and if he lags
department his
themselves
Users
equipment.
the work for them.
Manufacturers
some equipment
termination
for
occassional ly
may
(as they
discouraged by the saturation of demand
in
supplier could
produce
some
of
supplier to try to innovate.
many
In
contrast,
of
wire
in
equipment
whatever
a
manufacturer will also produce and
supply items.
this line of reasoning,
fact have), but are
And the manufacturers'
may already be working on.
brands
that
introduce
suppliers,
by
lease equipment at no profit.
or
and cable handling "everyone knows"
to
little
have
develop new equipment since the suppliers are doing
incentive to
handle all
this
in
sales will gradually erode as users switch to the
firms with the best
whom sell
wire
It
is
versions
will
thus pointless for
The benefit calculations,
a
according
are incorrect because they omit
these
strategic factors;
This argument,
firms will
never
too,
try
has weaknesses.
to break
It
seems
into new markets.
to
contradictory
evidence.
Unfortunately,
impossible even to begin to test the hypothesis here:
require twenty industries, not twenty innovations.
that
Certainly the
two termination innovations introduced by nonsuppliers
considered
say
could
it
be
is
that would
7
answered.
established
has
It
it
has
Precisely
nature.
it does
a
we cannot
motivation
a
mystery, however.
But perhaps
not because we do not have the answer,
test the answer
theories, which
to
achieved
have
though
success
some
they
considerations that
shape
incentive
other studies
in
throughout
If nothing
else,
market
the
strategic
and
potential innovators' expectations of
the way to
a
this
have
to
the innovations
research
more
within
a
a
question
detailed
degree of
verify
to
supplier
problem with
historical
single industry.
Gathering information for
a
it
would
data
for
further,
set of industries,
made it difficult to give even the
help
realistic test.
hoped that this study has at least pointed
is
innovation and to survey
test.
a
proved
it
fruitful area of inquiry.
To probe
desirable
gather the data necessary for
it
sample
the
benefit in the industry were so many and complex that
to
it
explain most of the innovation
could
Unfortunately
source variation.
too difficult
and
but because
Economic
certain.
be
(Spierings 1979, von Hippel 1979) looked
selection as
supplier
of
why supplier innovation occurs when and where
remains something of
mystery
than
existence
the
innovation and discovered some components of its
or
28
CONCLUSIONS AND RECOMMENDATIONS FOR FURTHER RESEARCH
This study has probably raised more questions
is
Page
rather than
be
each
merely
Lack of detailed data
hypotheses
simplest
a
fair
set of industries might reveal
industry-specific factors that influence the
involvement
gathering
more
and
limitations on time and ability.
in
process
better
innovation.
data
Many of the
of course,
is,
data
The
of
interest
Page
of individual
for analysis
innovations are proprietary, internal
information of
a
particular
time-consuming
to
locate
firm.
anyone
who
It
claims
is
to
accurately, and very difficult to induce these people
them,
even
with
promises of confidentiality.
often
very
know
them
to
reveal
Perhaps some more
aggregated and readily accessible variables could be
cross-industry study.
29
used
in
a
Page
APPENDIX
A:
COMPUTATION
30
PRODUCTIVITY
OF
RATIO OF INNOVATIVE EQUIPMENT
The criterion for inclusion of an innovation in
was that its sustained labor productivity be at least
that of
commercial use
innovative
the
of
equipment" here
1
2/3 times
best equipment available at the time of first
next
the
refers
to
equipment.
"Next
candidate innovations
researcher calculated
the
ratio" and compared it to
1
this
"productivity
appears
depended
ratio
or
1
2
on
whether
the
pieces of alternative
new equipment executed an operation that was
the
If
test
To
2.
innovative equipment was compared to
equipment.
a
This is the ratio that
2/3.
after each innovation in Table
for
best
the piece or combination of pieces of
equipment that had the next highest labor productivity.
The formula
sample
the
formerly done on one piece of equipment the formula was:
PRODRAT
where FIO
=
=
(FI0xPI/0I)
/
(FAOxPA/OA)
the fraction of the total paid operator time that the
innovative equipment
is
excludes repair and set-up time.
PI
01
the production
=
actual operation.
or
terminations/machine-hour)
of
operators
innovative equipment.
FAO
=
(Completed wires,
is
the number
=
(Fraction)
rate of the innovative equipment while
it
in
operation
actual
in
unit
per
of the
(Operators/machine)
the fraction of the total
alternative equipment
required
cables,
is
paid operator time that the
in
actual
excludes repair and set-up time.
operation
(Fraction)
—
Page
PA
=
31
the production rate of the alternative equipment while
it
is
actual operation.
in
(Completed wires, cables,
or terminations/machine-hour)
OA
=
operators
the number of
alternative equipment.
In
operations
formerly
equipment.
used
cases
several
performed
a
unit
per
of
the
(Operators/machine)
innovative
the
such cases
In
required
equipment
combined
separate
pieces
of
modified version of the
formula
was
two
on
:
PRODRAT
where P0A1
(FIOxPI/OI)
=
FAOxPA/OA,
=
/
[1
full-time
+
the
i.e.,
1/P0A2)]
for the first piece of
as defined above,
alternative equipment,
output per
(1/P0A1
/
operator.
hourly
sustained
cables, or
(Wires,
terminations/operator-hour)
P0A2
equipment.
FAOxPA/OA for
=
(Wires,
the
second
piece
of
alternative
cables, or terminations/operator-hour)
When interviewees said that operator time lost to repair and
set-up time was negligible, the operation fraction (FIO
or
FAO)
was set equal to one.
When the
production
rates
of
the
equipments
under
consideration depended on the form of the output (length of wire,
configuration of terminations, etc.)
a
interviewees were asked for
"typical" form and the rates applicable to that were used.
The productivity data
given in Table
5.
collected
for
each
innovation
are
INNOVATION
ALTERNATIVE EQUIPMENT
Linear Feed
Automatic
(2)
C
&
C
&
S
S
Machine/a
Machine
Automatic Lead-Making Machine/b
Automatic C & S Machine
Crimper Dikes
(3)
(4)
(5)
(6)
(7)
(10)
(11)
01
PI
(13)
( 1
4
)
(15)
0.75 3000
1
1
Strip-Fed Bench Press
Power Crimp Bench Press
600
Thermal Stripper
Calibrated Mechanical Strippers
400
Die-Type Hand Stripper
Thermal Stripper
845
1579
545
Str ipper-Cr imper/d
900
1000
Semi-Au toma tic ID Terminator
ID Hand Tool
1250
Automatic ID Harness Maker/e
Linear Feed C & S Machine
Semi-Automatic ID Terminator
2500
1
75
1
300
1
<200
1
400
1
845
1
86
1
1
1
1
1
1
1
540
1200
Connector Assembly Machine
Strip-Fed Bench Press
Hand Crimp Insertion
RC C & S Machine/h
Automatic Ribbon Cable Cutter
Abrasive RC Stripper
150
1
<1
Heat-Shrink Sleeve Fixtures
Hand Assembly
(16) Automatic
0A
0.75 3400 0.17
150
Automatic Ribbon Cable Cutter/f
Pneumatic Ribbon Cable Press/g
PA
0.75 3400 0.16
Rotary Stripper
Strip-Fed Bench Press
(12)
FAO
0.97 7000 0.25
Pneumatic Crimp Bench Press/c
Cr imper Dikes
Semi-Automatic Die-Type Stripper
Die-Type Hand Stripper
(8)
FIO
1
1
1
1200
720
1
1
1
275
1
(17)
Pneumatic Ribbon Cable Press/i
Hand Ribbon Cable Press
(18) Semi-Automat ic RC Terminator
96
1
48
450
1
Pneumatic Ribbon Cable Press
(19) Automatic RC Harness Maker/j
96
450
TABLE
Flat Conductor Cable Stitcher
Hand Soldering
5:
3500
225
3600
1
1
Automatic Ribbon Cable Cutter
Semi-Automatic RC Terminator
(20)
1
1
1
1
600
1
LABOR PRODUCTIVITY DATA FOR INNOVATIONS SAMPLED (continued)
/a As sume s machine s are cutting 8-inch wires.
cutting 8-inch wires with a terminal attached
/b As sume s machine s
are
to one end
in
/c As sume s tools a re applying heavy-duty terminals of the sort used
WW II a ircr af t
/d By the
time
o f release of the stripper-crimper the production rate
1200
nearly
to
improved
of the
had
press
str ip-f ed
bench
cr imps /hour
/e As sume s termina tions of 8-inch wires.
/f As sume s machine s are cutting 24-inch cables.
used for cutting as well as
is
ribbon cable press
/g Th e pn eumatic
te rmin ating .
them
at
stripping
/h As sume s machine s are cutting 24-inch cables and
on e en d.
numbers of
in
/i Te rmin ation
ribbon cable are given
r ates
fo r
wires
individual
number of
CO nnec tors atta ched per hour, not the
the
is
connector
cable
ribbon
one
Attaching
te rmin a ted per
hour
eq ui va lent of t ermi nat i ng as many as 50 individual wires.
a
attaching
cutting 24-inch cables and
are
/j As sume s machine s
CO nnec tor to ea ch end
.
.
.
Page
APPENDIX
34
CALCULATIONS OF ECONOMIC BENEFIT
B:
To calculate the economic benefit
equipment innovation
each
to
party
from
an
set of standard formulas was established.
a
The formula for supplier benefit was:
SUPBEN
where TP
=
TP
PC
x
PP
x
x
x
SRS
x
2112
placements
total accumulated
=
UF
(sale
lease)
or
of
equipment during the first five years after commercial
release.
I.e.,
(Machines
PC
PP
=
)
the hourly
part consumption of
operation.
(Parts/machine-hour)
a
)
of equipment is actually in use.
the supplier's
=
parts
2112
equipment.
the fraction of the working day that the average piece
=
SRS
unit of equipment in
the average price of the parts used in the
=
(Dollars/part
UF
the "number of machines in the field."
=
(Fraction
.
return
on
(Fraction)
sales from the sale of the
)
the normal number of work hours in
wire preparation operations.
a
year
for
user
(Hours/year)
The formula for manufacturer benefit was:
MANBEN
where MP
=
=
MP
x
PE
=
MRS
the number of units of
fifth year
PE
x
equipment
placed
after commercial release.
the average sales price for
(Dollars/machine)
one
unit
during
the
(Machines/year)
of
equipment.
Page
MRS
the manufacturer's
=
35
return on sales from sales of the
(Fraction)
equipment.
The formula for user benefit was:
USEBEN
where LA
=
(LAxPIxFO)/(FAxPA/OA)
[
-
(FIxOIxLA)]
21120
x
the largest accumulation of equipment by any one
=
user
release.
firm in the first five years after commercial
(Machines)
PI
rate of the innovative equipment while
the production
=
is
it
in
cables,
(Completed wires,
actual operation.
or terminations/machine-hour)
FO
the
=
fraction
of
time
work
repair,
FA
=
excludes
idle,
(Fraction)
and set-up time.
of the total
the fraction
--
operation
equipment is in actual
innovative
the
that
paid operator time that the
actual operation
next best alternative equipment is in
—
PA
=
(Fraction)
excludes repair and set-up time.
equipment
production rate of the next best alternative
while it is in actual
wires,
(Completed
operation.
cables, or terminations/machine-hour)
OA
=
the next best
number of operators required per unit of
(Operators/machine)
alternative equipment.
FI
=
fraction
the
of
work
time
that
equipment must be tended to by operators
repair and set-up time.
01
=
number
of
operators
innovative equipment.
21120
=
innovative
the
—
includes
(Fraction)
required
per
unit
of
(Operators/machine)
for equipment
the typical annual wages and overhead
Page
(Dollars/operator)
operators.
For each of the nine innovations,
estimates
yet released
a
full
5
obtained
were
For innovations not
symbolic variables in the equations.
for all
36
years, the estimates are projections.
When interviewees said that operator time lost to repair and
set-up time was nelgigible,
equal to
the operation fraction
(FAO) was
set
When the production rates of the equipments under
one.
consideration depended on the form of the output (length of wire,
configuration of terminations, etc.)
for the most
A
the interviewees were asked
"typical" form, and the rates for that were used.
number of simplifications in
collection may
estimates.
have
Those
contributed
considered
calculations
the
inaccuracy
to
the benefit
in
serious
most
the
data
and
discussed
are
below
Use of current amount s for economic variables
historical data,
the price of parts
innovative equipment
operator (21120),
(PE),
the
(PP),
wages
labor costs
current
concerned,
are
a
overhead
values.
this
As
far
as
one
for
(SRS),
(MRS)
equipment
of
unit of
the supplier's return on sales of parts
their
to
the price of
and
and the manufacturer's return on sales of
set equal
For lack
.
were
the prices and
simplification
of
is
no
consequence for the calculation of relative benefits if all these
quantities
have
risen
since
the
fifth
commercialization by exactly the same proportion.
has introduced
biases.
If
after
year
If
not,
this
the return on sales percentages are
higher (lower) than in the years just after the commercialization
of the equipment,
the supplier and manufacturer
benefit
figures
Page
37
will be relatively too high (low).
Use of actual results for hypothetical situations
case only
one
three parties originated the innovation.
the
of
The benefit of this party was calculated from
(or projections).
market data
in theory,
two parties is,
each
In
.
actual
historical
The benefit for each of the other
what they would have gotten
been the innovators instead.
But to estimate this,
they
had
data from the
actual innovator's experience was used, which may be unrealistic.
For example,
when
implicitly assumed that if
would have
placed
price.
reality,
In
just
a
machines
(because his
originated
supplier
a
a
innovation,
an
manufacturer had done so instead
as
many
units
manufacturer
will
use
might
all
placed
have
brands
price might have been higher (because he takes
lower
efficiency in
equipment
(because
is
his
of part)
he
or
more
fewer
His
bigger markup on
a
expertise
production
and
Likewise,
greater).
is
with users at the same
(because the suppliers' marketing organizations are larger).
equipment) or
it
if
a
user had
originated the equipment he might have incorporated more or fewer
units into his operations, been able to design it
Analagous
effectively, etc.
arise
problems
more
or
less
regardless of who
originated the innovation.
Lack of consideration of "new busines s fraction
in
a
the main text,
."
As
noted
only some fraction of the parts running through
supplier's innovative equipment are "new business" -- parts tne
supplier would
to go with them.
parts,
not
the
not
It
have sold but for his offering the equipment
is
total
the profit on this portion of
itself,
innovating supplier's benefit.
that
is
the
total
normally considered the
Inability to get estimates of new
Page
business fractions
procedure
simply
of
innovations
the
for
calculating
forced
profit
the
use
on
38
of
the
total
part
consumption and taking ratios of supplier benefit to next-highest
of relative benefits if the new business
same for
innovation.
each
innovation to
produce
ordering
This simplification would not affect the rank
benefit.
a
innovation,
fraction is actually the
where
But
applying
it
the
differs greatly from
fractions
true
might
re-ordering of the list.
The actual fraction of machine part consumption that is
business is
complex ways
responses
difficult
a
of
competitors
substi tutab il ity of
method of
estimating
business
the
to
competitive
would have been used.
the new
to
estimate.
supplier-innovator's
the
on
number
it
equipment innovations,
particular
depends in
share,
more.
and
the
simple
No
cases was known, or it
for
than
wire
for
cable
and
for why it might tend to be higher or
lower for the innovations that were originated by suppliers
for the
innovations
that
were originated by nonsuppl ier s
analysis is thus currently unable to identify
in
why
might tend to be higher or lower for
innovations
or
the
equipment,
Nor was there an obvious argument
fraction
termination equipment
in
market
new
parts,
It
new
a
systematic
the hypothesis test resulting from this simplification.
than
.
The
bias
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Berger, A
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and
Activity
Unpublished S.M.
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Sloan
Innovation
Cambridge, Massachusetts:
Management.
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.
Inn o vatio n
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i_n
the_
A
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S.M.
M.I.T.
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S
January
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N ew
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"Inventions in
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ve
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"The
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von Hippel 1979
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,
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5 '82
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limits
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227