MGT 2119
THE ECONOMICS OF INNOVATION AND ENTREPRENEURSHIP
FALL 2004
COURSE MEETS: Wednesdays, 1:45 – 3:45, Classroom 133
Instructor:
Email:
Homepage:
Phone (Fax):
Office Hours:
Maryann Feldman, RTM 578
maryann.feldman@rotman.utoronto.ca
http://www.rotman.utoronto.ca/feldman/
416.946.5511 (416.978.5433)
R 10:00 – 12:00, & by appointment
Teaching Assistant:
Email:
Office Hours:
Debbie de Lange, PhD Candidate, Strategic Management
debbie.delange03@rotman.utoronto.ca
T 1:00 – 3:00, RTM 259
COURSE SCOPE AND MISSION
Innovation is pervasive in today’s economy. The most successful managers understand innovation: how
to recognize, manage and generate innovation for sustained competitive advantage. This course combines
economic concepts with an historical approach to illuminate what innovation is and how it has changed
the nature of competition between firms, creating and destroying industries and generating economic
growth.
Understanding the historical path of innovation allows us to examine how radical ideas achieved
commercial success, why some good ideas took a long time to be realized and why some inferior ideas
become dominant. This course will provide an overview of business history, tools for evaluating
innovative opportunities and context for making business decisions. The intention is to train visionary
leaders who will recognize both the potential and possible pitfalls of new technologies.
COURSE REQUIREMENTS
Regular attendance and class participation are critical to successfully completing this course. You are
expected to participate actively in each class session. Read each assignment before class and be prepared
to discuss it.
Given the importance of class discussion, pre-class preparation is crucial. For readings, you should be
prepared to outline the topic that each reading addresses, describe its central points, and offer your critical
analysis. For cases, you should identify the core challenge facing the case protagonist(s), offer a critical
assessment of the situation, and lay out cogently and persuasively a course of action. When cases and
readings are assigned for the same day, you should be able to draw links between the case and reading in
your discussion.
To encourage participation the course requires students to write a memo summarizing the main points,
commenting on or synthesizing the week’s readings. Memos should be emailed to Deborah deLange by
noon the days that are marked with a * on the syllabus. Late memos will not be accepted.
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There are ten * listed on the syllabus which allows you to miss one assignment and not be penalized.
Completing all ten memos will yield extra credit.
Memos are a common form of business communication and writing effective memos will serve you well
in your professional career. If you are not familiar with writing memos see the postings on the course
portal for background. The goal is to acquaint you with this mode of communication and to move you
along the learning curve with this type of communication. After writing nine memos it will become very
second nature for you.
Students are also required to write an approximately 20-page paper exploring a technology or company in
greater depth. This may be a retrospective exercise looking at an existing product or process that has
already been commercialized or a prospective look at the potential of some new invention or discovery.
This assignment allows you an opportunity to examine a topic of your choice in greater depth. This is
your chance to investigate an innovation – the requirement and grading criteria is that you use
terminology and concepts developed in the course.
A memo presenting your paper topic with an annotated bibliography and other information sources and
contacts is due by October 27 and at that point in time you should be fairly far along with your research.
We will have in –class presentation of the group research projects on December 8. The final paper is due
by the end of business (6:00 p.m.) December 12. Please send a copy electronically to Miriam Bosiljevac.
I am willing to look at intermediate drafts of the final assignment. Email is the best way to communicate
and please copy Deborah de Lange.
EVALUATION AND GRADES
Class participation: (attendance @ 6 points per class discussion;
and informed comments)
Memos (9 @ 10 points each)
Paper
(With bibliographic references)
Presentation
84 points
90 points
90 points
20 points
The following scale will be used to assign grades to all course assignments:
Evaluation
> 280
> 268
> 240
> 222
> 200
> 180
> 157
Letter Grade
A+
A
AB+
B
BF
2
Grade Point
9
8
7
6
5
4
0
Missed Assignments/Examinations
Students may miss an assignment or exam due to illness, domestic affliction, or in the case of part time
students, work commitments, without academic penalty providing the appropriate documentation is
received and approved in a timely manner.
In such cases students must notify the MBA Program Services Office on the date of the missed
assignment or examination and a medical certificate, employer’s letter or other supporting evidence must
be submitted to the Director, MBA Program Services within 48 hours of the due date of the assignment or
the exam date.
A resolution will be determined by the instructor and may take the form of a make-up exam, rewriting the
exam at the next offering of the course or a revised grade calculation. The decision as to how to handle
the missed assignment or exam is at the instructor’s discretion. If a student misses an assignment or final
examination for any other reason, a resolution will be determined at the instructor’s discretion and may
include an academic penalty. Students who do not notify the School of a missed assignment or exam will
be given a grade of FZ (failing grade) for the assignment or exam.
Course Work & Academic Honesty
Submission of Assignments – Students are required to use the MBA Assignment Cover Sheet Template
(see the Portal) for all submitted work which will be reviewed by the Professor. In the case of group
assignments, all group members must sign the Assignment Cover Sheet. Late submissions of any
assignment will be considered; however, a resolution will be determined at the instructor’s discretion and
may include an academic penalty.
Academic Honesty - The University’s Code of Behaviour on Academic Matters (“Code”) applies to all
Rotman students. The Code prohibits all forms of academic dishonesty including, but not limited to,
cheating, plagiarism, and the use of unauthorized aids. Students violating the Code may be subject to
penalties up to and excluding suspension or expulsion from the University. A copy of the Code may be
found at: http://www.utoronto.ca/govcncl/pap/policies/behaveac.html
The Rotman Code of Integrity
Students are expected to conduct themselves with the utmost integrity during their time at Rotman and,
without limiting the foregoing, will:
• Submit only original work, giving credit to others where appropriate;
• Neither give nor receive unauthorized aid in examinations or on assignments;
• Contribute substantially and proportionally to each group assignment;
• Ensure enough familiarity with the entire contents of group assignments so as to be able to sign off on
them as original work;
• Accept and acknowledge that assignments found to be plagiarized in any way will be subject to
sanctions under the University’s Code of Behaviour on Academic Matters;
• Represent myself honestly to members of the Rotman community and to outsiders; and
• Represent Rotman appropriately to the outside world.
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Weekly Schedule
Session
September 15
September 22*
September 29*
October 6*
Topics
Introduction And
Definitions
Institutions and Opportunity
Government Policy and
Competitiveness
Entrepreneurship I
October 13*
Sourcing Technology from
Universities
October 20*
Patents and Intellectual
Property
Competitive Intelligence
October 27*
November 3*
Sourcing Technology or inhouse development
Readings & Cases
Rosenberg, Nathan and L.E. Birdzell, Jr (1986), How the West Grew Rich.
Basic Books: New York. (Ch.4: The Evolution of Institutions Favorable to
Commerce; Chapter 8: The Link Between Science and Wealth)
Steinbock, Dan (2001) “Assessing Finland’s Wireless Valley: Can the
pioneering continue?” Telecommunications Policy 25: 71-100.
Koehn, Nancy F.(2001), Brand New. Harvard Business School Press:
Cambridge MA. (Ch.2 Josiah Wedgewood).
Bhide, Amir (1996), “The Questions Every Entrepreneur Must Answer,”
Harvard Business Review Reprint 96603.
Surface Logix (HBS Case 9-802-050).
Seabrook, John (1993). “The Flash of Genius.” The New Yorker. January
11. 68 (46): 38 - 52
Breitzman, Anthony F. and Mary Ellen Mogee. (2002) “The Many
Applications of Patent Analysis”. Journal of Information Science. 28 (3):
187-205
Graff, Gregory. (2003). “Observing Technological Trajectories in Patent
Data: Empirical Methods to Study the Emergence and Growth of New
Technologies”. American Journal of Agricultural Economics. 85 (5):
1266-1274
Domino Printing Sciences (A): Technology Development Or Acquisition?
(European Case Clearing house 602-031-1)
Domino Printing Sciences (B): Managing The Acquisition Of The
Technology (European Case Clearing house 602-032-1)
November 10*
Industry Evolution
November 17*
Disruptive Change
Womack, James. P., Daniel T. Jones and Daniel Roos, 1990. The Machine
that Changed the World, Harper: New York. selections.
Hattori-Seiko and the World Watch Industry in 1980 (HBS Case 9 -385300).
“The Disruptive Start-up: Clayton Christenson on how to compete with the
Best.” Inc. Feb 1, 2002.
November 24
December 1*
Project Work Day
Wrap-up
Giarrntana, Marco (2004). “The Birth of a New Industry: Entry by Start-up
and the Drivers of Firm Growth, The Case of Encryption Software,”
Research Policy 33: 787-806.
Hamel, Gary (2001). “Smart Mover, Dumb Mover,” Fortune, September 3:
144 (4): 191 – 193.
December 8
In Class Presentations
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Study Questions: These questions are provided simply to start our daily discussions and to
ensure that you are getting major points associated with the day’s lecture and readings.
1) September 15: Introduction and Definitions
a) Define science, technology, basic research and commercialization. Define inventions and
innovation. How are these terms different?
b) Is economic growth the same as economic development?
c) Why are you taking this class?
2) September 22*: Institutions and Opportunity
a) Are the conditions that Rosenberg notes for the industrial revolution still relevant for the
developing world?
b) Apply Rosenberg’s framework to Canada or another country. What are the country’s
strengths? What are potential barriers to economic development?
3) September 29*: Government Policy and Competitiveness
a) Summarize the reasons the author puts forward for the development of the telecom
industry in Finland? Are these reasons consistent with Porter’s Diamond?
b) Why does innovation cluster spatially?
c) What is 3G? And why is it changing the nature of competition in telecom?
d) Can we apply this framework to Nortel? What is Nortel’s story, anyway?
4) October 6*: Entrepreneurship
a) What is entrepreneurship? Why is it important?
b) What factors account for Wedgwood’s success?
c) Apply Bhide’s framework to Joshua Wedgwood’s experience.
d) What is the role of consumers in explaining innovation?
5) October 13*: Sourcing Technology from Universities
a) Why makes universities attractive partners for licensing technology?
b) Under what circumstances would a company engage in an R&D alliance with a
university?
c) Why do universities take equity in start-up companies?
6) October 20*: Patents and Intellectual Property
a) What is the economic justification for patents?
b) What are the other ways of protecting IP?
c) What are the ways in which patent protection might decrease innovation?
d) Do we need a Canadian patent office?
7) October 27*: Competitive Intelligence
a) Check out www.uspto.gov.
i) Look up patents for a company, organization or person. Now look up competitors for
each of these. Who is doing better and why?
ii) Look up patents for a technology. Who is the market leader – justify your answer.
b) Are patents a good measure of innovation? Why or why not?
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8) November 3*: Sourcing Technology or in-house development
a) What are the relative advantages of out-sourcing versus in-house development?
b) What role do users/adopters have in innovation?
c) When is it most appropriate to outsource? When is virtual virtuous?
9) November 10*: Industry Evolution
a) What are the stages of industry evolution?
b) What is the product life cycle? How does it relate to diffusion theory?
c) What are the current issues in the world watch industry?
10) November 17*: Disruptive Change
a) What is disruptive change? Is it a new idea?
b) What are long waves of economic development? Why do they occur?
c) How do you diagnose disruptive change?
d) What do you do if you are an incumbent?
11) December 1: Wrap-Up
Background Readings: Part of your experience here at Rotman should be acquiring a stock of
knowledge that will carry you far in your career. These are additional background readings that
may of interest to gain a deeper understanding. These are the reference materials I use to prepare
for the days lecture.
1) September 15: Introduction and Definitions
• Feldman, M., Link, A., and Siegel, D. 2002. The Economics of Science and Technology.
Boston, MA: Kluwer Academic Press
• Feldman, M. 2004. Economic Growth and Innovation. In Göran Hallin and Anders
Östhol (Eds.), On the Growth Policy Agenda. (pp.18-27). Sweden: Institute for
Tillväxtpolitiska Studier.
• Kuhn, T. S. 1996. The Structure of Scientific Revolutions. 3rd edition. Chicago, IL:
University of Chicago Press.
• Levin, R.C. 1988. Appropriability, R&D Spending and Technological Performance.
American Economic Review. 78: 424-28.
• McKelvey, M. 1996. Evolutionary Innovations. The Business of Biotechnology. New
York, NY: Oxford University Press.
2) September 22*: Institutions and Opportunity
• Bresnahan, T. and Trajtenberg, M. 1995. General Purpose Technologies: Engines of
Growth. Journal of Econometrics. 65: 83-108
• David, P. 1990. The Dynamo and the Computer: An Historical Perspective on the
Modern Productivity Paradox. American Economic Review. 80: 355-361.
• Freeman, C. and Soete, L. 1997. The Economics of Industrial Innovation. 3rd Edition.
Cambridge, MA: MIT Press.
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Mokyr, J. 1997. Are We Living in the Middle of an Industrial Revolution? Federal
Reserve Bank of Kansas City Economic Review. 82: 31-43.
Rosenberg, N. and Birdzell, L.E., Jr. 1986. How the West Grew Rich. New York, NY:
Basic Books.
Trajtenberg, M. 2001. R&D Policy in Israel: An Overview and Reassessment. In M. P.
Feldman and A. N. Link (Eds.), Innovation Policy in the Knowledge-Based Economy.
pp. 409-454. Boston, MA: Kluwer Academic Publishers
3) September 29*: Government Policy and Competitiveness
• Bush, V. 1945. Science: The Endless Frontier. pp. 1-40. Washington, DC: National
Foundation.
• Feldman, M. P. 1999. The New Economics of Innovation, Spillovers and Agglomeration:
A Review of Empirical Studies. Economics of Innovation and New Technology; 8: 5-25.
• Krugman, P. 1992. Geography and Trade. Chapter 2. Cambridge, MA: MIT Press.
• Ruttan. V.W. 2000. Technology, Growth, and Development: An Induced Innovation
Perspective. Oxford: Oxford University Press.
4) October 6*: Entrepreneurship
• Rothwell, R. 1977. The Characteristics of Successful Innovation and Technically
Progressive Firms. R&D Management. 7: 191-206.
• Scherer, F. 1992. Schumpeter and Plausible Capitalism. Journal of Economic Literature.
30: 1416-1433
• Schumpeter, J. 1934. The Theory of Economic Development. Cambridge, MA: Harvard
Press.
• Schumpeter, J. 1976. Capitalism, Socialism & Democracy. Cambridge, MA: Harvard
Press.
• Von Hippel, E. 1988. The Sources of Innovation. Oxford: Oxford University Press.
5) October 13*: Sourcing Technology from Universities
• Bozeman, B. 2000. Technology Transfer and Public Policy: A Review of Research and
Theory. Research Policy. 29: 627-655.
• Feldman, M.P. and Desrochers, P. 2004. Truth for Its Own Sake: Academic Culture and
Technology Transfer at Johns Hopkins University. Miverva. 42: 105-126.
• Gregory G., Heiman, A. and Zilberman, D. 2002. University Research and Offices of
Technology Transfer. California Management Review. 45: 88-116.
6) October 20*: Patents and Intellectual Property
• Besen, S.M. and Raskind, L.J. 1991. An Introduction to the Law and Economics of
Intellectual Property. Journal of Economic Perspectives, 5: 3-27
• Gallini, N.T. 2002. The Economics of Patents: Lessons from Recent U.S. Patent Reform.
Journal of Economic Perspectives. 16: 131-154
• Granstrand, O. 1999. The Economics and Management of Intellectual Property: Towards
Intellectual Capitalism. pp. 17-106. Northampton, MA: Edward Elgar.
• Jaffe, A.B. 2000. The US Patent System in Transition: Policy Innovation and the
Innovation Process. Research Policy. 29: 531-557
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Kingston, W. 2001. Innovation Needs Patents Reform. Research Policy. 30: 403-423.
Lerner, J. 2002. Innovation and Patent Protection Over 150 Years. Harvard Business
School. Working Paper. http://www.people.hbs.edu/jlerner/publicatios.html.
7) October 27*: Competitive Intelligence
• Dasgupta, P. and Maskin, E. 1987. The Simple Economics of Research Portfolios.
Economic Journal. 97: 581-595.
• Dasgupta, P. and Stiglitz, J. 1980. Industrial Structure and the Nature of Innovative
Activity. Economic Journal. 90: 266-293.
• Dasgupta, P. and Stiglitz, J. 1980. Uncertainty, Industry Structure and the Speed of R&D.
Bell Journal. 11: 1-28
• Lerner, J. 1997. The Empirical Exploration of a Technology Race: The Winchester Disk
Drive Industry, 1972-1988. Rand Journal of Economics. 28: 228-247.
8) November 3*: Sourcing Technology or in-house development
• Chesbrough, H.W. and Teece, D.J. 1996. Organizing for Innovation: When is Virtual
Virtuous? Harvard Business Review.
• Teece, D.J. 1987. Profiting from Technological Innovation: Implications for Integration,
Collaboration, Licensing and Public Policy. Ed. D. Teece. The Competitive Challenge.
pp. 185-219. Cambridge, MA: Ballinger Publishing.
9) November 10*: Industry Evolution
• Carlton, D.W. and Perloff, J.M. 1999. Modern Industrial Organization. Addison-Wesley.
• Chandler, A.D. Jr. 1993. The Railroads: Pioneers in Modern Corporate Management. The
Railroads and the Beginnings of Modern Management. Harvard Business School Case
Study #9-391-131.
• David, P.A. 1985. Clio and The Economics of QWERTY. American Economic Review.
75: 332-337.
• Gort, M. and Klepper, S. 1982. Time Paths in the Diffusion of Product Innovations.
Economic Journal. 92: 630-53.
• Klepper, S. and Graddy, E. 1990. The Evolution of New Industries and the Determinants
of Market Structure. The Rand Journal of Economics. 21: 27-44.
• Rogers, E. 1983. Diffusion of Innovations. 3rd Ed. New York, NY: Free Press.
• Scherer, F. and Ross, D. 1990. Industrial Market Structure and Economic Performance.
Boston, MA: Houghton Mifflin Company.
• Sloan, A.P. 1990. My Years with General Motors. New York, NY: Doubleday
• Tushman, M. and Rosenkopf, L. Organizational Determinants of Technological Change.
Research in Organizational Behavior. 14: 311-47.
10) November 17*: Disruptive Change
• Arthur, W.B. 1989. Competing Technologies, Increasing Returns, and Lock-In by
Historical Events. Economic Journal. 99: 116-131.
• Christensen, C.M. and Bower, J.L. 1996. Customer Power, Technology Investment, and
the Failure of Leading Firms. Strategic Management Journal. 17: 197-218.
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David, P.A. 1985. Clio and the Economics of QWERTY. AER Papers & Proceedings.
75: 332-337.
Dosi, G. 1983. Technological Paradigms and Technological Trajectories. In Freeman, C.
(Ed.) Long Waves in the World Economy. pp. 78-101. London: Butterworth.
Henderson, R. 1993. Underinvestment and Incompetence as Responses to Radical
Innovation: Evidence from the Photolithographic Alignment Equipment Industry. Rand
Journal of Economics. 24: 248-270.
Henderson, R.M. and Clark, K. 1990. Architectural Innovation: The Reconfiguration of
Existing Product Technologies and the Failure of Established Firms. Administrative
Science Quarterly. 35: 9-30
Kuhn, T. 1996. The Structure of Scientific Revolutions. Chicago, IL: University of
Chicago Press.
Walsh, V. 1993. Invention and Innovation in the Chemical Industry: Demand-pull or
Discovery-push? Research Policy. 22: 115-116.
11) November 24: Project Work Day
12) December 1*: Wrap-up
13) December 8: In Class Presentations
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