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Firms that commercialise radically new products dominate world markets and increase the competitiveness of their national economies. But what drives this radical innovation?

Policy makers still look for answers in government regulation, scientific talent and investment. However, as world economies converge and labour and capital become more mobile, country level drivers of innovation are no longer relevant, according to research conducted by an Innovation Fellow of the Advanced Institute of Management Research (AIM) and his co-authors.

“Today, corporate culture is the strongest driver of radical innovation,” says Jaideep Prabhu of Cambridge University.” And firms can foster an innovative corporate culture regardless of the country in which they are located.”

He cites the example of the United States – traditionally an innovative country and home to radically innovative firms like Apple but also to firms such as Kodak, which have failed to cannibalise successful products.

“Then there are firms like Samsung and Infosys,” he says. “They are in the lagging economies of Korea and India but have leapfrogged ahead of slumbering American giants.”

The study acknowledges that corporate culture is intangible and notoriously difficult to change. However, it identifies the specific attitudes and practices within innovative firms that make them special and drive radical innovation. These include:

• Embracing risk rather than averting it.
• Being concerned with future development rather than complacent about a successful past.
• Cannibalising successful products for future innovations.
• Empowering product champions.
• Fostering internal competition.
• Providing incentives for enterprise.

In line with AIM’s objective to impact on management practice, the research has developed a diagnostic tool to help managers assess their corporate culture and so benchmark their firm against others. In this way, they can foster attitudes and practices that support innovation.

The research provides a number of important insights into radical innovation and corporate culture that could have a significant impact on current management practices and government policies.

• National governments cannot increase innovation unless firms themselves embrace a culture of innovation from within.
• Firms will have greater success if they develop a culture of innovation than if they rely on governments to invest in or protect markets.
• R&D spending, scientific personnel and patents across countries do not automatically lead to the creation of new products or guarantee financial value.
• Radical innovations significantly increase the market-to-book value of firms.
• Patents are not as important in influencing financial value as radical innovations and firms can be highly innovative without patenting.

Professor Prabhu concludes that measuring radical innovation allows firms and nations to gauge where they really stand on the outputs that count. “This,” he says, “helps firms and governments channel resources towards drivers that matter. It ensures that the whole process of innovation is efficient and productive.”


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For further information contact:

Professor Jaideep Prabhu (Tel: 01223 765468; 07747 184790; Email)

Colin Hallmark, 3:nine Communications (Tel: 0207 736 1888; 07745 914170;
Email)

Notes for Editors

1. The research was carried out by Gerard J.Tellis, Director of the Center for Global Innovation, Neely Chair in American Enterprise, and Professor of Marketing, Marshall School of Business,University of Southern California Email, Jaideep C. Prabhu, Jawaharlal Nehru Professor of Indian Business and Enterprise and Director of the Centre for Indian Business, Judge Business School, of Cambridge University, and Rajesh K. Chandy, James D.Watkins Chair in Marketing, Carlson School of Management, University of Minnesota, and Professor of Marketing, London Business School Email. Jaideep Prabhu was supported by an AIM Innovation Fellowship during part of this research.

2. The study was based on survey and archival data from 759 public firms across 17 major economies of the world. The firms in the sample come from developed economies such as the US, UK, Germany and Japan, as well as developing economies such as China and India, thus allowing the comparison of the drivers of innovation across very different national contexts.

3. AIM is a UK leader in the field of management research. It brings together academics, business, public sector and policy thinkers to develop world class research that has an immediate and significant impact on management practice. It addresses four main themes: Sustained Innovation, Promising Practices, Services and Productivity and Performance. AIM’s research is designed to shed new light on challenges facing the UK and to inform practitioners and public policy debates.

AIM Research

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