CHAPTER 13 Capturing the Business Value of Innovation

Photograph of a puffer fish.

In the next two chapters, we examine how organizations, private and public, can better capture the benefits of innovation and minimize the risks of innovation. We begin with a discussion of the classic, but rather narrow, view of economists who identify some of the ways in which firms appropriate the benefits of innovation, in particular, through returns on product and process innovation. In the second section, we identify the relationships between different types of innovation and various forms of financial and market performance. Next, we broaden the scope to include the competitive advantages of exploiting knowledge, both tacit and more formal types, including intellectual property. In the following chapter, we review the more fundamental contributions innovation can make to economic and social change, focusing on the potential for economic development, improvement in social services, and greater sustainability.

13.1 Creating Value through Innovation

One of the central problems of managing innovation is how to create and capture value. For example, in Chapter 1 we discussed the recent transitions in the music industry and how changes in music is produced, distributed, consumed, and paid for (or not in many cases). Video content is facing a similar challenge to the dominant business model, and the producers, distributors, ...

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