For thousands of years, technological innovation – the application of knowledge about tools, materials, processes, and techniques to problem solving (Afuah, 2003) – has had a profound effect on our lives as people, sometimes positively, and other times negatively, as any user of electronic mail can attest. Perhaps more importantly for the scholarly study of business, technological innovation has been a central component of the way in which new economic value is created by permitting people and companies to use existing resources more efficiently, as well as to come up with products and services that meet people's needs in ways that were not met before (Mokyr, 1990).
Because technological innovation creates economic value, it also affects the growth and decline in shareholder wealth. This effect on shareholder wealth impacts all shareholders, regardless of whether they are founding entrepreneurs, employees, or investors in companies, and regardless of whether they are shareholders in the innovating company or the company that competes with innovators.
The importance of technological innovation to economic value creation and shareholder wealth has made the management of it a central part of business activity. Although technological innovation can be accidental as well as planned, many firms seek to manage it in the hopes of making innovation more profitable to the firm. This effort to manage technological innovation is important because, as the ...