Industrial diversification and innovation : An international study of the aerospace industry

University dissertation from Cheltenham : Elgar

Abstract: This thesis examines the process of industrial diversification as a strategy to spur innovation within firms and foster structural change in industry. Diversification is the process by which firms depart from their core competencies to enter new markets and new technologies. Management theories addressing the strategy of diversification provide an explanation of those phenomena that are internal to the firm, but they ignore most of the external actors and institutions relevant to the diversifying process within the firm. In contrast, systems of innovation theories discuss innovation processes in relation to an institutional environment, but they do not address specific strategies for spurring innovations within firms. This research attempts to draw upon both management and systems of innovation theories, and focuses on understanding why and how firms diversify in their respective systems of innovation. In other words, the diversification process is described as taking place within an institutional context.To illuminate the importance of the national aspects of institutions in processes of diversification within the aerospace industry, a comparative case-study methodology is used. Three cases of diversification are analyzed in depth: Sweden (Saab ); France (Dassault); and South Korea (Daewoo). The two European cases discuss diversifications from military to civil aircraft, while the Korean case addresses a diversification from heavy industries to military aircraft.The analysis shows that, in each case, certain national institutions kept the firm 'lockedout' of the industry into which it wanted to diversify. The emergence of a market ortechnological opportunity eventually triggered the removal by the State of the institutionallock-out, allowing the firm to diversify. The implementation of the diversification was thencarried out within the world-wide sectoral innovation system, involving other firms, research organizations and sectoral institutions. The thesis concludes with an analysis ofwhat kinds of institutional structures and management strategies are needed in order tofacilitate industrial renewal through diversification.

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