The pace of innovation : Patterns of innovation in the cardiac pacemaker industry

University dissertation from Linköping : Linköpings universitet

Abstract: The PhD thesis "The Pace of Innovation" addresses the questions how patterns of innovation change over time in an industry, their consequences for competition and how institutional conditions in an industry shape determinants of patterns of innovation. Patterns of innovation mainly refer to how certain regularities in the diversity, types and locus of innovation change in an industry according to a technology and industry life cycle.The theoretical literature predicts that patterns of innovation evolve through three phases: a first phase characterized by a high rate of major product innovations stemming from different technological paradigms finally subsiding into a stable product architecture which meets the needs of the users; a second transitory phase characterized by a reduced rate of major product innovations and an increased rate of process innovations; and finally, a phase in which there are few product and process innovations and firms compete in terms of price.In the thesis this theoretical prediction is confronted with a case study of the cardiac pacemaker industry spanning over 35 years, from the late 1950s to the mid 1990s. The pattern of innovation in the cardiac pacing industry coincides with theory for the first phase, but contrasts with theory for the second and third phases. Instead of a declining rate of major product innovation, the rate of product innovation remained high during the second phase and actually slightly increased during the third phase.In the first phase, firms needed to work closely with lead users and to test out different technological design solutions. In the second phase, firms needed to both master economies of scale via vertical integration and to introduce innovations along a product line. The third phase additionally required that firms excel in managing systemic relations between innovations both along and between related product lines. This, in turn, made it necessary for firms to vertically integrate innovation processes along the value chain of a product line as well as to manage horizontal interdependencies between product lines. The basic reasons for this sustained high rate of major product innovation related to institutional conditions that: 1) stimulated research, related to the design and use of products and thus created a rich potential for innovation; 2) favorably influenced the financial terms of introducing and adopting innovations and thus constituted strong incentives for innovation; 3) supported user-producer interaction on the one hand and competition within groups of users and producers respectively and made producers subject to extensive product regulations, thus sensitizing users and producers to critical issues that triggered their innovation activities.The results of this study show that the prediction of the theory of patterns of innovation that the rate of major product innovation, following a dominant design, should decrease, must, in its universal claim, be considered refuted. This conclusion also extends to the related theory of technology cycles in so far as no single technology cycle on a product system level corresponding to the predicted patterns of innovation sequence could be identified. However, if the identified resulting pattern of innovation is considered an effect of several technology cycles at product subsystem level, a much better theoretical match is achieved. In order to better explain and possibly predict how patterns of innovation change over time as a result of institutionally shaped determinants, further comparative research is necessary.

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