01 October, 2007

How to Capture Value from Innovation

California Management Review, Fall 2007, with David Teece

Innovation presents a dilemma for managers. On the one hand, innovation is proffered as an elixir for growth, profitability, and competitive advantage. One need look no further than firms such as Apple, Google, Intel, or Genentech to see examples of how innovation can drive performance. On the other hand, there are no guarantees that innovators will be rewarded for their efforts. Business history is littered with examples of innovators who failed to parlay their innovations into economic advantage. The Hydrox Cookie Company invented a chocolate cookie with a vanilla cream filling; but Nabisco followed with the Oreo cookie, and the Hydrox Cookie Company disappeared. Netscape may have been the first commercially viable web browser, but it was Microsoft’s who garnered the larger market share. Search engine innovators lost market share first to Yahoo, then to Google.