Christian Reiner, Senior Researcher at LBS, published a book chapter on firm innovation together with Katerina Vrtikapa. The paper is a chapter in the book “Umkämpfte Technologien. Arbeit im digitalen Wandel” edited by the „Beirat für gesellschafts-, wirtschafts- und umweltpolitische Alternativen“ (BEIGEWUM). The authors provide an overview on the actors within an innovation system focusing specifically on the role of firms. Private companies are the driving forces of innovation in capitalist systems. Their innovation activities are motivated by profit maximization and they try to protect their new goods and services against competitors. Market structure plays an important role when it comes to firm innovation. Interestingly, firms in a perfect competitive market environment have no incentives to engage in innovation activities because competitors would copy their new product immediately; innovators would have to incur the fixed costs of innovation without reaping the benefits. Consequently, firms are only willing to innovate if they can keep their competitors from copying their innovation. As a result, private sector innovation only occurs when markets are characterized by some degree of imperfect competition and innovative firms are able to gain a (temporary) monopoly position for their innovative product.
The public sector plays an important role in the innovation system as well. For example, the state grants a temporary monopoly to inventors by granting patents; no other company is allowed to sell the same technology unless it pays a negotiated license fee to the innovative firm. The study of how the important innovations in the last decades came about reveals the crucial role of government agencies and public research institutes. Almost every ground-breaking invention was promoted and developed by public agencies. Private firms adopted the invented technologies later and made a profit by selling products that make heavy use of the publicly invented technologies. Taken together, a successful environment for firm innovation consists of a fruitful interplay between private firms and the public sector. In addition, policy makers should ensure that innovations satisfy not just the pursuit of private profit but also help to tackle the grand challenges of societies (e.g. climate change).
The paper will be presented together with other contributions from the book “Umkämpfte Technologien” (“Contested technologies. Work in the Age of Digitization.”) on December 5, 2018 at FORBA, Aspernbrückengasse 4/5, 1020 Wien, 17-19 pm. (official invitation)