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Entrepreneurship
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Role of Technological Innovations for Competitiveness and

Entrepreneurship
Devanath Tirupati
Journal of Entrepreneurship 2008 17: 103
DOI: 10.1177/097135570801700201
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Role of Technological Innovations

for Competitiveness and
Entrepreneurship
DEVANATH TIRUPATI
In recent years, technological innovations have emerged as an important source
of competitive strength, and firms in many industries have achieved success by
competing through innovation. Taking the business perspective of a small enterprise
with focused technological capabilities, we examine here the role of innovations
for competitiveness. We present a framework that is useful for classifying and
characterising different types of technological innovations and describe their impact
on firms capabilities. The narrow focus of small enterprises enables them to develop
into niche players with specialised capabilities; however, it often prevents them
from offering complete products or services. In this context, we identify and discuss
the needs of such enterprises for survival and growth and describe two alternative
models of support to improve the success rate.
Devanath Tirupati is Professor of Operations Management at the Indian
Institute of Management, Ahmedabad, India.

It is well recognised that technological capabilities and related innovations have the potential to significantly enhance competitiveness of firms.
In the new economies of the late 20th and 21st centuries characterised
by globalisation and growing competition, innovation has emerged as a
major source of competitive strength, and competing through innovation
has become a successful paradigm for firms in many industries. Traditionally, technological developments and innovations have been perceived
as internal activities confined to R&D divisions of firms. However, recent trends suggest that this perspective is changing and collaborative
developmentboth within the firm and beyond is becoming an important
driver of technological capabilities. The impetus for these developments
comes from two factors. First, products and production technologies are
becoming more complex, requiring diverse capabilities that are beyond
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a typical firm. Second, developments in computers, communication

and information technologies have made it easier to integrate efforts of
diverse parties separated by geography and time zones, thereby facilitating
collaboration. As a result, business opportunities for the single or a small
group of inventors with technological innovations in a focused area
have increased and thus provide scope for establishing commercially
viable enterprises. In this article, we examine the role of technology and
technological innovations for entrepreneurial success from the perspective
of such an innovator and offer suggestions for improving the success rate
for conversion of innovations to viable enterprises.
The remainder of the paper is organised as follows. In the following
section, we present a framework to view technology from a broad, business perspective. This framework is useful for classifying and characterising technology and technological innovations. The implications for
competitiveness of different kinds of innovations are discussed in the next
section. Finally, we discuss the factors of technology that contribute to
entrepreneurial success and failure, and describe two models of support
for the inventor/entrepreneur to improve success rate of transforming
innovations to viable enterprises.
Technology and Technological Innovations
Traditionally, technology is viewed as the mechanism that transforms
inputs to outputs and has been studied from different perspectives by
researchers in several disciplines that include economics, engineering,
organisational behaviour, operations management, management science
etc. For example, economists tend to view technology as the black box for
conversion of inputs to outputs and employ production function to characterise the transformation, with labour and capital forming the key input
resources. In contrast, the interest of engineers is in the process details
and the physical laws that govern the transformation process. Operations
management researchers tend to have a decision focus with a business
perspective and typically deal with firm-level issues and consider both
soft and hard aspects of technology management. Broader issues related to
the process of innovation and developments of technological capabilities
are studied by researchers in strategic management and organisational
behaviour.
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Innovations for Competitiveness and Entrepreneurship / 105

From the foregoing it should be clear that the subject of technology

and innovation management is multi-faceted with several perspectives. In
this article, we do not provide an overview of these diverse perspectives.
Instead, we present an operational view of technology for the firm-level
manager. The objective is to develop an understanding of the different
elements of technology and their implications for building firm-level
capabilities.
Chandra (1995) offers a useful framework for characterising technology. In this framework, technology is characterised by three elements
products, processes and practices, and it is the knowledge embodied in
these elements. Products comprise the knowledge of how things work,
their design and their interface with other products. Processes refer
to the knowledge of the laws of the transformation processes and the
relationship between different components of the process. Practices
deal with the management of the productprocess combine and include
related managerial systems and processes. It should be recognised that
in this conceptualisation, technology is viewed from a business perspective wherein both tacit and procedural knowledge are embedded in its
elements.
The above framework is conceptual in nature and somewhat abstract.
A few illustrations from manufacturing and service sectors may be useful
to clarify the concepts. For example, consider a firm in the auto industry.
The end productan automobileis well known and requires little
elaboration. Product element of technology includes the knowledge
and processes that are involved in the design and development of new
models and variants/upgrades of the existing products. Similarly, process
element refers to the manufacturing processeschoice of processes, layout
and organisation of the shop floor, equipment machinery, skill level of
the work force and so on, required to manufacture the product. Finally,
practices include managerial systems employed to manage the process.
Thus JIT (Just-in-Time), planning and control systems, CAD (Computer
Aided Design), CIM (Computer Integrated Manufacturing), TQM (Total
Quality Management), etc. all constitute the practices component of
the technology. A second example from the banking sector illustrates
application of the framework to the service sector. For this sector, products
could be different instruments of lending and borrowing, different
investment schemes, services provided etc. Processes could include
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various banking procedures and norms, bank personnel, forecasting

procedures, software employed to process various transactions etc. Finally,
practices include established service norms, staffing and allocation rules,
research in new product development etc.
To summarise, technology is conceptualised in this framework from
a business perspective and integrates products, processes and practices.
Technology management involves management of different elements in
a manner consistent with the overall business objectives of the firm. This
in turn implies that the following issues need to be addressed for each of
the components:
1. Defining sources of competitiveness.
2. Integrating technology with the overall strategic objectives of the
firm.
3. Technology flows, that is, transfers, imitation, development.
4. Commercialisation of technologies.
5. Innovation and improvement processes (e.g., spillovers, continuous
improvements, shop floor practices).
6. Capability building processes.
7. Evaluation of technological change.
For further details on the preceding issues, the reader is referred to Adler
and Cole (1993), Chandra (1995), Cohen and Levine (1989), Evenson and
Westphal (1994), Leonard-Barton (1992), Milgrom and Roberts (1988),
Womack et al. (1991) and references therein.
Similar to technology, we consider innovations also from a broad business perspective and include all innovations that contribute to enhancement
of technological capabilities of the firm. The technology framework
described earlier provides a natural scheme for classification of such
innovations. Thus, innovations leading to new and/or improved products
can be classified as product based innovations. Similarly, process-based
innovations lead to improved production processes providing benefits that
may include higher productivity, better quality, lower costs, flexibility etc.
Likewise, innovations in practices may impact product and/or process
elements of the technology.
Innovations can also be classified and characterised on other, perhaps
overlapping, dimensions as well. For example, the nature of innovation is
an important feature with potentially significant implications for the firm.
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Clearly, original innovations that represent new discoveries/developments

related to one or more technology elements are likely to substantially enhance capabilities of the firm. In addition, we consider all adaptations of
existing technologies with potential for improving firm-level capabilities
as innovations. Based on the type of adaptation involved, innovations may
be classified into the two following categories:
1. Adaptations for New Markets/Regions: This class includes modifications of existing technology to make it suitable for a new
customer/market segment and/or a different geographical region.
Clearly, adaptations of existing products for new markets will fall
into this category. This is a common expansion strategy employed
by many firms. However, innovations in this category are not
restricted to product technologies, and there are several examples
(illustrated later in this section) of process- and practice-based
innovations that are based on adaptations for a new/different
environment.
2. Adaptations for Other Sectors/Industries: This class includes
innovations related to adaptation of technologies successful in
one sector/industry to make them suitable for application in other
industries. For example, a number of technologies developed in
the context of defence and space research applications have been
successfully adapted for commercial purposes. While elements
related to process and practice technologies are natural candidates
for such adaptations, product technologies have also benefited
from such ideas, and there are a number of examples of product
innovations based on successes in other industries.
The nature of impact is the third dimension by which innovations may
be characterised. Innovations with major changes that result in order of
magnitude impact are referred to as breakthrough type. In contrast,
incremental innovations require only small changes and are likely to
result in modest improvements rather than a big bang. In the remainder of
this section, we describe these characteristics in more detail using several
illustrative examples.
Typically product innovations have more visibility than other technological innovations and hence are more easily recognized and do not
require much elaboration. In the past two/three decades, a number of
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breakthrough product innovations have come from new technology-driven

industries such as biotech, semiconductor, software/IT, pharmaceuticals
etc. In contrast, breakthrough product innovations are less frequent in
sectors such as automobiles, commercial aircraft, steel etc. For example,
a new platform introduction, which can be interpreted as a breakthrough
product innovation in the automobile sector, occurs with much less
frequency than in software or semiconductor industry. Although the
pace of breakthrough product innovations depends on the maturity of
the industry, incremental innovations leading to product variants can be
found in most sectors. Continuing with the example from the automobile
sector, annual model introductions by the auto companies essentially
represent incremental innovations of the existing models. Similarly,
model introductions in new and emerging markets are essentially
based on adaptations of existing models with modifications for the new
environment. Likewise, pharmaceutical companies routinely modify existing products to conform to regulatory requirements and make them
suitable for new/different markets. Closer home, Amtrex, a manufacturer
of air coolers located near Ahmedabad has adapted its domestic products
and introduced desert models for Middle East. Incremental innovations
to adapt products from one sector to another are also common in several
industries. One can find several examples in software industryin design,
process control, inventory management etc, where applications from one
sector have been successfully adapted for other sectors, thereby expanding
the market for existing products.
In contrast to product technology-based innovations, process innovations
may not always be visible, but play an important role in enhancing firmlevel capabilities. For example, much of the developments in electronics
and computers have been driven by innovations in process technologies.
Breakthrough innovations in semiconductor processes played a key role
in enabling rapid miniaturisation of devices and in the emergence of
several generations of very large-scale integrated circuits. Similarly in
bio-tech sector and to some extent in pharmaceuticals, process innovations
are critical in scaling up and advancing product development from
laboratory stage to pilot plant and eventually commercial scale production.
Incremental innovations in process technology are generally easily
understood. For example, productivity improvements through learning
effects can be mostly traced to incremental process innovations.
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Practice-based innovations are perhaps not as readily understood and

require some elaboration. From the earlier discussion, it should be clear
that practice component of technology interfaces both product and process,
and innovations in this area have potential to impact products and/or processes. For example, just-in-time (JIT) with origins in automobile sector in
Japan (more specifically, in Toyota Motor Company) was initially intended
for repetitive manufacturing environments, and its application in discrete
manufacturing led to breakthrough improvements in several instances.
Over the years, with a large number of incremental and some breakthrough innovations, the practice has evolved into lean philosophy with
applications beyond manufacturing into other functions of the organisation.
More recently, innovations in lean practices have enabled extensions to
other sectors including services such as logistics, hospitals and health
care and airlines. Total quality management (TQM) and Six sigma (6)
are other examples of practices with origins in manufacturing that have
much wider application today as a result of technological innovations.
Similarly, tools and techniques developed in the context of supply chain
management in grocery and retail sector can be seen as practice-based
innovations with breakthrough impact on the entire supply chain and have
transformed the structure of the industry. Over the years these technologies
have been successfully adapted for many other sectors.
We conclude this section with two interesting observations. First, technological innovations in one component (product, process or practice)
enhance firm-level capabilities and provide some benefits; realisation of
the full potential of such innovations requires integration of all three components. Second, often there is asymmetry in the perceptions of the various
entities involved regarding the impact of technological innovations. For
example, customising an ERP application package to a specific customer
or for a specific sector might be considered incremental adaptation by the
software provider with opportunity to expand its market and customer base.
However, introduction of ERP might actually be a breakthrough innovation
requiring major changes in the organisation for the customer.
Implications of Technological
Innovations for Competitiveness
Clearly, all innovations enhance capabilities of the firm and lead to
performance improvements. However, the nature and magnitude of
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improvements and their impact depend not only on the innovations but also
on their interaction with other technology components and their influence
on the overall competitive position of the firm. In this section, we use the
framework described in the previous section to discuss in detail some of
the implications of technological innovations for competitiveness.
Product innovations: As described earlier, product innovations can
take many forms with breakthrough innovations expanding existing
markets, opening up new markets and customer segments and providing
first mover advantage. For example, there are several instances in the
pharmaceutical industry of breakthrough drugs giving long-term advantage
for the first mover. In contrast, ability to develop improved products
quickly enhances capabilities to rapidly introduce new products and providing product variety to meet the needs of diverse customer segments.
Such capabilities are particularly useful for small producers in job shop
environments and playing the role of supplier of components to original
equipment manufacturers (OEMs) or their suppliers. Third, ability to adapt
existing products for applications in other industries/sectors is similar to
breakthrough innovation in that they open up new markets and give first
mover advantage.
Process innovations: Typically, process innovations lead to improvements with potential to make the production process (either manufacturing
or service process) more efficient and effective. The benefits of such
innovations can come in a variety of forms. Following is a sample of process innovation benefits:
1. Reduction in process time leading to higher productivity and
efficiency.
2. Reduction in set-up time and/or cost providing flexibility and enhancing the capability to produce more variety.
3. Improve the quality of output, thereby producing superior product.
4. Reduce wastage, increase process yield and thereby improve conformance quality and product reliability.
In turn, the above process improvements can lead to enhancements
in operations-related competitive dimensionscost, quality, flexibility
and delivery.
For firms producing end products or components, process innovations
can directly enhance competitiveness of the firm. On the other hand, small
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firms with focused capabilities and providing specialised services need to

develop linkages with others (for example, customers or other producers)
to realize the potential of process innovations. For example, a small firm
engaged primarily in design services developed a superior controller for
electroplating operations in printed circuit board (PCB) manufacture. The
controller had potential to significantly reduce cost and simultaneously
improve quality of gold-plated PCBs. However, the firm itself was not
engaged in any manufacturing activity, nor did it have any presence in
the PCB industry. To realise the potential of this process innovation it was
thus necessary to link with a PCB manufacturer willing to incorporate the
innovation in its production process.
Practice innovations: As described earlier, the impact of the practice
element of technology may not always be visible directly. However, by
interfacing between products and processes, practice innovations have the
potential to enhance firm-level capabilities either in products or processes
or both. For example, adoption of lean manufacturing practices in production enables the firm to improve its processes. Extending application
of lean philosophy to design and the entire organisation, will result in
enhanced product technologies as well. Similar is the case with design
for manufacturability (DFM) practices. Design for manufacturability
involves departure from traditional design practices and involves other
stakeholders, in particular, manufacturing and directly incorporates
manufacturing capabilities in the design of the product. Besides leading
to development of superior products and enhancing ability to frequently
introduce new products, this technology results in more manufacturable
product and increases production efficiencies as well.
Technological Innovations and Entrepreneurship
Enhancement of capabilities and consequent improvements in competitive
position stemming from technological innovations often provides business opportunities for innovators and has long been a major source of
entrepreneurship. Developments of Internet and information technologies
in recent years resulting in better linkages between producers and markets have further lowered barriers for budding entrepreneurs. It is no
coincidence that in the past quarter century we have witnessed a large number of success stories involving individual or small groups of inventors
(referred to as small enterprise). However, despite more visible successes,
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the fact remains that success rate of conversion from innovation to enterprise is rather small. In this section we examine factors that influence
entrepreneurial success from the perspective of small enterprise and
offer some prescriptions for improving the success rate. Our suggestions
are in part based on our experience in the incubator at the Centre for
Innovation, Incubation and Entrepreneurship (CIIE) at Indian Institute
of Management, Ahmedabad.
The innovators journey begins with an innovative product or process
with potential for commercial viability. Typically, the inventor has sound
knowledge of the technology involved in the innovation but is otherwise not well trained in other business aspectsmarketing, finance,
organising for operations, etc. Usually, the innovator is not conversant
with intellectual property rights and the processes involved in securing
them. Further, awareness of markets and funding opportunities are also a
concern. Often the new product/process is at a primitive stage of development and requires refinement before gaining market acceptance. In
these circumstances the inventor faces many hurdles resulting in either
market and/or capabilities failure. It is well recognised that support to
small enterprises from an appropriately designed innovation system
greatly mitigates such failures and improves the survival and success rate.
(Innovation system refers to the cluster of organisationsfirms, universities, public organisations etc., and their linkages through which innovation processes develop [Aubert, 2005; Steil et al., 2002]). In the remainder
of this section we describe briefly two mechanisms that have been effective
in a wide range of environments.
1. Technology incubators: Most technology incubators focus on
one or a small set of technologies. Typically they have a pool of
resources comprising in-house expertise and facilities related to the
technologies of interest and are designed to provide the requisite
support. For example, most technology incubators set up in India
with government support conform to this model. Interestingly, the
focus in these incubators is on technological aspects, and services
provided include assistance with refining the product/process,
testing, establishing standards, etc. On the other hand, they do not
seem to have much expertise in business processes and functions
and have limited capability in this respect. In contrast, the incubator
at CIIE, Indian Institute of Management, Ahmedabad does not
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have any specific technology focus. Instead, it has linkages with a

number of technology institutes, engineering colleges, universities,
laboratories and research organisations, venture capitalists and
other funding agencies, experts in the field of intellectual property
rights, etc., thereby creating a virtual network with a wide range of
expertise. Together with in-house knowledge of business and management, the incubator is in a position to provide comprehensive
support tailored to meet individual needs. (Further details on the
incubator at CIIE can be obtained from http://www.iimahd.ernet.
in/ciie.)
2. Clusters of producer networks: This is a collaborative model in which
a large number of producers with focused technological capabilities
and operating in close proximity are able to develop synergies and
compete together successfully in the larger marketplace. Based
on a study of success stories from Japan, China and India, Chandra
(2006) proposes a collaborative model of innovation system for such
small firms. The model involves a network of producers organised
in a cluster operating with regulatory support. In what follows we
describe briefly some key features of this model.
Focus of the firm: As mentioned earlier, small firms are forced to develop specialised capabilities in a narrow area. Successful clusters are
characterised by a large number of such firms that are complementary in
nature and together provide a comprehensive mix of products and processing services.
Interactive/cooperative producers: Complementary capabilities among
producers located close to each other provide the cluster members an
opportunity to interact and cooperate and thereby successfully compete
together. This interaction can occur in many formssharing of orders,
forming a sales network, have outsourcing arrangements, etc. Sharing of
orders can act as a hedge against market uncertainty and help firms with
overlapping capabilities. Similarly, outsourcing arrangements for specialised requirements allows firms to concentrate on their core strengths
and invest in related technological developments. This is particularly
useful when firms have complementary skills, say in product and process
technologies, as it provides synergies and allows them to compete
together.
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Market maker/coordinator: Access to markets is critical for success of

clusters. With no single producer having the requisite market knowledge
and/or technical capabilities, there is a need for a coordinator to bridge
the gap between the markets and the cluster of producers. Typically,
the coordinators role is twofold: (i) act as an agent between producers
and buyers and provide the necessary market information to the parties
involved and (ii) bring producers together by leveraging the strengths of
the group and thereby help the network become diverse and attractive to
customers.
Regulatory support: Most small innovators often suffer from market
and/or capability failures and some handholding through targeted government initiatives can help minimise such failures. Specific areas of
government help could include: incorporation and closure processes,
access to market and market information, market for credit, etc.
Capability building support: First and foremost, in the absence of scale
economies, small firms need to maintain their technical edge to remain
competitive. This requires continuous training and innovation efforts in
the focus areas of expertise. Second, small firms are typically managed
by a single (or a small team) owner/innovator and lack basic business
skills. Hence training in basic business skillsfinancial and marketing
management, lean practices, awareness of funding opportunities and processes for obtaining funds etc. will go a long way in mitigating some of
the problems. Third, to facilitate access to new markets and capabilities
beyond the firm and the cluster, small firms need to form linkages with
customers, technology and material suppliers, research and testing institutions, consultants, etc.
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