ECONOMICS OF INNOVATION AND DIGITAL MANAGEMENT

The “fabri-digitale”
when industry, digital and services merge.

Today we are in a scenario characterized by a high level of uncertainty, which is provoking changes.

● The first effect of massive diffusion of information and communication technology: is a change in
supplies. It’s easier and quicker to find resources (e-commerce), find partners etc.
● new markets arise (China, Brazil, India) which creates new equilibria in production systems. They also
can represent threats (wages competition). Questions arising are what cultural setting I find when i
enter a new country, what suppliers should i pick
● we observe new perimeters and players at international level who led the evolution of specific
economic areas (European Central Bank). This points out where the decisional centers are.
● We have new migration flows which bring new values, culture, new needs and competences.
Institutions have to think of new services and solutions.
● We are facing a greater uncertainty in terms of market prices, inflection rates
● New non-linear development (new and unforeseen path), contrary to the past, nowadays the
innovation process is so complex that it opens multiple actors with different logic the way to join the
development of one specific product.
● Sectors are more blurred, especially when considering the manufacturing and services. It is
increasingly difficult to locate a business in a specific sector than another.
● Polarization of business performances (fortune500 list)

This uncertainty regarding new organizational, technical solutions

STRATEGIC DIRECTIONS FOR BUSINESSES:

What can a business do to fight against the uncertainty?

1. Obsession for 360° innovation:

● work organization
● communication
● supply chain
● sustainability → this used to be confined to the environmental aspect. Now it has expanded to
“people”. Now we talk about inclusion, inclusion index etc. This is the social sustainability concept,
found first in 1987 with the Burtahn report.
● certifications
2. Internationalization (especially made in Italy products)
3. tailor-made offerings: something that is perceived as unique, as a high value. This is enabled as well
by the high marketing profilation and complementary products promotion.
4. more emphasis on the soft aspect of the production process. Special focus on human capital (how to
retain it) and brand.

The business is involved in a system (supply chain) characterized by neighborhoods. Beyond looking at what a
company can do, we need to look at what multiple actors in the system can do.
The ecosystem comes into play.
PROCESSES:
- need to develop an ecosystem of innovation that favors development processes
- creation of hubs, centers which are specialized in distribution, logistics, or storage, etc.
 - new industrial policies that need to consider the inter-national level
- relationships with the territory (need for training, links with associations, etc) all local associations
that can represent and know what smaller companies need.

DIGITAL TECHNOLOGIES
When talking about digital technologies we think of: AI, business analytics, cloud computing, Internet of
Things, but also mobile applications, social media (which is a source of data from which we can extract info and
value).
(Google Collab: where you can collaborate with other people and store data)
(Data scraping, text mining)

These digital technologies are characterized by accessibility, ease-of-deployment, scalability and ubiquity.

→ Will machines substitute human beings in their activities?

● Many jobs will change rather than disappear.
● There will be innovation based on intelligent automation. That is, use AI as an enabler of innovation in
products, processes and business models. We are changing how the workers will perform the job.

A SPECTRUM OF INTELLIGENT AUTOMATION:

- support works: technologies as Tools rather than automation (e.g. taxi driver who uses GPS)
- automation: it allows tasks or processes to be carried out without human assistance or participation,
but humans may supervise the work or perform adjacent or complementary tasks.
 automated financial tradings in banks
 changing precision technology: in China 90% workers replaced with robots
 Amazon has hired more than 300000 people since 2018 when purchased KIVA System
 self-driving vehicles (limited spatial area within specific circumstances)

We have to learn what we can extract from the technology.

MINDS AND MACHINES

In 1996/97 Deep Blue, IBM computer which beat Kasparov.
Chess community worked on open-source projects to beat Deep Blue. (Stockfish project in 2008, an OSS; and
finally, AlphaZero in 2017 software developed by Alphabet’s DeepMind by self-learning).

4 scenarios of investment in minds/machines:

1. minimal investment in automation technology and people
2. heavy investment in automation technology but little investment in human capital
3. incremental changes in jobs and skills with little investment in intelligent technologies
4. massive investment in both intelligent technology and human capital innovation

Most innovative Companies: service now (cloud computing solution), workday (cloud for finance and human
resources), salesforce, tesla, Netflix, amazon, naver

These companies provide service for other companies. Most of them are not so recent.

Technologies come from different parts, and it can be broadly intended as innovation. Stakeholders:
companies, universities, individuals, other stakeholders.
STARTUPS:
These are an important part of the innovation system as they enter the game. Every single new business
changes the competition within the environment they enter. Startups which are particularly innovative might
change the rules of the game of an industry (example: uber, blablacar)

Not all startups are successful. About 90% tend to fail. this is known as the Revolving door phenomenon. This
represents how fast a company enters and leaves the market.

If something fails, then it does not provide any value: this is not true. The company which fails can leave to others
all the technological advancement that they wanted to introduce in the market.
Some startups are so interesting that they get acquired. Big Corps usually tend to dedicate budget to this sort of
acquisition. This is also what venture capitalists tend to do.
There are competitions aimed at getting novel ideas and supporting actors succeeding in the first part of the
research and development funnel (Start cap Toscana).

In the case of startups, in the robotic field (Source: Robotics Business Review) we can find lots of established
businesses such as ABB, iRobot, etc., but also startups such as WAYMO, or DJI. So, in 2016 in this field, about
1 out of 4 businesses were startups.
Today we find robotics in agri-food awarded for innovation, example is Insight TR. Also, robotics in defense,
manufacturing and research.

Start-up: an overview
it is defined as a startup a company with these three main characteristics:

1. less than 10 years

2. innovative technologies and/or business model
3. significant employee and/or sales growth

We have industries for which the development of products might take longer than 10 years (example pharma).
So, a company which is providing and developing a service in a high intensive sector such as pharma, or which
you need a longer time frame of development, these years may not be enough.

Europe:
In 2018 about 800.000 companies / 426 billions total revenue / 4.52 millions employees / 36 billion total funding
Italy:
Among start-ups, Italy is focusing on “innovative start-ups “with ad hoc programs.
These are granted financial benefits and support (mentoring for example). The Italian government identified 7
main criteria over which we can call a startup innovative:
1. recently formed (within the past 5 years )
2. headquarter in: Italy or EU with production site or branch in Italy
3. Annual turnover lower than 5 million €
4. not distributing the profits
5. social object linked to tech innovation
6. not constituted by merges, fusion, where existing businesses are spinned out
7. 50% of the turnover dedicated to R&D / ⅔ of members must have a master degree / must have a patent

Why do we/Italian government care about innovative startups?

What is the impact of this type of distinction among the whole Italian startup system?
- reducing unemployment
- incentivizing higher level of education
- boosting patenting activity within Italy to increase innovation within borders

One company’s example: Catalyst → marble patent to create bricks

Start-ups: Where are they from?
type of business foundation:
- independent venture foundation
- spin off from university/university product (example: Pikkart AI)
- spin-off from an existing company

- Spin-off from other research institutions

We tend to see a startup along multiple phases. As a business growing from small to big corporation, also
startups face challenges in different points in time.
We identify 5 development stages of a startup:
- seed stage: founders are in the process of idea generation and have not yet generated any
revenue
- start-up stage: founders are on the verge of offering a marketable product/service and of
generating first revenues and/or customer value
- growth stage: the start-ups have succeded in creating a marketable product/service and have
shown high sales/customer value growth
- later stage: start-ups have become established players and/or planning an exit (e.g. IPO)
- steady stage: stagnation or decreasing growth rates

These stages are accompanied by different types of benefits and constraints. We are facing a managerial
debate: to what extent is worth being small or large/established

when you are small you can gain benefits due to the size of the business:
- avoid coordination costs
- scarcer bureaucracy
- higher flexibility
- greater operational expertise and customer knowledge
- greater ability to utilize external
cost from smallness
- Limited resources and capabilities;
- Weaker external contacts;
- Underdevelopment of training and education and scant opportunities to recruit specialized workers;
- Small innovation portfolios that prevent firms to spread the risk.

Challenges of startups:
sales and customer acquisition, but also:
process-related
 product development
 processes/internal organization
financing-related
 Growth and internationalization
 Fundings
 Profitability
Human resource-related
 Acquisition of staff
 Team development

With respect to finance, we talk about the Valley of

Death curve → it is a space where a company is keen
before proving they are good enough. It is made of 4 phases:
➔ discovery
➔ pre-NPD
➔ development
➔ commercialization
These resources need to be either financed or can be
found in the market through collaborations.
Sources of financing:
1. Savings of the founders
2. Family and friends
3. Governmental subsidies/funding
4. Business angels
5. Venture Capital
6. Incubators/accelerators (
7. Bank loans
«To attract funding the start-ups business needs to be proven quickly»

shape-up: market has changed, outdated technology, value proposition challenged by competitors, change in
customer demand. This type has reached growth objectives but have to reinvent the business model
start-up: fail fast, trial and error, co-creation, crowdfunding  find the model
stand-up: protect the business model, safeguard related investmentssecure the model
scale-up: obtaining as many customers as possible, replication of existing business model  scale the model

Business models are not patents. These are not protected therefore it is possible to copy/replicate them.
Examples of similar business models: easyjet and ryanair. Everything revolves around the value offering.

Companies that are able to scale up are very interesting (blabla car):
In this case the characteristics are:
- a functioning business models
- ambition to growth
- penetration effect
- network externalities

Scalability is looked at by investors (venture capitalists).

Start-ups mainly cooperate for:

1. customer/market access
2. reputation/image transfer
3. gaining tech expertise
4. fundraising
5. exit possibilities
6. data (open data)

Collaborations Type:
1. startup with established company: low-commitment and high-commitment collaboration.
accelerator and incubator are different actors.
→ acceleration: boosting companies to allow them to grow. (Mentoring, advice on which market to enter, etc. in
return for equity). Business model sis to diversify the risk and invest in companies from which at least one will
grow a lot
→ incubation:
→ acquisition:
→ acqui-hiring: acquiring the company and its employees (blablacar)

ESTABLISHED COMPANIES:
Being established has to do with the below:
● time and governance
● size
- large businesses
- SMEs
● countries
Size is crucial when analyzing a company. Challenges and benefits change.

Large established businesses (250 employees):

COST
→ loss of managerial control
→ lower incentives for individual scientists (R&D)
→ bureaucracy and lower flexibility: more procedures and rules
→ communication and coordination: it is harder to achieve with a big group of people
→ strategic commitment: how you can push the organization to follow the strategies in place

BENEFITS
→ higher capability of obtaining financing for R&D projects
→ spreads costs of R&D over large volumes
→ greater economies of scale
→ learning effects: costs and cumulative output graph. The first unit of output has a very high cost and uses a
longer time. The cost of producing the output decreases as soon as you start producing more units. The learning
effect has that on the contrary the performance of the output tends to grow with time while the cumulative output
decreases.
→ taking large scale and risky projects

Organizational structure can help in mitigating costs. (Matrix, functional or divisional structure).

framework called IAO: input activities output

input related to for instance how much each company invests in innovation, or whether a company has acquired
patents from a third party, new material/resources could be an input.
activities these are based on the new product development process for instance, or also collaborations with
external groups
output that can be measured for example with the respect of intensity of the innovation you have developed. It
could be completely new or incremental to what is already existing.

what is innovation?
Innovation is generally understood as the commercial introduction of a new or significantly improved product or
service.
Innovation is not necessarily an invention and the other way round. Innovation imposes a commercial
introduction. It is a product/service/new process/ new material/ new business model that goes beyond the entity
that has developed, and enters into the market.

Innovation can also be for non-commercial applications such as for better public services or for addressing social
needs (social innovation).

Henry Ford “if I’d asked my customers what they wanted, they would have told me “ a faster horse “.
Usually, what consumers want is related to what consumers already use and have.

Innovation example: ai → enabling technology, virtual reality, electric cars, cryptocurrencies

technology: techne: the art of doing something * logos

We define innovation based on 4 main dimensions:

1. nature (service/product or processes)
2. intensity (incremental: small changes to what is existing; or radical: innovation built up on some basis.
example: mobile phones evolution) variation on the level of intensity based on the novelty of the
innovation at a market or firm level.
3. destination (modular: changes on components; or architectural example: bike )

Clayton Christensen (photocopy)

Professor at Harvard Business Review. started his work on technologies in a time (early 90s) where many
companies were entering the market with technologies already in place, but with different characteristics,
disrupting incumbent companies' leading position.

Technology s-curve
VINTED CASE leggere slides

A broad overview of the period 1750-1914

Interpretations:
1) Growth before 1800 was not existent→ convergence club since 1830
2) Expansion of goods and factor markets; rising interdependence of households and firms
3) Industrial organization →I importance of factories; concentration of workers and top-down coordination (weber,
1923)
But, in all the FUNDAMENTAL change in technology that characterize the Industrial Revolution

Results:
- Trasportation networks and communications
- Growth in life expectancy
- Access to information
- Urbanization
- Changes in quality and variety of goods and services

How does technology advance?

Endogenous growth theory: innovation is ‘produced’ within the system, subject to economic incentives, and it is
the OUTPUT resulting from inputs (e.g. physical capital, human capital, R&D, economies of scale); economic
agents are motivated by SELFISH considerations of advancement
- Technology is non-rivalrous (→social marginal cost = 0) →But... none has incentives to invest in risky R&D
→ how best to establish optimal incentives in innovative activity?
→Patents and IPRs
→But knowledge is often produced under conditions of «open source»

• Internalist theory
Evolutionary process
Past influences the future

• Externalist theory
Tech change is determined by economic needs

• Social constructionist theory

- Tech is the result of political processes and cultural transformations
- Lobbies/class/groups of interests
The degree of inefficiency of the innovative process can be reduced («try every bottle on the shelves»→reduce
the number of shelves)
Modern economic growth was allowed by the ‘division of knowkedge’ (specialization)
Total social knowledge equals the union of all individual pieces of knowledge
→ knowledge for technological advances was increasing
→ decline in access costs (thanks to invention of the printing press and the Internet, but also institutional and
technological advancements such as codification)

Technology in a ‘Malthusian economy’

«Pre-1800 society was able to develop many extremely useful techniques without, usually, understanding why
and how they worked» (p. 16)
From a world where useful knowledge was empirical, unsystematic to be organized and agent of economic
change
There was progress also before the First Industrial revolution (technology was not stagnant), but most of the
gains in output and income could be attributed by the growth of commerce and markets
Most inventions were introduced by artisans→craft guilds
...but could artisans alone be capable of generating something like the Industrial
Revolution?
- There was an «economy of imitation» (i.e. artisans reproduced existing knowledge)

The first Industrial Revolution

Malthusian societies were replaced by rapid growth societies
Industrial Enlightenment
Francis Bacon (1561-1626): focus on inductive method and the central role of science
→ ‘invisible college ’→Royal Society: «build bridges between formal science and the actual practical applications
of the ‘useful arts’»
→ From the Royal Society (that lately lost interest in ‘practical knowledge’ there were other Socities where
Bacon’s spirit lived on
→ In XVIIIth century (even if there had been Galileo, Newton, Descartes) much of the natural philosophy
consisted on the three Cs: counting, cataloguing, and classifying

Difference between inductive and deductive methods:

- Inductive : Seeing what's going on an try to generalize from what you see
- Deductive : we have a theoretical frame and then we deduce that something is happening

• Propositional knowledge got better at informing technology, but there was also feedback from improved
technology into more knowledge
• The new technology created factories that became repositories of useful knowledge (techniques were executed
with a growing process of specialization)
• Second half of XVIIIth century: Industrial Revolution
 Not a matter if cotton and steam only, but the push of the progress on a wide front
 E.g. agriculture, but for example many problems were beyond the scientific capabilities of that time

The transition to modern growth, 1830- 1880

• 1815: Restoration→conservative regimes across Europe
• Growth in transport technology (railroads – led by British engineers)
 Development of high-pressure engine
 Strong connection between the railways and the mining sector
- Rationalization of manufacturing; power-driven machineries; special-purpose tools (e.g. presses, drills, pumps
cranes)→mechanical production→mass production
- 1830s: electrical telegraph development (it was an international effort)
However, before the telegraph could become truly functional, the physics of transmission of
electric impulses had to be understood (galvanometer «Mechanical science» served well Britain in the first half of
XIXth century

The Second Industrial revolution

• By 1860s, the Western world had experienced revolution in textiles, materials, transportation, and energy
• 1859-1873: one of the most fruitful and dense in innovations in history
 Impact of cheap steelBessmer’s converter (1856) and Siemens-Martin process (1865)
 Steel allowed economies of scale, revolutionalizing trade, urban locational patterns, warfare
 Artifical dyes, soda-making (Solvay) and explosives (dynamite – Nobel) • Patents (especially in
Germany)→chemistry
 Haber-Bosch process (1912)
 Science and formal training prepared the minds that Fortune favored

In the 19th century what had characterized the second industrial revolution has been the discovery and diffusion
of electricity.
- We assisted to lot of advancement thanks to the community of scholars
- we had epistemic base of the techniques
- knowledge available
- self-excitation could generate large scale electricity

Industry 4.0
first industrial revolution (XVIII) → use of machine powered by mechanical energy (introduction of power for the
operation of the production plans)
second industrial revolution (XX) → mass production and assembly lines (introduction of electricity , chemicals and
oil)
third industrial revolution (1970) → industrial robots and computers (use of electronics and IT to further automate
production)
fourth industrial revolution (today) → connection between physical and digital systems, complex analysis through big
data and real time adaptations (use of intelligent machine, interconnected and connected to the internet)

movie Enigma (the imitation game)

A brief introduction to the role of services

What is a service?

Services are “the application of specialized competences (knowledge and skills) through deeds, processes, and
performances for the benefit of another entity or the entity itself” (Vargo and Lusch, 2004:2)

Services are different from products over 4 main characteristics.

Services are :
intangible
inseparable
heterogeneous (most of services tend to be different from each other)
perishable
These ideas are changing. Heterogeneity of services is being impacted

(Servqual scale → it is a framework applied often to measure consumer perception of service quality)

From an historical perspective service have attracted attention in the last century.

We had a shift from an agriculture focused economy, and then a higher relevance of industry, and finally with the
passing of time services gained more weight.
with new types of skills and resources we moved to the tertiary sector and more oriented service economy.
In particular starting from the 1990 we noticed that services were very specialized activities (a lot of knowledge-
high skilled jobs).
Now services are focusing towards the sharing economy.

The impact of services over the GDP:

particularly relevant in some specific countries. The US for instance is service intensive.
The service economy on the World Bank website.
Why did we move so fast towards a service economy?
more advanced countries tend to have a higher level of service. the factors that are affecting services are many:
- of political nature (policies that could have favored the service activity. one example being the
healthcare and education)
- social changes pushing countries to services (aging population might require new services ) or new lifestyles
( wellness → gyms, entertainment, etc.) we are looking to an increasing level of services related also to
manufacturing
- business trend
- technological progress
- internationalization and globalization: what is happening in one country is replicated in others

How to classify services? There are many ways.

Some are provided by private organizations, others by public ones, some are for businesses and some are for
customers.
target market: B2B B2C
nature of service: transformation of goods/ information vs personal service
service provider: public or private

Innovation and Services:

The literature is broad Sirillli and Evangelista identify services by :
- co-terminality → it is a sort of inseparability between production and consumption (the perception over a service is
personal )
- high information-intangible content → example dentist
- human resources are important → it is the interface to provide the service
- organizational factors for firm’s performance → know-how and capabilities (threshold: servitization paradox)

Central role is played by the customer, called “user” with respect to the service.

Lot of service innovations are based on «experiences» Knowledge exchanges is more difficult
End-users are very important for innovation projects
- fast development - cost reduction
Users may not be willing to cooperate:
- difficulties in providing information  importance of toolkits - expected benefits

Ikigai  leggi slides

Service innovation
Henry Chesbrough → Father of open innovation: phenomenon started in 2003 with the commodity trap
We are interested in creating value. if something becomes a commodity, this means that this commodity has no
value. commodities and commoditized companies are not able to create value. Many companies are facing this
commodity trap.
Commodity trap due to three factors :
- production and ideas diffused
- manufacturing activity move towards low-cost countries
 - shorter product life cycle
consumers face difficulties in understanding where value is. These factors together create the trap.

open innovation is a concept that has to do with the management of knowledge that is brought within the
company and therefore it is given to third parties (licensing for instance) and mechanism of external knowledge
as we might need ideas from outside.

The Open Service Innovation is a solution to the commodity trap. How?

To escape the trap we should start changing our mindset in several ways:
1. or company is not necessarily a company that produces its products. therefore, the business is a
business open to service
2. we need to start involving clients to co-create
3. we need to consider OI as a way to exploiting unused knowledge
4. modify our business model

When we think about the dichotomy of product/service we have to think about resources under a different
perspective. For instance, foods: farmers in terms of producers, groceries are the distributions, but we also have
different services like restaurants and fast food giving the same service: provision of food.
We could also have a company related to food (example El Bulli) that has reconverted itself on a creativity
platform.

The case of Chez Panisse: creation of an ecosystem of partners

Toward a service-dominant logic (SDL)

(Concept that appears in marketing related studies):
- focused on service and goods as vehicle for service provision
- primacy “operant” (initiator)
- value iss co-created with customers and other stakeholders
- value-in-use
- value creation networks
- symmetric information floss
- open source communication

The market is not only the consumer per se, but part of the value is in the consumer.

The service paradox is that the quality of the product is reduced to providing services.

In order to transcend the tangible-intagible and producer-consumer divides, Lusch and Nambisan (2014) propose
a new framework that emphasises 4 aspects:
1. Innovation as a collaborative process occurring in an actor-to-actor network
2. Services as the application of specialized competences for the benefit of another actor or the self as the
basis for all the exchange
3. The generativity unleashed by increasing resource liquefaction and resource density
→ Resource liquefaction: the decoupling of information from its related
physical form or device
→ Resource density: whether resources can be quickly mobilized for a time/space/actor that will offer the desired
service
4. Resource integration as the fundamental way to innovate

The framework comprises three dimensions:

- service ecosystem → it is a community of interacting entities (organizations and individuals) that coevolve their
capabilities and roles and depend on one another for their overall effectiveness
- service platforms  defined as a modular structure that comprises tangible and intangible components
(resources) and facilitates the interaction of actors and resources (or resource bundles) leverage
resource liquefaction and enhance resource density
- value co-creation  all social and economic actors integrate various types of resources to create value
Information technology is both operand and operant.

«We define innovations that are used in the same sectors as those in which they are produced as PROCESS
innovations, and those that are used in different sectors as PRODUCT innovation» (p. 345)
Each innovation is attributed 3 numbers in Standard Industrial Classification:
1) Sector of production of the innovation
2) Sector of use of innovation
3) Sector of the innovating firm’s principal activity

Compare sectors in terms of:

1) Sectoral SOURCES of technology USED in a sector
2) Institutional SOURCES and NATURE of the technology PRODUCED in a sector
3) CHARACTERISTICS of innovating firms

Industry 4.0  leggere slides

Industry 4.0 and clusters

Cluster: are geographic concentrations of interconnected companies and institutions in a particular field. Clusters
encompass an array of linked industries and other entities important to competition

Districts: have been defined by Becattini as “a socio-territorial entity which is characterized by the active
presence of both a community of people and a population of firms in a naturally and historically bounded area.”
And for certain types of production, there were two efficient manufacturing systems: (i) the established method,
based on large, vertically integrated units and (ii) production based on the concentration of many small factories
specializing in different phases of production process and located in the same geographic area (Becattini, 2002)»

- growing industries were agglomerations of small firms strongly connected to international markets
- importance of «physical» continguity of firms
- Local networks as vehicles of knowledge transfer and diffusion
Examples: Sassuolo (ceramic tiles) in Emilia Romagna, Prato (textile) in Tuscany

• A (numerous) population of firms (mostly SMEs) and institutions

• A specialization on as specific business area
• A division of labour among firms and consequently inter-organizational relationships, being mostly vertical
• A circumscribed territory

How to digitalize SMEs in Industrial Districts?

Premises
SMEs have difficulties related to:
- Poor capabilities (IT, budget, tech)
- Lock-in and cognitive inertiatrust, social capital, repetitive interactions with local networks
- Exchange tacit knowledge for incremental innovation

Role of Research and Transfer Institutes (RTIs)

RTIs = non-university research institutes (e.g. Fraunhofer, Germany) or collective research centers that are
spatially bounded→RTIs as public and private organizations formed by a coalition of industry, government and
science representatives that are geographically, institutionally and socially embdedded
- RTIs act as COLLECTIVE ACTORS
- RTIs can initiate collective actions to signal change and also legitimate new digital
technologies, showing the way to local SMEs
- Targeting leading firms that do interact with RTIs and, subsequently, promoting interaction
between leading firms and their networks of SMEs to ‘contaminate’ local SMEs

Vinalopo footwear district

- Roots in traditional footwear artisans (espadrilles) in late 19° century
- Low-tech and traditional district in Alicante, Spain
- digital design and 3D printer technologies
- 30000+ manufacturing jobs, 2700 firms

Vedere slides se va aggiunto qualcosa

I4.0 adoption in IDs

To understand the impact of location of firms on their propensity to adopt I4.0 technologies and specifically to
explore how district firms invest in such technologies within the theoretical debate on the evolutionary dynamics
of IDs
Apulia region: agri-food, clothing-footwear and mechanics-mechatronics SMEs
Apulia region presents a ‘moderate’ innovation region
→ Need of creating a digital entrepreneurial culture, promoting sessions of collaborations, networking

4-levels approach towrards the digital transformation:

 Digital awareness
 Digital enquirement (tech solutoions at the basis of smart district 4.0)
 Digital collaboration (companies are accompanied into an activity of exploration of the potential benefits
of digitalization in their own business processes and strategies)
 Digital transformation (tech made available are mainly digital solutions for production, distribution and
with a more relevant impact on the company’s in terms of strategic and organizational issue for the
business strategy and organizational settings

I4.0 adoption by IDs’ firms vs. non- IDs’firms: Del Brenta

Riviera del Brenta’s shoe district (30 km north-west from venice)
Del Brenta is family-owned, small firm, founded in 1968 by Giorgio Polato, specialized in the production of heels
Today: 10 mln and 40 employees
Evolution:
- 1980s-1990s: small clients localized in the district; production based on handwork of trained workers with the
help of traditional mechanical technologies
- 2000: Luciano Polato took the lead
- New scenario: increasing globalization of the value chain, new competitors (especially from low cost countires),
introduction of euro
Del Brenta became a one-stop-shop for luxury brands, from design to product
- Focus on product upgrading; more services; increased flexibility
- Computer Numerical Control (CNC) milling machines
- Different allocation of tasks between employees and machines: craftsmen able to focus on the design and
development of heels;
- selling the service of design and development of heels independently from production
→ The designer/stylist needs a lot of technical advice for designing a heel
→ 3D printers → 3D scanners
transformed a physical prototype into a digital model that could be processed by CNC machines in production

- iterative process of back and forth between analogic-physical prototype and digital ones
- new service to the design and development: the possibility to interact at distance with the designer/stylist of the
brand that ordered the heels (they interact on the same digital objects and make modifications in real-time)

industry 4.0 knowledge dissemination in Industrial Districts

How is Industry 4.0-related knowledge spread in IDs active in traditional industries?
Application of the ARA (Activities- Resources- Actors) model
Being in the same district does not imply to have access to the same knowledge...

Role of «gatekeepers» in the local dissemination of knoweldge

→The gatekeepers have an «ability to access external knowledge and construct a conversion process which
deciphers external knowledge and turns it into something locally understandable and useful (Hervas-Oliver and
Albors-Garrigos, 2014, p. 431)”
→They absorb and match internal and external sources of knowledge, and then disseminate the resulting
knowledge within the ID
→Institutions, research centers, universities, business associations and knowledge providers that operate as
local/global cognitive interfaces

Empirical setting: furniture/woodworking machineries ID located in Pesaro (Marche region)

Emerged soon after the Second World War
1950s-1960s: period of growth
In later 1960s the woodworking machinery started
In 2000s: 35% of the local economy was implemented around the furniture
Impacted by 2007-2008 crisis
→ Berloni Furniture and FEBAL (crisis)
→ IMAB and Scavolin
SMEs have difficulties implementing industry 4.0. Because:
they have poor capabilities
lock-in and cognitive inertia
exchange tacit knowledge for incremental innovation

in the last 7 years, the organization of workshops and training and R&D projects , led to
they identified 3 phases of cluster evolution:
1. pioneering phase: I4.0 is introduced by few local pioneers, that have become aware of I4.0 relevance,
but still not have a clear plan of action. Leading firms that because of the size were able to invests in
risky projects (BIESSE and Sophia project)
2. dissemination effort: approval of National plan on Industry 4.0 (2017-2020). we see an effort from not
only the firms but also local institutions ( ex university) that started adopting training courses. The
emphasis is on the processes (how they change once you introduce new technologies). Introduction of
a FabLab (Siena’s is Santa Chiara Lab
3. pursuance of institutional upgrading. This phase boosts the making of all companies as digital.
Establishment of DIHs and competence centers and cooperation between firms and universities. (each
region runs a budget for research and innovation activities for which the university and private
companies can apply).

Proximity and innovation: a critical assessment

Cognitive proximity
• Knowledge base; cumulative, localized and tacit nature of knowledge
• Require lot of absorptive capacity
• Pros: facilitates effective communication
• Cons: detrimental for learning and innovation;
1) Knowledge building often requires dissimilar, complementary bodies of knowledge
2) Lock-in and «competency trap»
3) Involuntary spillovers (knowledge cannot be totally appropriated)

Organizational proximity
• The extent to which relations are shared in an organizational arrangement, either within or between
organizations
Hierarchical organization→control and low opportunism
• Pros: beneficial for learning and innovation (importance of strong ties
that facilitates transfer of complex knowledge)
• Cons: lock-in in specific exchange relations (asymmetries); lack feedback mechanisms; low organizational
flexibility

Social proximity
• Economic relations are embedded in a social context
• Social ties affect economic outcomes
• Prons: Trust → facilitate the exchange of complex knowledge
• Cons: emotional bonds;
• Inverted U-shaped relationship between embeddedness and innovative performance

Institutional proximity
• interactions between players are influenced, shaped and constrained by the institutional environment
• Embedded relations in the institutional framework (macro-level)
• Formal institutions (laws and rules) and informal institutions (cultural norms and habits)
• Too much: lock-in and inertia
• Too little: lack of social cohesion and common values

Geographical proximity
• Spatial lock in

Absortive capacity
The ability of a firm to recognize the value of new external information, assimilate it and exploit it for commercial
ends.
Absorptive capacity is a byproduct of
 R&D investment
 Manufacturing operations
 Technical training

AC at individual level
Cognitive and behavioral research on memory development suggest that accumulated prior knowledge increases
the ability to put new knowledge into memory and the ability to recall it

 Prior knowledge facilitates the learning of new related knowledge (learning capability)  Capacity to
assimilate existing knowledge
 Problem-solving methods and heuristics typically constitute the prior knowledge that permits individuals to
acquire related problem-solving capabilities Capacity to create new knowledge

Intensity of efforts in developing related knowledge

• Increased usage of necessary associations improves retrieval of relevant knowledge
• Practice on early problems improves performance on higher complexity tasks later on

Knowledge is cumulative: the ability to assimilate information is a function of the preexisting knowledge structure
Diversity of knowledge
• Increases likelihood of relatedness to novel problems
• Enables novel associations and linkages

AC at organizational level
• Acquisition, assimilation... and also exploitation!
ACAP develops cumulatively
Organizational ACAP is NOT the sum of single employee’s ACAP
→Importance of structure of communication
→gatekeepers

Sources of ACAP:
1) Structure of communication between the external environment and the organization  How does an
organization communicate?
- specialized actors and/or less structured patterns -importance of background knowledge of the employees
2) Structure of communication between subunits of the organization
3) Character and distribution of expertise within the organization

Focus on the relationship between knowledge sharing and knowledge diversity

Diversity might be intended in “substantive” knowledge (what do you know) and also in “where” to find knowledge
(know who does what)

Some amount of redundancy is needed within the organization in order to build cross-functional absortive
capacity
Which are the internal mechanisms that influence the organization absorptive capacity?

LESSON 27/04/23

fascicolo elettronico

connected care

probiotic

prevenzione e stili di vita - accesso - curata - follow up

example : tupassi

Loccioni : apotecachemo

LESSON 10/3/23

Open Innovation : concept useful for startups

It's a cross sectional topic.
It's a 20 year old concept.
in this course :
- startup
- disruptive innovation
- classification of innovation
- typologies
- industrial revolutions
- different sectors ( vinted, healthcare, etc)

We are missing to understand how an innovation funnel works.

Among the first lessons we saw INPUT ACTIVITIES and OUTPUT. We have seen inputs and outputs but not
activities : the how.

Up to a couple of decades ago the attention about innovation was reserved to big companies (Du pont, merk,
pfizer, general electric, general motors etc.). If we think about how innovation has evolved, lots of attention goes
to patents. in the past most of the attention of economic agents was focusing on bigger companies trying to
invent something new ( creative flow ) and the big companies tended to hire engineers and scientists to develop
inventions, We can conceive the innovative activity as an activity somehow was close between the boundaries of
few bigger companies that tried to hired the most talented people worldwide to patent something new.
We describe this phase as a close model of innovation with a focus on invention - products - technology driven ;
meaning that we started first to have new inventions patentable, and through the new inventions, these were
pushed within the market.
All the innovative activities were related to internal development (internal R&D) and it was an engineering job.
(read the readings )
What has changed in the past years?
We have assisted a shake within the whole economic environment :
- we have started having venture capitalists (companies that are nurturing with investment potential
businesses)
- we also have witnessed higher infrastructure and connectivity ( ease of moving )
- war for talent → hiring persons at fast rate, higher availability of people
- the cost of the R&D has increased steadily
- shorter life cycle of products
- new tool : search of new sources of innovation : internet ( create ease but also complexity )

So starting from 1980 we had the Baydoll act, that has pushed also universities to behave more entrepreneurial
( third mission of university ) . → three aspects of university : teaching, research, public engagement ( dealing with citizen,
patent or transfer university knowledge also to companies ) (check project of EU upstairs)

the fact that the Uni has started to create patents, spinoff and circulate more, moving from an Ivory tower ( closed
into its own walls), nowadays we depict our economic scenario more as a city where we have bigger players but
also smaller actors ( startups), shifting from a closed model of innovation to open innovation.

We can see today that in reality innovation comes especially from smaller companies. it is not more
technologically driven but also value driven, the innovation process is a job that does not pertains only to
engineers but can belong to anyone, in particular we need to start considering also the importance of competing
not only through technology but also through business models.

In 2003 Henry Chessbrough introduce the concept of Open innovation :

open innovation is the use of purposive inflows and outflows of knowledge to accelerate internal
innovation, and expand the markets for external use of innovation, respectively.
Purposive means that the person in charge of managing knowledge are aware of giving the knowledge to
another party as they are of taking external knowledge from outside.

Henry started reasoning from 4 points :

1. ideas are distributed
2. Industrial innovation must play poker as well as chess : strategy is linked to chess. Traditionally the
business has one main competitor, the resources are the same and I know what to expect from the rival
after my moves. In the case of poker we have multiple players, we don’t have fixed resources and the
scenario is more complex. ( Compete and collaborate )
Most neoclassical economics is very well structured (behavioral economic is more recent)
3. intellectual property management : since we are changing the way companies are approaching
innovation and there are plenty of patents, it would be good whether some patents could go to someone
else (outsource)
4. not all smart people work for us : competitors too can have these resources

Therefore we started having the new concept of OI as introduced through a new analogy : traditionally the
development process was considered a closed funnel , with selection of ideas, prototyping, testing and launch.
Today this is not a linear process anymore. The open innovation fennel looks like a groviera. it becomes bubbled with holes
where knowledge comes out / gets in . (case of Loccioni → out of scope project which developed a company within the
startup which developed its own market) .

3 main processes :
- external knowledge that enters in the business ( outside in process or inbound process)
- knowledge within the business that goes out of the company ( inside out, or outbound innovation
process)
- combination of two processes where we have the coupled process

Bring description of 8 main papers : outside

Main findings : what they have research and identify the gap in terms of what we could look in the future in case
of research on innovation

analisi bibliometrica - bibliographic coupling

Lesson 11/05

SMEs’ Open Innovation: Applying a Barrier Approach → https://hal.science/hal-03944937/file/CMR.pdf

Open Source Collaboration in Digital Entrepreneurship → https://www.scopus.com/record/display.uri?eid=2-

s2.0-85125587730&origin=resultslist&zone=contextBox