AIB Canada Chapter Webinar - University of Victoria, BC

1. GLOBAL INNOVATION
SYSTEMS IN AN AGE OF
GREAT DISRUPTION
Professor David J. Teece
Thomas W. Tusher Professor in Global Business
Haas School of Business, University of California, Berkeley
Chairman, Berkeley Research Group
AIB Canada Chapter
Webinar November 20, 2020
University of Victoria, BC
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2. “Since the origins of technical and social innovations
have never been confined to the borders of any one
nation, the economic growth of all countries depends
to some degree on the successful application of a
transnational stock of knowledge”
(Teece, 1977, paraphrasing Kuznets, 1966)
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ECONOMIST SIMON KUZNETS UNDERSTOOD THE
IMPORTANCE OF TRANSNATIONAL KNOWLEDGE TRANSFER

3. KNOWLEDGE FLOWS (TECH TRANSFER) HAVE BEEN AT THE
CORE OF GLOBALIZATION… BUT HAVE HITHERTO BEEN
UNDEREMPHASIZED IN GLOBAL ECONOMIC RELATIONS
AND IN INTERNATIONAL BUSINESS SCHOLARSHIP
• Technology flows, not goods and financial flows, are at the strategic core
of international commerce and enterprise competitiveness.
• Global (open) innovation “supply” chains characterize today’s innovation
ecosystems.
• Yet most discussions of international commerce and international
business wrongly prioritize physical and financial flows and ignore
intangible assets
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4. GLOBAL INNOVATION SYSTEMS DEVELOPMENTS
1960 - 2020
• Post 1960 global dispersion in the sources of knowledge… used in
innovation became global, reconstruction of Europe, and Japan; and the
rise of Asia
• Enhanced competition… requires faster product development cycles
• Digital Convergence… dictates greater connectedness and platform
engagement
• Stronger IP rights post 1980 strengthened the market for know-how
• Decline in in-house R&D spending because of shareholder activism and
short-term focus (traders and raiders play too big a role in US Capital
markets) forces US corporations to cut in house R&D and focus more on
open innovation
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5. a) Timely access to domain and technology expertise is critical to firm level
competitiveness everywhere
b) Active engagement by practically all firms now outsource elements technology
development
c) Scouting/sensing tools need to be developed
d) Seizing/orchestration/integrating skills are also paramount… and global in scope
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INNOVATION TODAY IS GLOBAL AND
QUALITATIVELY AND QUANTITATIVELY
DIFFERENT FROM PRE-1980’S

6. “OPEN” INNOVATION AND THE UTILIZATION OF
GLOBAL R&D NETWORK IS A HANDMAIDEN OF
DYNAMIC CAPABILITIES
…and dynamic capabilities is also a handmaiden of
open innovation!
PFI = Profiting From Innovation 6
Dynamic Capabilities
Sensing Seizing Transforming
Open
Innovation (OI)
PFI/Open
Innovation

7. WHO PROFITS FROM THE GLOBAL SYSTEM OF
INNOVATION?
• Adner’s “Wider Lens”* is most insightful and outlines the importance of
“lining up all the ducks” to achieve commercial success
• Understanding Adner’s “Wider Lens” requires OI, PFI, and Dynamic
Capabilities.
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Ron Adner, Dartmouth
Ron Adner, “Wider Lens”, Penguin Books, (2012).

8. The PFI/open innovation (Teece) proposition:
The major prize might also go to the party that puts down the first
piece. It depends on whether or not the “piece” is the bottleneck.
The scarcity of the underlying resource has much to do with the
answer (e.g. is it is protected by intellectual property?)
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*Adner interview in Brian Leavy’s, “Ron Adner: managing the interdependencies and risks of an innovation ecosystem”, Strategy and
Leadership, (2012).
Adner proposition:
“The major prize was destined to go, not to the party that puts
down the first piece of the puzzle, but the one that puts down the
final piece.”*
CONTRASTING PERSPECTIVES?

9. SENSING AND SEIZING ARE CRITICAL ACTIVITIES
FOR SUCCESSFUL OI
• For those companies that embrace open innovation on the global stage, the greatest
challenge is being able to identify what is available in the market for sale or licensing
and then evaluating it in terms of its fit to their product strategy.
• Where it is needed, intermediaries are becoming established to join the two together
and provide a set of services around channeling innovations towards companies
whose business structure is based on open innovation. Markets are rapidly changing.
• It can be a long process from ideas to profit and doing all of the innovation
in-house is limiting.
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The overriding aim will be to get a progressively better return from
R&D/technology spend. It will not matter whether the approach taken is
closed, open or some combination of both

10. THE PERVERSION OF OPEN GLOBAL INNOVATION
NETWORKS? HAS CHINA SYSTEMATICALLY PRIED
TECHNOLOGY FROM FOREIGN COMPANIES?
“The combination of naiveté and hubris on the part of U.S. companies seeking to enter
the Chinese market, coupled with a sophisticated Chinese effort to extract technology
has been a lethal combination.”
Peter Navarro
Wall Street Journal
September 26, 2018
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These concerns are propelling “decoupling” and the bifurcation of global systems

11. • China has allegedly engaged in a technology coercion by:
• Denying open access to the home market (contingent on technology transfer by prospective
entrants from abroad)
• Using the regulatory process as a subterfuge to access technology from foreign firms. (e.g.,
antitrust investigations and documents raids designed to scoop up and disseminate trade
secrets)
• Making unwillingness to license IP to Chinese competitors an antitrust violation.
• Discriminating application of IP law in China (against foreign firms)
• The US and some other nation states are beginning to decouple and question
certain elements of certain versions of the existing global order.
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See D.J. Teece “Profiting from Innovation”, Research Policy, December 1986 for model on how market
access can be used to capture profits from (external) innovations.
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12. •The global innovation model is once again in major
transition.
•The bifurcation of the global economic system is the
major factor driving change.
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THE GLOBAL INNOVATION PREDICAMENT TODAY
(2020)