This article published in 2001 issue of MIT Sloan Management Review. In this article, Michael E. Porter and Scott Stern argued that innovation is strongly affected by location, which is the external environment for innovation. They stated that there is a shift in challenges for competitiveness, especially in advanced nations and regions. The challenges faced a decade ago were restructurization, lower cost and raise quality.
Today, operational improvement is given and many companies are able to acquire and deploy the best current technology. He also argued that producing standard products using standard methods will not sustain competitive advantage, on the other hand, they must be able to compete in the global frontier.
They also state that the vitality of innovation in a location is shaped by national innovative capacity. National capacity is defined as a country’s potential to produce a stream of commercially relevant innovations. Not only the realized level of innovation, but also reflects the fundamental conditions, investments, and policy choices that create the environmental for innovation in a particular location. For this, Porter and Stern proposed a framework to identify the sources of innovative capacity that enable a nation to innovate at the global frontier.
Finally in the end he pointed out several implications for innovation management, i.e. (1) Locate R&D investments and commercialize new technologies in environments with strong innovative capacity, (2) Proactively access the local strength, and (3) enhance local innovative capacity. He also suggested a broader agenda for innovation management that managers must also manage the process of how their compabies enhance and take advantage of opportunities in the local government.
Although Porter is considered to be “a guru” in corporate competitive advantage and value chain, but with his track record of national competitiveness study in his book, “Competitive Advantage of Nations”, this article would not only benefit corporations but government officials as well in spurring innovation in a region.
Innovation : Location Matters Originally published in Shvoong: http://www.shvoong.com/business-management/1920577-innovation-location-matters/
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