Economics and Management of Innovation


Master in General Management – a.y. 2013-14


Economics and Management of Innovation


Convenor Andrea Prencipe
Office hours after each class and/or by appointment


Tutor Luca Mongelli
Office hours after each class and/or by appointment


Aim of the course

The aim of this course is to provide students with theoretical and applied knowledge on the economics and management of innovation. Combining case studies and traditional lectures, the course addresses the economic, strategic, organizational, and operational dimensions of innovation with particular emphasis on innovative activities in technology-intensive firms.  The course also examines the challenge to building and maintaining an innovative organization, and how individuals can successfully innovate in organizations.


The key learning objectives are:

  • understanding the role and challenges of innovation across sectors and countries;
  • acquire tools to manage technology and innovation in dynamic markets;
  • identifying core problems that may impede innovative performance;
  • knowing how to manage groups that are innovating and how to develop and use firm’s capabilities to exploit innovative activities.


Rules of the game

I shall provide an overview of the topic using traditional lectures, mini case studies, and short movies.  This is going to last for about half of the overall session. The rest of the session is going to be dedicated to group discussion.  The discussion is going to be guided by the inputs provided by students through their active involvement, by which I mean that for each session (but the first one), students are expected to:

  1. Before each session, study the material – usually 1 paper and / or a case study – suggested in the reading list;
  2. During the session, actively discuss other students’ presentations and papers.


This is due to two related factors: (a) it is hard to teach an applied subject – such as Innovation – since it requires a certain amount of contextualization to specific organizations, sectors, or countries; (b) I believe in the old saying “tell me and I will forget, show me and I will remember, involve me and I will understand” (Confucius).



The grade is based on a written exam (50%) and a group presentation (40%). Group presentations will be also assessed through a peer-evaluation system. Active involvement in each class – e.g. attendance, participation to discussion, short presentations – will add up to 10% of the final grade.



Since the material in this course builds session by session, attendance at each session is important. Please notify me before class via email if you are unable to attend a session due to illness, family emergency, or an unavoidable conflict. No compensatory work will be given for an absence. Excused absences will not directly influence your grade. Unexcused absences will influence your grade. More than three unexcused absences will result in a failing grade for the course.


Those students who are unable to attend the entire course for substantial reasons should contact me before the start of the course.


Laptop and Mobile Phone Policy

All laptops and mobiles should be down unless instructed otherwise by the convenor.



  • Innovation sources and processes
  • Taxonomy of innovation
  • Sectoral patterns of innovation
  • Geography of innovation
  • Social capital and innovation
  • Marketing innovation
  • Organizing innovation process
  • Implementation processes
  • Managing innovation in complex product industries
  • Building ambidextrous organizations



Session I Fundamentals of Economics of Innovation
September 17th

September 18th


This session illustrates the aims of the course and the learning approach adopted throughout. It then (a) introduces the basic concepts of the course – i.e. types of innovation (b) starts exploring the economic interpretations of innovation; (c) analyses patterns of industrial innovation.

















Required readings

  • Dosi, G. (1988) Sources, Procedures, and Microeconomic Effects of Innovation, Journal of Economic Literature, 26, 3, 1120-71.


Optional readings

  • Breschi, S, Malerba, F, and Orsenigo, L (2000) Technological regimes and Schumpeterian Patters of Innovation, Economic Journal, 110, 388-410.
  • Fagerberg, J. “Innovation – A guide to the literature.” In: Fagerberg, J., Mowery, D. and Nelson, R. (Eds). The Oxford Handbook of Innovation. 2005, Oxford University Press, ch. 1, 4-9.
  • Abernathy, W and Clark, K (1985) Innovation: Map the Wind of Creative Destruction, Research Policy, 14, 3-22.
  • Pavitt, K (1984) Sectoral Patterns of Technical Change: Towards a Taxonomy and a Theory, Research Policy, 13, 343-743.


Session II Innovation and Industrial Evolution
September 24th

September 25th


This session aims to investigate the relationships between innovation and industrial dynamics.  It lays the foundations to understand the forces that drive industry evolution and industry life cycles. It then delves into the relationships between market structure and innovation.


Seminar session: discussion on the technological regimes of different industries as illustrated in Malerba and Orsenigo (1996)


  Required readings

  • Malerba, F. and Orsenigo, L (1996) The Dynamics and Evolution of Industries, Industrial and Corporate Change, 5, 1, 51-87.


Optional readings

  • Audretsch D (1997) Technological Regimes, Industrial Demography, and the Evolution of Industrial Structures, Industrial and Corporate Change, 6, 1, 49-81.
  • Klepper, S (1997) Industry Life Cycles, Industrial and Corporate Change, 6, 1, 145-181.
  • Acs, Z. J. and Audretsch, D. B. “Innovation in Large and Small Firms – an Empirical-Analysis.” American Economic Review, 1988, 78(4), pp. 678-90.
  • Aghion, P.; Bloom, N.; Blundell, R.; Griffith, R. and Howitt, P. “Competition and Innovation: An Inverted U-Relationship.” Quarterly Journal of Economics, 2005, 120(2), pp. 701-728.


Session III Geography of Innovation – guest speaker: Francesca Masciarelli
October 1st October 2nd


  • This session focuses on the geographical dimensions of innovation. It analyzes the concepts of (a) knowledge spill-over, knowledge externalities, and geographical agglomeration of innovation activities; (b) the main actors and relationships of local and global innovation systems; (c) social capital and innovation processes.


Seminar session: Francesca Masciarelli will lead a discussion on cases focused on the geographical dimension of innovation.


  Required readings

  • Audretsch, D. B. and Feldman, M. P. “R&D Spillovers and the Geography of Innovation and Production.” American Economic Review, 1996, 86(3), pp. 630-40.
  • Nelson, R. (1992) National Innovation Systems: A Retrospective on a Study, Industrial and Corporate Change, 1, 2, pp. 347-374.


Optional readings

  • Laursen, K. Masciarelli, F., Prencipe A. (2011) Regions Matter: how social capital affects external knowledge acquisition and innovation, Organization Science, 2012, 23, pp. 177-193.
  • Jaffe, Adam B. “Technological Opportunity and Spillovers of R&D: Evidence from Firms’ Patents, Profits, and Market Value.” American Economic Review 76, no. 5 (1986): 984-1001.
  • Cooke P; Gomez U; Etxebarria G. (1997) Regional innovation systems: Institutional and organisational dimensions, Research Policy, pp. 475-491.
  • Feldman, M. P. and Audretsch, D. B. “Innovation in Cities: Science-Based Diversity, Specialization and Localized Competition.” European Economic Review, 1999, 43(2), pp. 409-29.
  • Gertler, M. S. “Being There – Proximity, Organization, and Culture in the Development and Adoption of Advanced Manufacturing Technologies.” Economic Geography, 1995, 71(1), pp. 1-26.




  Session IV The Management of Innovation Processes
  October 8th October 9th


Interpretative models of innovation and their evolution. The discussion session is centred on the open innovation paradigm as adopted across sectors.


Seminar session: case on Open Innovation


    Required readings

  • Dodgson, M, Gann, D, Salter, A, (2008) Managing Technological Innovation, Oxford University Press, ch. 3
  • Chesbrough, H., (2003) The Era of Open Innovation, MIT Sloan Management Review, 44, 3, 35–41
Session V Market & Innovation
October 15th

October 16th


This session analyses the market/innovation interfaces. It deals with the types of market research that can be useful or misleading for different types of innovations. The class discussion focuses on two cases wherein the interface marketing/innovation was differently in totally different ways and led to different outcomes. It underlines the contingent nature of the innovation process in relation to the market dimension.


Seminar session: Marco Danuso (BCG) on innovation trends in the defense industry.


  Required reading

  • Learning from the market, ch. 7, Leonard-Burton, D. (1998), Wellsprings of Knowledge, Harvard Business School Press.


Session VI Market & Innovation: a rejoinder
October 22nd October 23rd


The session deepens the market/innovation interface to highlight the limits of customer involvement.  It illustrates the concept of disruptive technology – where the pace of technological progress easily exceeds the rate of performance improvement that customers in a market demand.  The case discussion highlights the implications of such innovation on the firms’ strategy.


Seminar session (Luca): discussion of disruptive innovation


  Required reading

  • Bower, J. and Christensen, C. (1995) ‘Disruptive Technology: Catching the Wave’, Harvard Business Review, 43-53
  • Case: Eli Lilly and Company


Session VII Organizing Innovation I
October 29th

October 30th


This section covers the key aspects and stages of the organization of the innovation process.  It introduces and analyses the organizational forms that may improve or hinder a firm’s likelihood of innovating. Specifically, it focuses on new product development teams in terms of composition and structure in order to identify the range of factors that impact the creative and innovative performance of teams.


Seminar session: organizing innovation in IDEO


  Required reading

  • Schilling M (2005) ‘Managing New Product Development Teams’, chapter 12, Strategic Management of Technological Innovation, McGraw-Hill.


Session VIII Organizing Innovation II
November 5th November 6th This session introduces the concept of ambidextrous organization – as an ideal type of an organizational form that may help firms introduce both incremental and radical innovations.

Video/case: Bug’s Life

Seminar session: Roberto Marinucci (CEO, Fater)



Required reading

O’Reilly, Charles A., III, and Michael L. Tushman (2004) ‘The Ambidextrous Organization’ Harvard Business Review, 82, 4, pp. 74-81


Session IX Platform Innovation
November 12th

November 13th

This session illustrates the concept of product architecture to highlight the relevance of product design approach for firm’s innovation strategy.  Building on literature on architecture, it also introduces the concept of platform innovation to illustrate how firms may leverage their product knowledge to shape and govern the industrial sector wherein they operate.


Seminar session: discussion on key issues regarding platforms and ecosystems – iTunes


  Required reading

  • Ulrich, K. (1995) ‘The Role of Product Architecture in the Manufacturing Firm’, Research Policy, 24, 419-440
  • Gawer, A. & Cusumano, M. (2002), The Elements of Platform Leadership’, Sloan Management Review, Spring.
  • Case: itunes


Session IX Globally distributed teams
November 19th

November 20th

This session centres on the role of globally distributed teams (GDTs) to manage innovation. It focuses on (a) the key factors that lead firms to rely upon GDTs, (b) the role of national cultural, and (c) the information and communication technologies.


Seminar session: case on on GDTs


  Required reading
  • TBD


Session XI Students’ seminars
November 26th

November 27th

Session XI Students’ seminars
December 3rd

December 4th



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