1 Moving Beyond Schumpeter: Management Research on the Determinants of Technological Innovation

Abstract

Schumpeter’s conjecture that large monopolistic firms were the key source of innovation in modern industrial economies has been the underpinning for much work on the topic of innovation. In this review paper we consciously move beyond the Schumpeterian tradition of focusing on firm size and market structure as the primary determinants of innovation to identify a broader set of innovation determinants that have been investigated by the management literature. We make a distinction between innovative efforts and innovative output and for each of these outcomes we group the determinants of innovation into four broad headings—industry structure, firm characteristics, intra‐organizational attributes, and institutional influences. We examine four aspects of the industrial structure and how they influence innovation: the horizontal market structure which reflects the influence of competition and collaboration, as well as the role of buyers, suppliers and complementors. Under the rubric of firm characteristics, we consider the many externally observable attributes of a firm such as its size, scope, access to external sources of knowledge such as through alliances, and performance. Under the heading of intra‐organizational attributes we look at the inside of the firm, the firm’s organizational structure and processes, corporate governance arrangements including compensation and incentive structures, the backgrounds of managers, and organizational search processes. Finally, we consider two significant sets of institutional influences, the supply of science (wherein we also examine the nature and degree of science–industry relationships), and the appropriability regime. In each setting we try to structure the existing literature to identify the core theoretical mechanisms as well as empirical support for those mechanisms. We explicitly focus on the management literature in this area recognizing that the work of economists is being summarized in other such reviews. However, we have consciously tried to use terminology and organizing structures that should be familiar to both economists and management scholars and hope to encourage greater conversation and cross‐fertilization between these two groups. To facilitate this outcome we especially emphasize some areas where management literature has developed the most (e.g., alliances and networks) but then integrate the literature in these areas within the broader rubric of work in the economics tradition.