Managing Innovation Probabilities: Core-driven vs. Bottleneck-removing Innovations

Abstract

This paper provides a simplified framework of focusing devices that generate different patterns of innovation, i.e., core-driven and bottleneck-removing innovations, and discusses the managerial implications. We show that core-driven innovation should be undertaken when technology components are independent (independent technology system), while bottleneck-removing innovation should be pursued when they are interdependent (interdependent technology system). Different types of focusing device should therefore be adopted based primarily on the degree of interdependence among technology components, which in turn maximizes underlying innovation probabilities. One of the implications of the results is that the effective management of innovation is made possible when innovative activities and corresponding focusing devices are appropriately arranged and coordinated to maximize innovation probability. We discuss these managerial challenges in terms of incentives, governance, and competitive strategies.