Academic journal article Management International Review

Strategies of Technical Innovation in Eastern European Firms

Academic journal article Management International Review

Strategies of Technical Innovation in Eastern European Firms

Article excerpt

Introduction

The transformation of Eastern European firms from a socialist to a market economy frequently implies entering into international competition. Due to the opening up of trade relations with Western Europe, Eastern European firms get the chance to sell their products and services on Western markets. On the other hand, new competitors enter the home market. Customer wishes change and new technology is available. This new situation may serve as a constructive force in the growth of Eastern European firms, or as a destructive force making those same firms vulnerable to competitors. In order to survive in a competitive market environment, Eastern European firms have to build up know-how and realize technical innovations (Witt 1995).

This paper analyses which strategies of technical innovation can be pursued in Eastern European firms, which typical problems may occur, and how the process of defining and implementing strategies of technical innovation should be managed.(1) The aim of the paper is to develop a conceptual framework for strategies of technical innovation in times of economic transformation. Although conceptual in focus, the paper makes use of experiences from several case studies of firms in transition. Within a larger research project at the Koblenz School of Corporate Management (WHU) on transformation processes, case studies of firms in transition have been conducted in different countries and different industries since 1992.(2)

Strategies of Technical Innovation

Technical innovations are defined as the introduction into the market of a new product or a new production process. A new product can be something completely new to the marketplace or something the respective firm has never produced before. Similarly, a new production process may be new to the market or just new to the firm. For the purposes of this analysis, we will use the term "innovation" from the viewpoint of the innovating firm. Product or production processes are innovations for an Eastern European firm if they haven't been produced or employed by that firm before. Therefore, a new product to the firm can also mean a change in the form, content, package, or method of distribution of an existing product (Roman and Puett 1983, p. 203). Sometimes, product and process innovations cannot be separated. A change in the products of a firm frequently requires changes throughout the whole system of materials, equipment, methods, and suppliers. In the chemical industry, some process innovations automatically lead to new products. Statistically, process innovations are much harder to trace than product innovations because they are less frequently submitted for patent protection. In general, process innovations become less visible to outside observers than product innovations. Therefore, in the section about the management of technical innovations product and process innovations will be analyzed parallely. In other sections, the distinction between product and process innovations will be made for reasons of analytical clarity, although the distinction may admittedly be difficult in reality.

Apart from the distinction between products and processes, a distinction between internal and external innovations is also useful for the analysis of Eastern European firms. Internal technical innovations are invented and developed within the firm. The significant advantages in maintaining R&D capability to realize internal technical innovations are the creation of proprietary knowledge, the training of specialists prior to production and the first-mover advantage in introducing the new technology to the market. However, internal innovations also mean high risk, high cost and long development time. We are considering activities in which failure is the norm and where the greatest part of the investment is wasted (Twiss 1986, p. 3).

External innovations are based on inventions generated and first steps in the development process taken in other firms, the further development and the introduction to the market is done by the firm under consideration (Albach 1994b, pp. …

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