Definitions for discovery, invention and innovation are:
a. Discovery: A new increment to knowledge. In this course
we
consider three types of knowledge of physical, biological or
social
systems. Theoretical knowledge is increasingly expressed as a
mathematical model. Empirical knowledge is obtained from
observations
of new phenomenon or observations deliberately taken to test a
theoretical hypothesis. Last, but not least, is practical
knowledge.
An important economic example is the practical knowledge acquired
by
a workforce to make a new manufacturing plant operate efficiently.
This knowledge is intuitive and frequently very difficult to
express
as equations.
b. Invention: A new device or process. To qualify for a
patent
an invention must pass a test of originality--that is, be
sufficiently
different from previous inventions. Most inventions are minor
improvements on existing inventions which do not qualify for
patents.
Only a small percent of patented inventions have any economic
value.
c. Innovation: A better way of doing things. Innovations
can
occur in all goal-directed behavior such as profit maximization,
reelection politics and personal lifestyles. Thus an innovation
improves performance in goal directed behavior as measured by a
criterion. An example of a criterion would be profit maximization
in
business. The advanced material at the end of this section
presents a
deeper development of innovation. [If you want to become a
grader, then I advise you to read this material]
It is important to distinguish between an invention and an
innovation.
Spreadsheet software is an invention. A new business application
of
spreadsheets that increases profits is an innovation. An example
of an
innovation in government is submitting tax returns to the IRS by
E-mail
instead of regular mail. An example of an innovation in personal
lifestyles is telecommuting by professionals from Telluride, CO.
Many current innovations are the result of applying new technology
in
(1) manufacturing and (2) processing of business and government
paperwork. Empirically, better performance is not achieved by the
new
technology to improve the performance of the old process. Rather,
the
manufacturing or paperwork process is redesigned from ground up to
make optimal use of the new combination of technology and people.
A
portion of the performance gain is from carefully analyzing the
process to be replaced and asking what really needs to be done to
maximize profits. In the business media, this is the origin of the
word "reorganization".
It is important to note several features concerning the
interaction between discovery, invention and innovation.
a. Invention is promoted by discoveries in the natural sciences
and
more recently the biological sciences; whereas, innovation is
promoted by discoveries in the industrial engineering, the social
sciences and the business disciplines.
b. The interaction between discovery and invention is a two-way
street. Obviously, as science advances, it produces opportunities
to
create new inventions. However, the development of the full
economic
value of an invention requires massive discoveries for many
inventions. For example, the modern airplane required the
scientific
development of aerodynamics. The economic development of
superconductivity will require the physicists to develop a theory
of
superconductivity.
c. Similarly the interaction between discovery and innovation and
between invention and innovation is two-way.
It is important to understand that discovery, invention and
innovation have very different incentive systems. Moreover, these
differences create problems in transfer from one activity to
another.
For example, the culture for discovery and invention are very
different
and transfer between the two activities requires incentives.
a. Discovery: Fame. Scientists want to become famous. Such fame
brings
them both praise and wealth. With fame as an incentive system,
scientists have powerful incentives to immediately broadcast their
results, thus creating a free flow of ideas. This means that
researchers have at their disposal all the current results in
conducting their ongoing research. However, fame does not create a
sufficient financial incentive for funding basic research.
b. Invention: Intellectual property. There are three important
forms of
intellectual property: Patents, copyright, and trade secrets.
Without
property rights rivals would immediately copy inventions and the
producer with the lowest costs would claim the financial reward.
Incentives to invent would be diminished. However, the creation of
a
socially efficient form of intellectual property rights is
difficult
because such rights can grant excessive monopoly rights and create
an
atmosphere of secrecy which impedes the free flow of ideas.
Intellectual property law is modified over time to create better
incentives in changing economic conditions. For example,
copyright,
which originally was for books, plays and other literary works,
has
been extended to software and integrated circuit masks. In the US,
a
patent is issued to the first to discover, not the first to file.
As
you might expect this leads to endless law suits. Bell's patent
for the
telephone is an example. Currently, there is a debate whether
patents
should be issued to the first to file, which is the practice in
the
rest of the world.
Surf the Net: Check out several intellectual
property sites:
c. Innovation: Better performance. There are no property rights for innovation; consequently, imitators immediately copy any promising innovation. Imitation has become more important in the private sector with increasing international competition. The new buzz word is ``benchmarking'' which means to compare the firm's procedures with the best practice in the world.