Technological Diffusion and the Flow of Technology

1
Technological Diffusion and the Flow of
Technology

• Charles Weber
• PSU-EMGT 510/610
• Innovation Management

2
Resistance to Change

• To get the bad customs of a country changed and
  new ones, though better, introduced, it is
  necessary first to remove the prejudices of the
  people, enlighten their ignorance, and convince
  them that their interests will be promoted by the
  proposed changes and this is not the work of a
  day.
• Benjamin Franklin (1781)

3
Resistance to Innovation

• There is nothing more difficult to plan, more
  doubtful of success, nor more dangerous to manage
  than the creation of a new order of things.
  Whenever his enemies have occasion to attack the
  innovator, they do so with the passion of
  partisans, while the others defend him sluggishly
  so that the innovator and his party alike are
  vulnerable.
• Niccolo Machiavelli The Prince (1513)

4
Gunfire at Sea A Case Study of
Innovation(Elting Morrison, 1966)

• Key Questions
• How did the initial idea for continuous-aim
  firing (change) occur?
• Who developed the hardware that enabled
  continuous-aim firing?
• How did Scott develop continuous-aim firing? Why
  he?
• Why was Sims initially unable to introduce
  continuous-aim firing into the US Navy?
• Who resisted Simss efforts and why?
• Discuss the three stages of resistance.
• How did Sims eventually prevail?

5
Micro-motives

• The incentives of individuals and groups do not
  align with the incentives of the organization.
• Careers may be invested in change or the status
  quo.
• Some people are natural rebels looking for a
  cause.
• Others identify themselves with the status quo.

6
The Not-Invented-Here Syndrome (NIH)

• Definition of NIH the tendency of a project
  group of stable composition to believe it
  possesses a monopoly of knowledge of its field,
  which leads it to reject new ideas from outsiders
  to the likely detriment of its performance.
  (Katz Allen, 1982)

7
NIH (Katz Allen, 1982)

• Katz Allen (1982) studied 345 RD professionals
  in 50 Project Groups.
• For the first few years of group tenure,
  performance increases due to teambuilding.
• Then stable project teams become increasingly
  cohesive over time.
• They separate themselves from external sources of
  technical communication.
• They communicate less with colleagues outside
  their teams.
• Project performance deteriorates.

8
The Influence of Job and Group Longevity(Katz,
1982)
Three stages Socialization, Innovation and
Stabilization
9
Situational versus Individual Control (Katz,
1982)

• With increasing job longevity.
• Situational control (dependence on others)
  decreases.
• Individual control increases.

10
Technological Diffusion

• Sociological Definition (Rogers, 1983) Diffusion
  is the process by which an innovation is
  communicated through certain channels over time
  among the members of a social system.
• Economic Metaphor (Mansfield, 1968) The higher
  the cost, the slower diffusion will occur. The
  higher the perceived profit from an innovation,
  the faster adoption will occur.
• Organizational Learning Perspective (Attewell,
  1992) Diffusion increases as barriers to
  knowledge transfer break down.

11
The Diffusion S-Curve
Economic Perspective Sociological
Perspective Organizational Learning Perspective
12
Factors that Affect the Diffusion Rate (Rogers,
1983, pp. 15-16)

• Relative advantage is the degree to which and
  innovation is perceived better than the idea that
  it supercedes.
• Compatibility is the degree to which an
  innovation is perceived as being consistent with
  the existing values, past experiences and needs
  of adopters.
• Complexity is the degree to which an innovation
  is perceived as difficult to understand and use.
• Trialability is the degree to which an innovation
  may be experimented with on a limited basis.
• Observability is the degree to with the results
  of an innovation are visible to others.

13
The Hybrid Corn Puzzle (Griliches, 1957)

• Key Question Why should hybrid corn be adopted
  earlier, faster and to a greater extent in some
  states than in others?

14
Facts about Hybrid Seed Grains(Jugenheimer, 1939)

• Hybrid seed grains are generally not produced by
  the farmer they are developed by specialists.
• The cost of developing a hybrid strain is fixed.
• New lines of seed grain are developed by
  inbreeding or self-pollination.
• Hybrid corn is the product of a controlled,
  systematic crossing of specially selected
  parental strains called inbred lines.
• Accompanying inbreeding is a rigid selection
  against seeds of poor heredity.
• The inbred lines are inferior in vigor and yield
  to open-pollinated varieties.
• However, vigor is restored through hybridization,
  the cross-pollination of two inbred lines.

15
The Flow of Technology (Allen, Marquis,
Frischmuth)

• Key Research Questions
• How to we get from science to the application of
  technology?
• How does the professional literature affect the
  flow of technology?
• How do organizations bring in new ideas and
  capabilities?
• How does physical proximity affect communication?
• Does workplace architecture influence
  communication?

Prof. Tom Allen MIT Sloan School
16
Critique of Allens Work

• Generally viewed as highly normative
• Engineering logic applied to organization
  science (Allen is an engineer by training.)
• High external validity
• Tom (Allen)s results can be repeated in most
  organizations and in many different industries.

17
Information Processing in Science and Technology
(Allen, 1977 Marquis Allen 1966)

• Question What about tacit knowledge?

18
Normal Progression from Science to Utilization of
Technology(Allen, 1977 Marquis Allen, 1966)
19
From Basic Science to Products in a Monopoly
Culture The Case of Bell Laboratories 1945-1985.
20
Inability to Control Spillovers The Case of
Copper Interconnect at IBM (Lim, 2001)

• IBM does not get return on investment.
• In the end, IBM lets suppliers manufacture copper
  interconnect equipment.
• IBMs process becomes de facto standard for
  semiconductor industry.
• IBMs semiconductor division has some learning
  curve advantage.

21
Science, Technology and Product Utilization
(Allen, 1977 Marquis Allen, 1966)

• Communication paths between the three streams of
  technological development are bi-directional and
  not necessarily sequential.

22
Managing the Flow of Technology in a
Strategically Complex Environment The Case of
SEMATECH
23
RD Funding in the 1990s

• Funding for advanced research is becoming
  extremely tight.
• Government is reducing RD funds for universities
  and national laboratories.
• Corporations are focusing RD dollars on
  product-oriented research.
• Access to technologies of the future is in
  jeopardy.
• One Solution pool resources in consortia.
• Consortia operate in a strategically complex
  environment.
• Consortium members compete against each other,
  their suppliers and their customers (Porter,
  1976)
• Key question how do consortium members gain
  competitive advantage in this complex environment?

24
About

• SEMATECH is a consortium of semiconductor
  manufacturers.
• It was founded in the 1980s to enhance the
  competitiveness of the U.S. semiconductor
  industry.
• It focused on the relationship between chipmakers
  and tool suppliers relations.
• It worked in partnership with SEMI/SEMATECH, an
  association of U.S. tool and materials suppliers.
• In the 1990s tool suppliers became increasingly
  involved in process RD.
• In 1998, SEMATECH became an international
  organization that coordinates the relationship
  between chipmakers and tool suppliers.

25
RD Spending in the Semiconductor Industry( From
Paul Peercy, President, SEMI/SEMATECH)
26
The Effect of Industry Coordination

• Joint tool definition at SEMATECH prevents market
  segmentation.
• Lower entry barriers for tool and materials
  suppliers. Risk reduction.
• Increased price elasticity of demand for tools
  and materials.
• Enhanced bargaining power for SEMATECH member
  companies (MCs).

27
Net Flow of Goods, Services and Informationfor
SEMATECH-Sponsored Activities
Research Groups
Tool Suppliers
Chip Makers
SEMATECH Member Companies
SEMI/ SEMATECH Member(s)
Natl Lab(s) Universities US Corp. RD

• SEMATECH

Participating Entities
28
Strategic Interests of Participants

• Chipmakers (including MCs) and tool suppliers
  compete by the learning curve.
• SEMATECH Member Companies (MCs)....
• want early access to useful and affordable tools.
• Participating Tool Suppliers....
• want early access to research
• want help with tool definition
• want additional funds for accelerated tool
  development
• will not withhold sales to MCs rival chip
  makers.
• Participating Research Groups....
• need industry contacts
• want to benefit from their intellectual property
• desire funds for new research.

29
SEMATECHs Strategic Dilemma

• Chronologically, the aforementioned
  SEMATECH-sponsored activities benefit....
• participating research groups first
• participating tool suppliers second
• SEMATECH member companies third.
• SEMATECH-sponsored activities inherently enhance
  the bargaining power of participating tool
  suppliers.
• Suppliers will sell to all chip makers when they
  are ready, essentially at the same time.
• Some goods, services and information will flow to
  the rivals of participating tool suppliers and
  MCs.
• How do MCs gain competitive advantage?

30
Effective Technology Integrationin the
Semiconductor Industry(Iansiti West,1997)

• Chip makers....
• sponsor internal and external research, which
  creates technology
• evaluate a plethora of technologies
• choose and incorporate the best technolgies.
• Rate of Technology Integration Competitive
  Advantage

31
The Directed Information Flow Model

• SEMATECH provides upstream feedback on use
  environment and downstream feedforward on
  technological characteristics.
• From basic science to product prototype in 2
  years.

32
The Sources of Solutions to Technical Problems
(Allen, 1977)

• Literature and company research provide a
  minority of solutions.
• People outside of your professional peer group
  tend not to read technical literature your field.
• Customers (users) are an important source of
  solutions. (von Hippel)
• An informal organization and external networks
  are the most common source of solutions.

33
Informal Organizations (Allen, 1977, Ch. 6-7)

• Information flow density clusters.
• An informal network-based organization develops.
• Star employees are immersed in information flow.

34
Technological Gatekeepers (Allen, 1977, Ch. 6
Katz, Tushman)

• Employees who bring technology into an
  organization from the outside.
• They have a reputation for technical competence
  in a particular field.
• They read the journals in the field
• They have many external connections
• They are frequently promoted to first level
  supervisory positions.

35
Becoming a Technical Gatekeeper(Katz, Allen,
Tushman)
36
Gatekeeper Networks (Allen, 1977, Ch. 6)

• Gatekeepers of a particular technology from
  different firms hang out together at conferences,
  
• and they join the same professional societies.
• Gatekeepers of different technologies within the
  same organization also hang out together,
• increasing their effectiveness in coupling their
  organization to the outside world.

37
Long Distance Communication (Allen, 1977, Ch. 8)

• The probability of communication among employees
  of the same firm drops dramaticallyas a
  function of separation distance.

• Telephones were available at time of study.
• E-mail and the Internet were not.

38
Communicating over Short Distances(Allen, 1977,
Ch. 8)

• If the separation distance between people exceeds
  10 meters, then the expected frequency of
  communication is low.

39
Workplace Architecture Matters! (Allen, 1977,
Ch.9)

• Open cubicles present fewer communication
  barriers than individual, closed offices do.
• Being on a different floor affects communication
  adversely.
• Being in a different building is a strong
  impediment.

40
Normative Implications of Allens Work (Allen,
1977, Ch. 9)

• One can design informal organizations.
• Co-locate offices of people that you want to
  communicate frequently.
• Warning!!!!!
• Aligning the formal and the informal organization
  by co-locating employees of the same department
  is a counterproductive practice that introduces
  communication barriers.
• Rebellious employees may practice passive
  aggression against your plan.
• Your organizational design criteria may be
  suboptimal.
• Do you really understand the internal dynamics of
  your organization?

41
Summary

• Adoption of technology is not instantaneous
  technology diffuses over time.
• There is resistance to innovation.
• The flow from basic science to technology to
  product utilization is not necessarily
  unidirectional and sequential.
• Informal organizations based upon communication
  patterns may develop.
• This informal organization may constitute a
  primary source of innovation.
• Networks of technical gatekeepers bring external
  knowledge into this organization.
• The frequency of communication between
  individuals strongly depends upon physical
  proximity and workplace architecture.
• According to Allen (1977), informal organizations
  can be designed.