The Regional Market Dynamics of Radical Innovation
4 Pages Posted: 23 Sep 2008
Date Written: May 19, 2008
Abstract
Our interest in writing this article is to create a bridge between the scholarly and academic research on technological innovation and a private sector, for-profit business model that implements the ideas on innovation and entrepreneurship, primarily in metro regional economies. In this article we address the relationship between how new markets potentially emerge as a result of market acceptance of a new product.
We begin by noting that many articles on innovation start with the assumption that an imaginary firm in a perfectly competitive market is the best place to begin the analysis of innovation. Often, the articles fail to distinguish between existing firms, or brand new ventures, and instead focus on the behavior of how the imaginary firm in a free market reacts to innovation.
Seeing innovation from the perspective of how market dynamics in a metro regional economy affects innovation begins by assessing the characteristics of real, not imaginary, firms. The structure and organizational relationship of firms in a marketplace affects the rate of innovation. The economic term used to describe this idea about firms is "regional economic structure."
We conclude that successful radical innovation occurs in market habitats that have multiple diverse networks of actors who share cognitive maps about innovation. These shared cognitive maps are geographically-bounded. In most cases, the shared maps occur within 50 miles of the metro regional boundaries, just about the same distance that regional private capital markets function when financing innovation projects.
The overlap between regional innovation markets and regional capital markets is not happenstance. Regionally dynamic markets create the environment for radical innovation, which is the best perspective to begin an analysis of why some regions have higher rates of technological innovation than others, especially the most valuable form of innovation: radical innovation in new-to-the-world products.
Keywords: New market emergence, radical innovation, Venture capital, regional innovation, private capital markets, Industrial value chains, innovation, technology investments
JEL Classification: M13, O16, O31, O32, O33, O38, R15, R58
Suggested Citation: Suggested Citation