Examine the importance of Innovation in creating and sustaining competitive advantage

Résumé du document

Nowadays, companies aim is to compete in the market place. The best way for them is to develop superior capabilities or competence which will enable to lead the market, in other term, to innovate.
J.Weerawardena and A.O'Cass (2003, p3) defined innovation as "the application of ideas that are new to the firm to create added value either directly for the enterprise or indirectly for its customers, regardless of whether the newness and added value are embodied in products, processes, work organization or management, or marketing systems."
This innovation will enable firms to create or sustain competitive advantage. J.Weerawardena et al. (2003, p4) cites Hyvarinen (1990), Lengnick-Hall (1992) and Rothwell (1992); according to them, "empirical evidence supporting the view that innovation leads to competitive advantage (stronger performance)". (J.Weerawardena et al. (2003, p4))
The aim of this essay is to understand, in a first part, why firms want to create or sustain their comparative advantage through innovation. In a second part, we will explain what the limits of this strategy are; and finally, how they can create and/or sustain this competitive advantage.

Extraits

[...] They focused on the fact that this is key to developing and maintaining sustainable competitive advantages through product and process innovation”. In order to develop knowledge more quickly than competitors, firms shouldn't follow the simple product life cycle. (See Appendix Nevertheless, they had to follow what D'Aveni hold, that is, to launch a new version of this product before the first one is becoming obsolete. This is what Sony does with his digital cameras in sustaining launching new resolution of cameras. [...]

[...] (See Appendix That is what Richard D'Aveni sustained with his theory of hypercompetition or the dynamic of competitive advantage in Besanko et al. (2004, p 455). (See Appendix According to him, “economic profits rise as the advantage is developed, ( ) and the period during which advantages are sustainable is shrinking.” He added that such environments, a firm can sustain positive economic profits only by continually developing new sources of advantage”. Innovation is also the key to sustain dynamically competitive advantage. M. [...]

[...] Indeed, firms that better equipped to respond to market requirements and anticipate changing conditions enjoy long-run competitive advantage and superior profitability.” (Day 1994, cited by Weerawardena J. et al p 419) Word count: 1994 words. BIBLIOGRAPHY J.Weerawardena and A.O'Cass, (2003) Exploring the characteristics of marketing-driven firms and antecedents to sustained competitive advantage, Industrial Marketing Management, volume 33, pp. 419-428. J.Weerawardena (2003) The role of marketing capability in innovation- based competitive strategy, Journal of Strategic Marketing, volume 11, pp. 15-35. Besanko et al (2004), Economics of Strategy, Third edition, Wiley International Edition. Perman R. & Scouller J. (1999), Business Economics, Oxford: Oxford University Press. Foss N. [...]

[...] et al (2004, p517) argued that theory predicts that Schumpeterian innovation will erode sustainable competitive advantage and thus prevent leading established firms attain persistent economic performance.” In fact, an innovation is not perennial and should be renew in a cyclical way, i.e. before the last version become obsolete. In competitive market, some threats impede firms to sustain their competitive advantage. In fact, a product always has to correspond to the demand of customers and firm organization should also suppose this demand. Research and analyses of the market and of the product must be essential. III. How firms can create and/or sustain this competitive advantage? [...]

[...] Furthermore, according to Rodriguez et al (2002, p 143), innovation generates “Schumpeterian rents” and also competitive advantages for the entire society. They cited Hamel (1998) which said that “strategy innovation is the capacity to conceive existing industrial model in ways that create new value for customers, foil competitors and produce new wealth stakeholders”. (Rodriguez et al (2002, p 143)) As we can see, innovation seems to be an efficient key to create or sustain competitive advantage, but it cannot always be a successful way to sustain them. [...]