Management of Technology and Innovation in Japan

Global Innovation and Knowledge Flows in Japanese and European Corporations 315
found implications on innovation strategies and on sourcing decisions within
MNCs.
�� Key Issue 1: Where is the Core of Value Added in the Innovation Process /
The Functional Source of most advanced Knowledge?
Where is the Engine in the Innovation Process?
Technology-push type Innovation
Researchbased
Innovation
Engineering Innovation
/ Advanced
Manufacturing
Traditional Interpretation / Linear-sequential Innovation Process
Problem-induced Innovation / Lead Market Pull
Lead Market Innovation
/ Advanced
Services
Changing Pattern of Knowledge Flow in the Innovation Process
�� Key Issue 2: Where is the Geographical Center / Locus of Innovation?
Where can we best learn about the Winning Combination?
Fig. 1. Innovation moving downstream / Reversal of knowledge flows in the innovation
process
In order to study knowledge flows within MNCs and effective new ways of
structuring innovation processes across locations and functions, we have to address
two key issues.
1. Where is the core of value added in the innovation process? Where is the functional
source of innovation? Which type of knowledge is most critical for leveraging
innovation? For illustrative purposes, we call this the engine or the
driver of the innovation process. 4
2. As a second key issue, we will ask: where is the geographical center, the best
place to learn about and implement a particular innovation in the world? In
which region or country do MNCs need to concentrate their most advanced innovation
activities?
Let us first address key issue # 1, the analysis of the core of value added in the
innovation process. Which factors or functional activities drive the innovation
4 For a more detailed description of functional sources of innovation see von Hippel
(1988, 1994) and Gerybadze (2004a: 16 ff.).