Rivalry, Learning and Variation in Innovative Activity

In the last chapter we looked at inter-industry differences in R & D activity in the context of the. open system framework. In order to do so, certain restrictive assumptions were placed on the analysis, and possible effects of intra-firm ø variables on the analysis were ignored. In this chapter we examine some aspects of variation in innovative activity1 within industries. While the open system framework appears to have facilitated interpretation and analysis of R & D activity at industry level in Chapter 7, the assumption of ‘representative firm’ does ignore the fact that industries typically incorporate a rich variety of types of corporation operating with a wide range of values of the ø variables. While the representative firm argument is useful as a first analysis and for explanation of certain gross features of industry behaviour, we are also interested in the possibility that the open system framework may be relevant for studying internal aspects of industry behaviour in this area. In doing so, it will be useful to bear in mind the central assumption of Chapter 6, that management seek to establish a pattern in their perception of corporate-industry relations. The way that this resource preference system is built up is through feedback from experience of past allocations. The steady-state allocations are learnt through this iterative process of resource allocation.