Innovation Studies

The Sites of Innovation

Historically, innovation has transpired in two settings: industries or firms. In industries, actors who might otherwise be competitors collaborate in pursuit of a common goal. This occurred in Gilded Age America, when different railroads grappled with a series of tragic accidents and joined forces to adopt new technologies and technical standards for the greater good. These new artifacts—secure coupling devices and a uniform set of colors for signals—were recent inventions, but the innovation was their application throughout the railroad industry. Similar innovation occurs today at the industry level through trade associations or standard-setting agencies, such as the National Bureau of Standards and the International Organization for Standardization, or ISO. The main function of standards is to facilitate the flow of products from farms, forests, mines, and sea to processing and manufacturing plants and to the ultimate consumer.

In firms, innovation historically occurred when companies sought to improve existing processes and products or to create entirely new ones. In the first case, innovation was often linked to the rise of big business and the quest for economies of scale. As large firms made standardized goods for oligopolistic markets, they competed by introducing efficiencies in production, packaging, and distribution. In mass-production industries like meatpacking, cost-cutting imperatives gave birth to new processes, as was the case in Chicago at the turn of the last century. The slaughterhouses of Armour and Company and Swift & Company did not invent a new type of cow, sheep, or hog, but they achieved scale economies in part through a manufacturing innovation, the “disassembly” line. At the firm level, innovation could also be linked to the basic need to develop new products. Manufacturers that followed this path moved from one business cycle to the next in pursuit of “novelty.” They relied heavily on flexible production practices, awarded managers a great deal of autonomy, and paid considerable attention to the external environment. For example, in New York City's garment district, which enjoyed a golden age of manufacturing from the 1920s through the 1980s, firms developed products by keeping tabs on Paris fashion and adapting new French styles to suit the distinctive needs of the American market.

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