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The challenge for businesses to exploit external knowledge sources while ‘protecting’ their own knowledge is observed by Doring and Shnellenbach (Doring and Shnellenbach 2006) in their work examining knowledge spillovers.

The transition of multinationals to Open Innovation strategies is not only shown by high-profile endeavours such as Proctor and Gamble’s ‘Connect and Develop’ strategy (Huston and Sakkab 2006) but also through observations of phenomena such as “ creation of new technological competencies through the international dispersion of corporate activities ” (Cantwell and Piscitello 2005), whereby firms seek access to knowledge and opportunities in other localities.

The Procter and Gamble ‘ Connect and Develop ’ strategy is particularly interesting as it uses an Open Innovation system to provide “ more than 35% of the company’s innovations and billions of dollars in revenue ” (Huston and Sakkab 2006). Having previously focused on the internal efforts of its 8,600 scientists the company looked outside to capitalise on the 1.5 million who worked elsewhere (Chesbrough 2003).

Sustainable innovation

Economic cycles

Above we have introduced the concept of business and technology cycles as developed by Joseph Schumpeter. The concept of economic cycles including those involving technological change has also been developed by other economists such as Kondratieff, who in 1925, drew attention to the ~60 year cycles which bear his name. While his research clearly did not examine modern technologies such as ICT or Genetics, the phenomena he observed from analysis of data relating to the technology sectors of his time can still be used as a basis for contemporary analyses.

In his view, each of these long business cycles was unique, driven by entirely different clusters of industries ( [link] ). Typically, a long upswing in a cycle started when a new set of innovations came into general use - as happened with water power, textiles and iron in the late 18th century; steam, rail and steel in the mid-19th century; and electricity, chemicals and the internal-combustion engine at the turn of the 20th century. In turn, each upswing stimulated investment and an expansion of the economy. These long booms eventually petered out as the technologies matured and returns to investors declined with the dwindling number of opportunities. After a period of much slower expansion came the inevitable decline - only to be followed by a wave of fresh innovations, which destroyed the old way of doing things and created the conditions for a new upswing. The entrepreneur's role, as Schumpeter saw it, was to act as ferment in this process of creative destruction, allowing the economy to renew itself and bound onwards and upwards again (McDaniel, 2005).

Schumpeter’s wave (Copyright: The Economist, 1999).

By the time Schumpeter died in 1950, the third cycle of his ”successive industrial revolutions” had already run its course. The fourth, powered by oil, electronics, aviation and mass production, is now rapidly winding down, if it has not gone already. All the evidence suggests that a fifth industrial revolution - based on semiconductors, fibre optics, genetics and software - is not only well under way but even approaching maturity. This may explain why America shrugged off its lethargy in the early 1990s and started bounding ahead again, leaving behind countries too preoccupied with preserving their fourth-wave industries. If so, then Schumpeter's long economic waves are shortening, from 50-60 years to around 30-40 years.

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Source:  OpenStax, A study of how a region can lever participation in a global network to accelerate the development of a sustainable technology cluster. OpenStax CNX. Apr 19, 2012 Download for free at http://cnx.org/content/col11417/1.2
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