Exploring the sources of innovation of the firm has central in the economics of innovation research. While both internal and external sources of innovation have been addressed, R&D activity is regarded as the main internal source of innovation and learning. Using a multiple case study approach, this articles investigates the role of industrial design as an internal source of innovation and learning of the firm. It arises that innovation activity in industrial design is characterized by firm-specific knowledge and learning processes, as well as intra-functional linkages within the firm and outside it. Also, industrial design stimulates not only product innovation, but also process innovation.49019

1. Introduction

Exploring the sources of innovation of the firm has been a central issue in the economics of innovation debate. Inspired by the importance of technical change for economic development and economic growth, scholars have devoted a lot of attention to the role played by Research and Development (R&D) activity as the key source of innovation. For numerous years ‘the process of R&D has been equated with innovation’ (Kline and Rosenberg, 1986). Along with formal R&D activity, other sources have been explored such as learning by doing and learning by using (Arrow, 1962; Rosenberg, 1976; Kline and Rosenberg, 1986; Freeman, 1994). Further, scholars have pointed to the importance of the sources of innovation external to the firm such as supplies and customers (von Hippel, 1998; von Hippel, 2005), as well as different within the social context (Lundvall and Johnson, 1994; 1998).

2. The sources of innovation: how firms learn

The sources of innovation are intimately linked to learning processes and capability to make use of knowledge of the firm. In the realm of the resource-based theory of the firm, the latter is conceived as an absorber, processor and generator of knowledge (March and Simon, 1958; Penrose, 1959; Cyert and March, 1963; Nelson and Winter, 1982). Knowledge differs from information as it implies understanding, elaboration, and assimilation of information. Given that technological knowledge has demonstrated to be very firm- and context-specific, the learning process of the firm assumes a central prominence in exploring innovation (Malerba, 1992; Archibugi and Lundvall, 2002). Research has shown that learning is characterized by some key characteristics: (1) is a rather complex activity requiring specific procedures, organizational routines, and the development of dynamic capabilities (Nelson and Winter, 1982; Teece and Pisano, 1994; Dosi et al., 1996; Nelson and Winter, 2002); (2) is local, contextual and tend to develop in a ‘coherent’ way (Teece et al., 1994; Antonelli, 2001; Piscitello, 2004); (3) is cumulative and path dependent (Dosi, 1982;

Antonelli, 1997; Dosi, 1997); (4) it relies on many sources belonging to different context (e.g. science, R&D activity, production, marketing) that can be both internal and external to the firm.

Besides the formal R&D activity, other sources of innovation have been explored. In his ‘The economics implications of learning by doing’ Arrow (1962) points to the importance of the manufacturing stage as a fundamental source of learning and source of technical change and reduction of real labour costs per unit of output. Lately, Rosenberg (1982) distinguishes between gains that are associated to the production process (doing) and gains that are generated as a result of subsequent use of that product (using). He argues that there are essential aspects of learning that are a function of the utilization by the final user.

As Freeman (1994) summarizes “The picture which thus emerges from numerous studies of innovation in firms is one of continuous interactive learning […] Firms learn both from their own experience of design, development, production and marketing and from a wide variety of external sources at home and abroad- their customers, their suppliers, their contractors” (p. 470) (see also Cantwell and Fai, 1999; Laursen and Salter, 2004; Reichstein and Salter, 2006; Vega-Jurado et al., 2009). This wealth of empirical research shows that firms learn from several sources, both internal and external. However, we claim that the importance of industrial design as a source of innovation of the firm has been downplayed (for an important exception see Walsh, 1996). This is well reflected also in the ‘innovation modes’ research, whereas industrial design has been rarely taken into account (Filippetti, 2011).