Innovation

In business and economics, innovation is the catalyst to growth. With rapid advancements in transportation and communications over the past few decades, the old world concepts offactor endowments and comparative advantage which focused on an area’s unique inputs are outmoded for today’s global economy. Now, as Harvard economist Michael Porter points outcompetitive advantage, or the productive use of any inputs, which requires continual innovation is paramount for any specialized firm to succeed. Economist Joseph Schumpeter, who contributed greatly to the study of innovation, argued that industries must incessantly revolutionize the economic structure from within, that is innovate with better or more effective processes and products, such as the shift from the craft shop to factory. He famously asserted that “creative destruction is the essential fact about capitalism.” In addition,entrepreneurs continuously look for better ways to satisfy their consumer base with improved quality, durability, service, and price which come to fruition in innovation with advanced technologies and organizational strategies.

One prime example is the explosive boom of Silicon startups out of the Stanford Industrial Park. In 1957, dissatisfied employees of Shockley Semiconductor, the company of Nobel laureate and co-inventor of the transistor William Shockley, left to form an independent firm, Fairchild Semiconductor. After several years, Fairchild developed into a formidable presence in the sector. Eventually, these founders left to start their own companies based on their own, unique, latest ideas, and then leading employees started their own firms. Over the next 20 years, this snowball process launched the momentous startup company explosion of information technology firms. Essentially, Silicon Valley began as 65 new enterprises born out of Shockley’s eight former employees.