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Start-Up and Incumbent Firms in Industry Innovation (Delta County Theoretical Model)

The world is in constant change as the free hand pushes the market in directions of its choice. Nations that can perceive these changes can better align their efforts to wiggle themselves into a stronger competitive position.  Understanding emerging economic systems rests on applying explanatory theory as new phenomenon unfold in real time. Transactional clusters theories offer opportunities to understand how ground level innovation occurs and how new knowledge influences local economic success. Delta County (DC) Michigan holds in its possession underutilized shipping infrastructure and a small business community that can benefit by implementing stronger pro-investor policies.

Start-Ups and Incumbent Firms Impact Economic Growth:

Start-ups are innovative by their very nature and attract the appetites of larger incumbent firms that devour innovations to develop novel products/services. Attracting new business to Delta County and juicing these businesses with investment capital can make a big difference in the quality of economic and social life for local residents.

Aligning local businesses to the needs of the global market generates new opportunities that move beyond the smokestacks of the Industrial Age and into wireless technologies of the Information Age. Local (and national) governments don't need shoot blindly into the whirlwind of change to find safe harbor in the Digital Economy. They must instead understand the fundamental key components of new economic realities.

Delta County's digitization could very well come through industries such as global logistics/shipping, engineering, small batch manufacturing (specialized military, space, and outdoor equipment), international tourism of localized products (micro-manufacturing of outdoor sports equipment) and the thrill of activities (waterfront, trails, hunting, fishing, diving, etc...).

Underutilized Strengths of Delta County:

Delta County Michigan is a tree covered semi-isolated county nestled on the water's edged of the Great Lakes with dormant assets that haven't been seriously explored since America began its outsourcing fantasies in the 70s.  As the nation pushes to bring U.S manufacturing back, Delta County sits as a strong contender for shipping infrastructure/distribution investments, and small batch manufacturing/assembly production. Matched with its trade oriented Bay De Noc Community College and other colleges  in the area (Houghton Tech and NMU) it could ferment U.S.  Human Capital Stock within those cluster competencies (Industry-University Competencies).

The sizable military and space industry investments in the Upper Peninsula could further influence new exploration of small batch production, shipment of equipment/supplies, and regional exportation in a way that could transform this area(See shipping review Delta County MI.). Delta County can be the "Dubai on the Great Lakes" if it can attract global firms with advanced business intelligence to test out and develop ground breaking products (Our nation will begin to change quickly once new digital, shipping and manufacturing infrastructure kicks in).

What are Transactional Clusters?

Transactional clusters is an emerging line of economic thinking based on the micro-transactions (that can be measured quantitatively) that are inherent in every day business activity such as making a purchase or sending an email. When you add these transactions up across a cluster you can determine essential factors that create innovation and growth. Research on how to develop innovation at the microcosm level has taken center stage as the United States seeks to revamp lost manufacturing capacity.

Transactional clusters develop collaborative/competitive environments organically based on the way in which people, resources, and industry interact to spur economic growth (i.e. Detroit and automotive or San Diego pharmaceuticals). With research we can recreate the innovation of clusters through focused infrastructure and business investments guided by the wisdom of good government policy.

Once sparked, clusters align to global needs, innovate quickly in their effort to "beat" the market. Such environments, “involves people working together to solve problems and accomplish work in ways that are synergistic – where more is accomplished than organization members could achieve separately and additively” (Shipper et al., 2013, p. 100).

How Start-Up and Incumbent Firms Create Innovation

Innovation is uniqueness in solution while business is the practical application of that solution. Start-ups are launched by entrepreneurs that have a new and useful innovations they want to sell on the market for profit. They invest their intellectual capital and often personal resources to launch a product but all too often find themselves in need of capital infusion as credit lines become stretched thin.

Connecting corporate investors with nimble new companies developing high prospect products/services spurs research & development (Importance of University Research and U.S. & China Patents) that often leads to innovation. Larger firms crave these start-ups to keep their own products and company at the leading edge of industrial development. They are willing to invest their resources into these resource start-ups in order to gain new technologies/products that help them achieve top market positions. 

Start-Up Firms:

Scientists from TU Darmstadt University analyzed factors that influenced successful collaboration between incumbent and start-ups to create technological advancements. They analyzed key factors between the two entities to gain greater awareness of why and how they collaborate (Islam, Buxmann, & Ding, 2017).  

The study method includes:

    • Semi-structure interview of 30 experts from incumbent firms (Group IF) and digital innovation start-ups (Group SU).
    • Start-ups were characterized by beginning-introduction stages and incumbent firms were characterized by maturity in the life-cycle stages.  
    •  Individual statements were coded into factors and in turn placed in categories for analysis.

The Factors (F1, F2, etc..) found from the interviews:

      • 12 for incumbent firms and 8 for start-ups
      • Two major categories "Intention to Collaborate" and "Actual Collaboration Behavior"
      • + Positive Influence - Negative Influence
      • F= factor

How Finding Factors Helps Create Innovation?

When researchers break down oral information obtained by interviewing executives working in start-up and incumbent firms, they develop a coded framework for further analysis. The real life experiences, intentions, and behaviors of these executives are important when we consider the human elements of how and why some partnerships succeed and some never happen! All economic systems rest on human decision making and behavior and thus the real lived experiences of professionals are testimony to internal cluster dynamics.

What we are likely to find if we repeated a similar study across a wide range of clusters (i.e. large survey) is that each cluster has their own unique factor (i.e. markers) that pertain specifically to that type of industry (Side note: With a strong cluster evaluation model we could assess for markers/factors that denote specific cluster competencies đŸ‘€). If we understand what factors/markers denote successful partnerships in those clusters we can better prepare start-ups for investment interest and increased growth prospects (Measurable Strategies).

How Does this Research Apply to Delta County?

Delta County Michigan is a place that retains significant underutilized value in small batch manufacturing, distribution/shipping, and tourism. When located in the same vicinity (virtual and/or physical) the development of one industry cluster can influence the innovative product/service development line of another cluster through shared resources and capital.  Multi-cluster knowledge accumulation can sometimes lead to whole new yet to be imagined industries as new discoveries in one area are quickly adapted to other industries within connected clusters. While the theory I'm working on is an adaptive transactional theory, its specific elements have support in prior scientific research. You can read the unfinished version HERE.

A Line of Thinking

Creating theories comes from the necessity of understanding the world in which we live through accurate assessment of available information (data). It might start from a hypothesis, or question, but ultimately must find logical support through utilizing the scientific method. One way to create a strong theoretical background is to review the research and the evidence other's have collected through their own analytical assessments (nanos gigantium humeris insidentes.). The more times something is experienced and tested, the more valid a theory becomes. In this case, the theoretical development borrows from other's research and in turn seeks to connect those concepts into something that may be useful for government decision making. 

In any great problem we must fist recognize pattern distortion and then a need to overcome the chaos (Economic Theory of Chaos) through specific actions (COVID Change). The earlier we can do this, and the more accurate our market projections, the more likely we can successfully navigate market disruption. Leaders should learn to use evidence based decision making (Social Constructionist Learning) to more accurately navigate complex environmental changes that can't be easily explained by pre-existing ideological beliefs (I-Conomics); drawing upon our socialized processes to spark new behavior patterns (Me-Conomics); and, in turn development new economic systems through collaboration (We-Conomics/In process).

A few articles to help explain the general concepts (not all). Theory development requires 100's of supportive documents (literature search) to justify the premises that lead to more complex knowledge creation.

1. Attract entrepreneurs to DC. (DC Neuroeconomics and Escanaba/Gladstone Downtown )

2. Find a strategy to attract international investment/companies to "break out" products (i.e. incumbent and start-up). (Venture Collaboration and ROI Pure Michigan and Available Investor Information and DC Virtual Communities) and Export Creative Destruction and Information Venture Validation.)

3. Seek to build viable clusters based on assets of the area (i.e. rail, deep sea port, skilled labor, tourism, skilled trades etc... (Digital Nomads Land and Human Capital Stock and Human Capital FDI and Technology Skill and Venture Cap. Environ. and Tourism Micro-Manufacturing and Global Supply Chains).

4. Ensure cluster behavior ties into and is enhanced by other cluster activities (i.e. create cluster flow that produces market solutions). (Transactional Subfactors and The Working Cluster and Digital GDP and Probability of Firm Linkage

5. Utilize innovation and collaboration among existing clusters to launch new technologies and industries (i.e. entrepreneurs, articulating market problems, etc...). Multi-Cluster New Innovation and and Global Perspective and Enhancing Manufacturing.

6. Adjust government and business behaviors to develop a sustainable economic system that invests in infrastructure and encourages further business investment in a way that creates "net positives" and reduces local (i.e. national) debt. (Sustainable Systems Marketing, Interactive Value Cities, DC Great Lakes Shipping Infrastructure, and Perpetual Economic Systems

7. Create competitive model that can be used as part of a larger strategy for prime investment locations in Michigan, region, and/or nation. Game Theory U.S. and Economic Platforms (Information Age) and U.S-China Econ Platforms and Regional Development and Economic Societal Development and Cultural Advantages and Advanced Industries  and International Marketing Dev. and Global Managers and China Manufacturing and Digital GDP Govt. and Bounded Rationality and Cluster Human Rights and Haiku Eagle Eggs.

Islam, Nihal; Buxmann, Peter; and Ding, David, (2017). "Fostering Digital Innovation Through Inter-Organizational Collaboration Between Incumbent Firms and Start-Ups. In Proceedings of the 25th European Conference on Information Systems (ECIS), GuimarĂ£es, Portugal, June 5-10, 2017 (pp. 1029-1043). ISBN 978-989-20-7655-3 Research Papers. https://aisel.aisnet.org/ecis2017_rp/67

Shipper, F., C. C. Manz, K. P. Manz and B. W. Harris (2013). Collaboration that goes beyond co-operation: it’s not just “if” but “how” sharing occurs that makes the difference. Organizational Dynamics, 42 (2), 100-109. 


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