International Business

Third Edition

Shad Morris and James Oldroyd

Chapter 12

Global Innovation and Intellectual Property

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Introduction
“Artificial intelligence and the internet of things is changing
the nature of man daily tasks and jobs on a global scale.
Developments in neuroscience and genetic engineering are
altering the ways we treat and prevent diseases. Virtual reality
may transform health care, travel, and recreation ”.
Learning Objectives
1. Identify three types of innovation that can fuel global
growth.
2. Outline ways to invest in global R&D operations.
3. Describe ways that companies drive innovation.
4. Discuss how firms can protect their intellectual
property.
 Innovation as a Tool for Global
Growth
• Invention- a new concept or product that derives form ideas or from
scientific research.
• Innovation- combination of new or existing ideas to create
marketable value.
• The inputs used to innovate could be new inventions or they could
be old ideas.

FIGURE 12.1 Primary components of innovation

For something to be truly innovative, it should be
desired by consumers, possible to make with
technology, and be commercially viable in that
someone can make money from building and selling it.
Three Kinds of Innovation
• Performance-improving innovations
• Efficiency-enhancing innovations
• Market-creating innovations
Global Innovation
Key terms:
• Performance-improving innovations- improvements to
existing products or ideas that meet more of a customers’
needs
• Efficiency-enhancing innovations- changes to existing
products or ideas that make them lower costs
• Market-creating innovations- products or ideas that meet the
needs of a group of potential consumers whose needs have
not been met before
Innovation in the Auto Industry

FIGURE 12.2 Innovation in the auto industry Karl Benz of Mercedes Benz
invented the automobile (left). Henry Ford of Ford Motor Company
innovated by combining ideas on assembly lines with car production (right).
Performance-Improving Innovations
Future iPhones will likely get thinner or move away from a
handheld device altogether.

FIGURE 12.3 The future of the iPhone

Coming to an Apple Store near you!
Efficiency-Enhancing Innovations
The grocery store Aldi, headquartered in Germany, was founded to
meet consumers’ daily market needs at a much lower cost than that
of its competitors.
FIGURE 12.4 Aldi offers a low-cost
food option The firm has been
growing internationally and has
stores opening across the United
States.
Market-Creating Innovations
The Chinese telecom company Huawei developed and marketed a system
that was a fraction of the price and size, opening a market that had been
previously ignored.

FIGURE 12.5 Huawei’s innovation

journey Huawei has moved from
being a copycat company, developing
low cost products, to becoming a
lead innovator in the
telecommunications space.
Evolution of Smartphones
It was at about this time, in 2007, that Apple’s iPhone was
introduced in the United States—a full 15 years after IBM’s
pioneering phone(Figure 12.6).

FIGURE 12.6 Evolution of

smartphones IBM’s Simon Smart
Phone from 1992 compared with the
Apple iPhone in 2007.
Investing in Innovation
• All companies must innovate if they hope to stay competitive
and continue to grow.
• To compete in this environment, companies have begun to
spread their innovation efforts across multiple markets,
including emerging markets.
• Benefits of Innovation:
o Developing products to meet local needs
o Decreasing costs of innovation by moving some R&D to
countries where resources are cheaper
o New ideas to help solve old problems
Evolution of the Razor

FIGURE 12.7 Evolution of the razor Clockwise from left: A double-edge razor, a
Schick Hydro, and a Gillette Guard.
Evolution of the Razor Continued
The Guard was priced at a
fraction of the cost of the
premium razor and
promised a high-quality
shave, featuring an easy-
rinse cartridge to limit
water consumption and a
lightweight ribbed handle
for ease of use and safety.

FIGURE 12.8 Gillette Guard compared with

the Fusion ProGlide and double edge
razors
 From Local to Global Innovation
If a company is in an
industry where
consumer tastes change
frequently or are
difficult to assess, the
center of innovation
should be set up locally,
close to the customers.
FIGURE 12.9 LG’s global R&D locations Because LG Lighting needs to adapt its
lighting products to most of its local markets, it has 89 R&D subsidiaries and 29
local offices to support R&D located throughout the world. The largest R&D
operation is in Korea, but Europe, Russia, China, North America, the Middle East
and Africa, and South and Central Europe all have their own R&D Centers.
Global R&D Operations
• Multinationals follow a common philosophy that says they
should put their R&D operations where the need for
information collection and processing is the greatest.
• Open Innovation platforms- electronic platforms through
which people from different companies and independent
contractors work collaboratively with internal R&D staff to
innovate.
Driving a Culture of Innovation
• Company culture- the unique combination of a company's
vision, values, norms, systems, symbols, language,
assumptions, beliefs, and habits
Specific investments to build a culture of innovation:
• Foundations of culture
o Corporate role models- leaders who demonstrate
ideals of innovation
o Stretch goals
• Innovators imperative
o Go local
o Reach Out
o Uncover Principles
 Advocacy for Innovation

FIGURE 12.10 Jack Ma

Ma is one of China’s richest men and a strong advocate for continual
innovation.
 The Innovator’s Imperative

FIGURE 12.11 The innovator’s imperative Building a culture of innovation within

foreign units starts with global products and processes developed at the corporate
level. Local units first modify and develop these processes and products to make
them their own. Then each unit reaches outside its local context and finally tries to
uncover underlying principles in knowledge from abroad.
Protecting Intellectual Property
Ways to keep intellectual property safe:
• Patents
• Copyrights
• Trademarks
• Trade Secrets
• International bodies and law governing IP
Protecting Intellectual Property Example
Even with IP protection, not all
global companies win their
complaints. Louis Vuitton lost a
trademark suit and appeal for its
famous checkerboard pattern found
in handbags and clothing. A court
based in Luxembourg ruled that “the
checkerboard pattern, as
represented in the contested
trademark, was a basic and banal
feature composed of very simple
elements.”52It was not able to be
FIGURE 12.12 Louis Vuitton’s
trademarked because it lacked a checkerboard pattern Turns out
monogram or other distinguishing that even Louis Vuitton can’t Patent
feature(Figure 12.12). a checkerboard pattern.
Patents

FIGURE 12.13 Number of U.S. patents granted, 1790–2020

Similar trends are evident across the globe, particularly in China.
Advantages of Patents
• Patents have a long history, and more than 150 countries
recognize and use them.
• The agreement most of them have adopted enables patent
applicants to seek protection in148 countries simultaneously
across the globe.
FIGURE 12.14
Patents are
recognized
worldwide Countries
that recognize the
international patent
system as of 2022 are
highlighted in blue.
 Trademarks
The German footwear maker Adidas vigorously defends its trademarks. In
2008, the company won a $305 million judgment against Payless Shoe
Company after Payless copied Adidas’s three-stripe design.

FIGURE 12.15 Trademarked

Footwear
Adidas works hard utilizing
trademarks to protect its iconic
three strip design.
Trade Secrets
Trade secrets can include
designs, patterns, formulas,
ideas, and processes. One
of the most famous trade
secrets is the recipe for
Coke, the world’s most
popular soda. The recipe
sits in a vault in the
company’s museum, as
shown in Figure 12.16
FIGURE 12.16 The Coca-Cola vault
Inside this vault is the recipe for Coke.
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