Technological Innovations and Trajectories in the Manufacture of Diamond Jewelry

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Chapter 2: Literature Review

Technological Innovation

In the context of an organization, technology is associated with competitive advantage in terms of technological change, or technological innovation. Moreover, technological innovation is considered a driving force for competitive advantage. This linkage has been addressed by Porter (1985 & 1990) and other scholars (Bell, 1973; Burgelman, Maidique, & Wheelwright, 2001; Hamel & Prahalad, 1994; Schumpeter, 1942; Solow, 1956; Stoneman, 1995).

Technological innovations help in creating new possibilities in the designing of the product, the processes through which it is produced, promoted and marketed, and supplied or delivered to the customers, along with the way services are provided to the customer (Stoneman, 1995) . Firms have been seeking to create competitive advantage by discovering innovative and new ideas and more improved ways for competing within the industry in order to bring those products and services to market (Porter, 1990). Schumpeter (1942) indicated that competition is profoundly dynamic in character.

There is no equilibrium in competition, and improvement and innovation in an industry are a never-ending process. The competitive environment is a continuously changing landscape at which new ideas, innovative products, new marketing and promotional techniques, new processes for production, and completely new market segmentations emerge. From a basic economics perspective, technology is considered a means for transforming available factor inputs, or resources, into marketable value-added outputs (Stoneman, 1995). Productivity is the value of those outputs. Improving productivity requires minimizing the cost of resource inputs and maximizing customer perceived value of outputs. Furthermore, continuous productivity improvement is required to sustain a competitive advantage (Sharif, 1995).

Historically, the factors of production necessary to compete in any industry have often been described in very broad terms such as land, labor, and capital. According to Porter, this classification is too general to have a bearing on competitive advantage in strategically distinct industries (Stoneman, 1995). Those resources most important to achieving and sustaining competitive advantage in most industries are created, not inherited (Porter, 1990). Competitive advantage from those resources depends on how efficiently and effectively they are managed, and the value of particular factors can be dramatically altered by the choice of technology (Stoneman, 1995). The stock of resources at any particular time is less important than the rate at which they are created, upgraded, and made more sophisticated. Therefore, sustaining competitive advantage over time demands that the sources of advantage be upgraded, and upgrading demands more sophisticated technology (Porter, 1990).

With the integration of technological innovation, firms are empowered to control the scarcity of resource factors by bringing new procedures and processes, and thus, have also reduced the significance of some of the factors. For instance, by the integration of automated procedures, the labor content and quantity with respect to many products have been reduced in a number of industries. It has also given accessibility to-the-state-of-the-art technology, which has gained more attention than the low wage rates. There has been a substantial reduction in the use of energy, material and other resource-based inputs, and ...