ABSTRACT

Innovation, Consumption and Knowledge:
Services and Encapsulation

CRIC Discussion Paper No. 62

Professor Jeremy Howells

The paper explores the role that consumption plays in the innovation process. The study first seeks to provide a comprehensive review of current literature on the subject of consumption and innovation. The analysis then moves on to more specifically consider how the consumption process helps articulate and frame the dynamics of innovation. It is argued here that knowledge generation and transfer plays a key role within this context. The paper focuses on one particular aspect of the consumption process as it relates to innovation, namely the role of intermediate demand and consumption and the interface between services and manufacturing within innovation. This examines the role of the firm as the consumer of new goods and services, and the interactions between firms as consumers and producers; i.e. beyond the boundaries of the firm. As a lens into this interaction between manufacturing and services the paper explores a phenomenon termed here as 'encapsulation'. This phenomenon helps suggest a new perspective on what consumption and innovation are about. Lastly, the paper considers the role of consumption in terms of firm's repertoire of capabilities and how its strategic potential remains largely unfulfilled.

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