So again, let's take an example. Here, the example of the electric car.
Simply developing the electric car would be a drastic innovation.
Why? Because if electric cars take off, this
could potentially replace the entire market for fuel-powered cars,
petrol-powered cars. Right?
So potentially this has huge implications for the market for cars.
Incremental innovation here would be the improvement of a battery unit that
increases the range of the electric car. So again we would expect higher profits
from that, we would expect higher market shares from that, but not necessarily
complete replacement of the existing product with a new innovation
with the new battery unit. Okay so again drastic versus incremental
innovations are important if we think about what they mean for the dynamics of
the market. In drastic innovations we expected a completely new
shape of the market, structure of the market, incremental innovations will lead
to slight shifts. So in these last two videos we set the
fundamentals, the fundamental principles and definitions for all that follows in
the next couple of videos. We first learned that there are 3 stages of
R & D. Specifically, basic research and applied
research and product development. Basic research is difficult to protect
through patents, and it's mainly, therefore, undertaken by universities,
public laboratories and networks of firms.