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The aim of this book is to contribute to the understanding of product innovation – how it takes place and how it affects the economy. Our analysis of product innovation links it to interactive learning and to the performance of firms. On the basis of unique data sets and detailed case studies we study the interconnections between these three elements from different angles. We believe that the book will prove helpful for managers, employees and policy makers as well as for all those in academia who wants to understand the role of product innovation in the economy.

This chapter treats the management’s understanding of the potential of managing interaction between product innovation and learning. The chapter draws its empirical results from interviews with the management, project leaders, and other employees working on product innovations in five manufacturing firms visited three to four times during 2001–2002. It is shown that the managed interaction between innovation and learning is promoted by explicit strategic consideration and most strongly by a knowledge management strategy. Important positive and negative structural conditions are highlighted.

This chapter treats new product development in relation to management and organization. The data comprise new product development within four Danish manufacturing firms studied by interviewing the management, product leaders and other employees. The results show how integrated product development procedures have furthered a stronger market orientation. The stage-gate version of integration has fertilized knowledge across functions. The new procedures have made the understanding of cooperation across functions topical and have been followed up by more involvement of the employees. The changes have run into barriers which to a certain extent have been met by organizational changes.

This chapter extracts a broad range of learning situations in connection with product innovation. The data comprise interviews with the management and employees in five Danish manufacturing firms visited during 2000–2001. Among important learning situations and factors promoting learning have been found the firms’ contacts with customers, project leaders’ cross functional coordinating activities, and cooperation with suppliers and knowledge institutions. The restraints upon learning comprise inter alia strategic patterns, tight time planning, old routines and communication difficulties, changing of roles, ad hoc decisions on training and education and some times among employees lack of motivation. Some policy perspectives are outlined.

In relation to firms’ innovative performance this study investigates the importance of human capital for the firm’s absorptive capacity. The estimation of an ordered probit model including 1938 firms from the private manufacturing and non manufacturing sectors shows that the share of highly educated employees, development of a closer relationship with both vertically related actors and knowledge institutions and, application of human resource management (HRM) practices within the firm, not only promote the ability to innovate but also reduce the degree of innovative imitation. Finally, estimations according to size show that development of a closer relationship with a complete network of actors is especially important for firms with less than 50 employees.

In this chapter it is shown that, in spite of the fundamental importance for economic growth of product innovation, standard economic theory – neo-classical as well as transaction cost approaches to industrial organization – tends to neglect it. It is also shown that moving the focus to product innovation leads to very different conclusions on how alternative institutional set-ups affect economic performance. Institutional set ups assumed to optimise allocation and minimise transaction costs do not support innovation and growth. That is why producer goods where innovation is a regular phenomenon are transacted neither in pure markets nor in hierarchies. The omnipresence of “organized markets” reflects the need for users as well as producers to engage in on-going information exchange and interactive learning in connection with product innovation.

This chapter is about the production, diffusion and use of knowledge seen in an economic perspective. Fundamental distinctions between tacit and explicit knowledge and between know-how, know-why, know-what and know-who are related to distinctions between public/private and local/global knowledge. It is argued that the idea of the economy as being knowledge based is misleading and that we have moved into a learning economy where interactive learning is a key to economic performance of firms, regions and nations. This is one reason why a narrow economic perspective is insufficient. When it comes to understand industrial dynamics in the learning economy it is necessary to bring in other disciplines than economics in the analysis.