Cmgt 515: Innovation and the Information Economy Fall 2016

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CMGT 515: Innovation and the Information Economy

Fall 2016 (rev 20160916)

Instructor: Lian Jian

Office: ANN 414A

Class meets: Th 6:00-8:50 pm @ ANN 210

Office hours: by appointment


Course Description and Aims
Innovation is the fundamental driving force of economic growth and has profound impacts in our economy, society, and daily lives. This course will explore the microeconomic and sociological foundation of innovation, the role of institutions in fostering and marketing innovation, the adoption and diffusion of innovation and the impact of government policies. In particular, we will explore answers to the following questions:

  1. What’s innovation and how to foster and protect it?

  2. How to market innovation?

  3. What’s the role of information technology in innovation?

  4. How can firms use intellectual property rights as business strategy devices?

  5. How does innovation fuel economic growth?

Grading Scheme 

A      93.0% or higher 

A-     90.0%-92.9%  

B+    87.0%-89.9% 

B      83.0%-86.9% 

B-     80.0%-82.9% 

C+    77.0%-79.9% 

C      73.0%-76.9% 

C-    70.0%-72.9%  (C- or lower is a failing grade)

D      60.0%-69.9%

F     59.9% or lower

Components of the Grade
06% Project: Part 1 -

Choice of topic(s) in innovation (most likely a firm, or some kind of start up); compilation of materials (articles, cases, books)

12% Project: Part 2a -

Descriptions of the history of the industry, technology, and the market environment; descriptions of relevant concepts that explained the innovation’s success and/or failure

24% Project: Part 2b -

Revision of Part 2a

24% Project: Part 3 -

Description of the current state and environment of the innovation; application of relevant concepts to diagnose weaknesses and explore possibilities

15% Project: Part 4a -


06% Project: Part 4b -

Response to peers’ project presentation

06% Project: Part 5 -

Peer evaluation

07% Participation in general class discussion

It is essential that you participate actively in the class discussion. Each student must contribute to the learning in this class. Ask questions, voice out opinions, and argue respectfully. In order to do so, you must read the assigned materials before class, and pay attention to arguments made by others. Staying silent is poor behavior and will result in low participation grade (e.g., 1 or 2). Active and constructive participants will receive the full score. Simply attending classes and only speak occasionally will result in a mediocre score (e.g., 3). If you are absent, disengaged or disrespectful, you will earn zero. Judgment of participation is based on the instructors’ aggregate impressions gained throughout the semester

Attendance and Punctuality
This class is designed to be small and discussion-based. So every student’s attendance and participation is important. You are allowed one absence without penalty. Thereafter, each first unexcused absence costs 2% of the total grade (being late counts as half an absence). Being absent from more than three classes opens the possibility for more stringent penalties (e.g., the highest grade to be earned is a C). Excused absences have to be documented (e.g., doctor’s note) and approved by the instructor.

Attention and Mobile Screens in Class
I know, I am obsessed with my smart phone too. However, the screens (phones, ipads, laptops etc.) have become a major distraction in classrooms. And for instructors, competing with the screens for your attention is hard. So, in order to maintain a healthy environment for learning, to build respect for each other, the instructors will ask that all screens be put down or closed, and attention focus on the topic or speaker in the front. When such a call is made, please heed. If not heeded, the behavior – continuing to be distracted by the screens - will be considered disruptive, and will be reflected in the participation portion of the grade, and penalties to the final grade.

Academic Conduct

Plagiarism – presenting someone else’s ideas as your own, either verbatim or recast in your own words – is a serious academic offense with serious consequences.  Please familiarize yourself with the discussion of plagiarism in SCampus in Section 11, Behavior Violating University Standards  Other forms of academic dishonesty are equally unacceptable.  See additional information in SCampus and university policies on scientific misconduct,

Note: Any draft submitted to the instructors is a formal document, subject to the University’s policies regarding plagiarism. Plagiarism is not excused for drafts.
Discrimination, sexual assault, and harassment are not tolerated by the university.  You are encouraged to report any incidents to the Office of Equity and Diversity or to the Department of Public Safety 

This is important for the safety whole USC community.  Another member of the university community – such as a friend, classmate, advisor, or faculty member – can help initiate the report, or can initiate the report on behalf of another person.  The Center for Women and Men provides 24/7 confidential support, and the sexual assault resource center webpage describes reporting options and other resources.

Support Systems

A number of USC’s schools provide support for students who need help with scholarly writing.  Check with your advisor or program staff to find out more. 

Students whose primary language is not English should check with the American Language Institute, which sponsors courses and workshops specifically for international graduate students.  The Office of Disability Services and Programs provides certification for students with disabilities and helps arrange the relevant accommodations.  If an officially  declared emergency makes travel to campus infeasible, USC Emergency Information provide safety and other updates, including ways in which instruction will be continued by means of blackboard, teleconferencing, and other technology.

Readings and Viewing Materials
The following books are required:

  • You will need to use this link to purchase the course pack on Harvard Business Review: During the semester new cases might be added and for each case there is a $4.25 fee. In total you should expect the cost to be somewhere between $25 ~ $35.

  • Shapiro, C. and Varian, H. R. (1999) Information Rules: A Strategic Guide to the Network Economy. Boston, Massachusetts: Harvard Business School Press. Free download at:

  • Other readings will be specified in the week-by-week agenda below. Many will be provided on Blackboard, the course management system.

  • For your major course project, you should be prepared to spend some funds (about $50) to acquire additional materials.

Weekly Topics:

Week 1 (Aug 25): Introduction: What is Innovation?
Varian, H. R. (2004). Review of Mokyr’s Gifts of Athena.” Journal of Economic Literature
, 42(3), 805–810.
Salter, A., & Alexy, O. (2014). The Nature of Innovation. In M. Dodgson, D. M. Gann, & N. Phillips (Eds.), The Oxford Handbook of Innovation Management (pp. 26–49). Oxford University Press.
Watch this Ted talk: The Art of Innovation

Hand-out: Schumpeter: P. 6 in The Oxford Handbook of Innovation.

Mokyr, J. 1992. “Technological Inertia in Economic History,” Journal of Economic History, Vol. 52, No. 2, pp. 325-338.

Part I: The Nature of Innovation
Week 2 (Sep 1): Product, Process, and Organizational Innovation

Hendricks, D. (2016) 3D printing is already changing health care, Harvard Business Review.

Jovanovic, B., & Rousseau, P. L. (2005). General purpose technologies. Handbook of economic growth, 1, 1181-1224. (2016) March of the Machines: A Special Report on Artificial Intelligence, June.
RollingStone (May 23, 2016): Will Virtual Reality Change Your Life?
HBR Case: McCue (2015) 3D printing is changing the way we think
Economist, (2012), A third industrial revolution, Apr 21.
Nelson, R. R. (1962). The Link Between Science and Invention: The Case of the Transistor (pp. 549–583). Princeton University Press.
Week 3 (Sep 8): Financing Innovation
Project Part 1 due at 6pm on Blackboard
HBR case: Note on the venture capital industry

Zider, Bob (1998) How Venture Capital Works? HBR (2015) Venture Capital: Disrupters Disrupted, Mar 16th. (2015) Silicon Valley: To fly, to fall, to fly again, Jul 25th.

Sahlman (1997) How to write a great business plan
HBR case: Dyer and Furr (2015) Tesla Motors: Disrupting the Auto Industry?
HBR case: A note on valuation in private equity
Hall, B. H., & Lerner, J. (2010). The financing of R&D and innovation. Handbook of the Economics of Innovation, 1, 609-639.

Week 4 (Sep 15): Open Innovation
What Tesla Stands To Gain From Sharing Its Patents, Forbes, Jun 16, 2014.
Chp 2 “Development of Products by Lead Users” and Chp 6 “Why Users Often Freely Reveal Their Innovations” in von Hippel, Eric A., Democratizing Innovation. Democratizing Innovation, MIT Press, Cambridge, MA, April 2005. Available at SSRN:
HBR case: Lakhani, Hutter, Pokrywa, and Fuller (2013) Open Innovation at Siemens
Alexy, Oliver and Dahlander, Linus (2014) Managing open innovation, in the Oxford Handbook of Innovation Management. Oxford University Press.
Part II: Innovation in the Age of Information
Week 5 (Sep 22): Price discrimination and Market segmentation

Project Part 2a due at 6pm on Blackboard

Machlup, F. (1955) Characteristics and types of price discrimination

(Eds) Stigler, G. J., Business Concentration and Price Policy, Princeton University Press.

Cravens, D. W., and Piercy, N (2006). Strategic marketing. Vol. 7. New York: McGraw-Hill.

Week 6 (Sep 29): Locking-in and Network effects
Shapiro, C. and Varian, H. R. (1999) Information Rules: A Strategic Guide to the Network Economy. Boston, Massachusetts: Harvard Business School Press. Chapter 5, 6, and 7.
Scotchmer, S. (2004) Innovation and Incentives. Cambridge, MA: MIT Press. Chapter 10 Networks and Network Effects
Week 7 (Oct 6): Business Model Innovation (2015) Schumpeter: Shredding the rules. May 2nd.

Girotra, Karan and Netessine, Serguei (2014) Four paths to business model innovation, Harvard Business Review, July-August Issue.
HBR case: Johnson, M W., Christensen, C. M., Kagermann, H. (2008) Reinventing Your Business Model
HBR case: Zhu and Acocella (2016) Fasten: challenging UBER and LYFT with a new business model
Massa, L., & Tucci, C. L. (2013). Business model innovation. The Oxford Handbook of Innovafion Management, 420-441.
Stephens, M. (2016) History of Newspapers

Week 8 (Oct 13): Sharing Economy
Project Part 2b due at 6pm on Blackboard

Chapter 1, 2, and 3 in Sundararajan (2016) The Sharing Economy

Malhotra, A., & Van Alstyne, M. (2014). The dark side of the sharing economy… and how to lighten it. Communications of the ACM, 57(11), 24-27.
HBR case: Hoffman (2016) Uber and the Sharing Economy: Global Market Expansion and Reception
Guttentag, D. (2015) Airbnb: disruptive innovation and the rise of an informal tourism accommodation sector. Current Issues in Tourism, 18(12), 1192-1217

Week 9 (Oct 20): Growing a Platform
Eisenmann, T., Parker, G., and Van Alstyne, M. (2006). "Strategies for Two-Sided Markets.” Harvard Business Review
Brown, M. (2016). Airbnb: The Growth Story You Didn't Know. Growthhackers, 1–42.
Brown, M. (2016). [Ideas Inside] The Story of Etsy's Crafty Growth to IPO and a $2 Billion Valuation. Growthhackers, 1–46.
Brown, M. (2016). Uber — What“s Fueling Uber”s Growth Engine? Growthhackers, 1–18.
HBR case: Teixeira and Brown (2016) Airbnb, Etsy, Uber: Growing from One Thousand to One Million Customers

Week 10 (Oct 27): Teamwork Time
You should use this as an opportunity to work together on your project

Week 11 (Nov 3): Cultural Effects, Diversity, Geographic Stickiness of Innovation

Readings to be added
Week 12 (Nov 10): Teamwork Time
You should use this as an opportunity to work together on your project, and prepare for your presentation.

Week 13 (Nov 17): Project Presentations (Project part 4a)

Week 14 (Nov 24): No Class --- Have a Great Thanksgiving Break!

Week 15 (Dec 1): Guest speaker

Week 16 (Dec 8): Project Part 3, 4b and5 due at 9pm on Blackboard

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