Innovation in Complex Systems Industries: the Case of Flight Simulation

Abstract

The paper proposes that the notion of complex systems usefully describes a group of large scale, customized products and their associated supply industries. Examples include flight simulators (FSs), telecommunications exchanges, military systems, airplanes, chemical process plants and heavy electrical equipment. Complex systems, made up of many interconnected customized components, exhibit emerging properties through time as they respond to the evolving needs of large users. Taking the FS industry as a case history, the study identifies some of the basic rules governing innovation in this industry. These rules contrast sharply with those typically found in the ‘conventional’, market contest Schumpeterian model. Innovation in FS is coordinated by an institutional structure made up of suppliers, users, regulators, industry associations and professional bodies. In contrast with co, wentional market selection, new designs are negotiated prior to product development. Long-term stability among FS makers is observed, despite radical technological discontinuities, as industrial adjustment occurs via the exit and entry of specialist suppliers. There is no dominant design in the usual sense, nor do the conventional rules of volume competition and process-intensive innovation apply in FS. Competitive strategies remain focused upon design, engineering andprototype development, rather than incrementalprocess innovation. Collaboration occurs among the innovation actors within institutions created by them to harness innovation and to allow new product markets to develop. Recognizing the limits of a single case, the paper suggests that other complex systems might exhibit similar processes for governing innovation and reducing risk and uncertainty in the absence of conventional Schumpeterian market mechanisms.