Final answer:
Large telecommunications firms often focus on improving existing products over inventing new ones due to the challenges in capturing the full social benefits of new inventions and competition that can quickly replicate innovation.
Step-by-step explanation:
The question pertains to the aspect of innovation in business where large telecommunications companies have a incentive to improve existing lines of products and services rather than creating entirely new products. This behavior demonstrates a specific innovation dynamic in large corporations and highlights the challenges related to research and development (R&D) investments. When new inventions are easily copied, the original innovator's incentive to invest in further R&D diminishes due to the lack of ability to capture the full benefits, which often spillover to other firms. As a result, the social benefits of an invention usually exceed the private benefits to the original innovator. Large companies may focus on incremental improvements to guarantee a return on investment, recognizing that they can maintain a competitive edge and earn above-normal profits temporarily before competitors replicate the innovation.
Gregory Lee, CEO of Samsung, emphasized the importance of continuous innovation as the business's core principle, indicating that innovation could enable consumers to explore new possibilities. However, this does not mean that large companies are always inflexible or that small businesses are the only sources of real innovation. Instead, market dynamics, the ability to control intellectual property, and the relative advantages of size play roles in how different firms approach innovation.