Question

What is the relationship between innovation and competitive advantage

A. Innovation is a powerful weapon for gaining and maintaining competitive advantage.
B. Innovation is the enemy of competitive advantage because it is a constant process.
C. Although innovation can help a company gain competitive advantage, it cannot help a firm maintain that advantage.
D. Because innovation happens so quickly, it is of limited use when it comes to gaining competitive advantage.

Answer 1

Innovation is integral for a firm to gain and maintain competitive advantage, allowing it to produce efficiently or provide desirable products, thereby temporarily earning above-normal profits before competitors catch up.

Step-by-step explanation:

The relationship between innovation and competitive advantage is that innovation acts as a critical mechanism for achieving and sustaining competitive advantage. Gregory Lee, CEO of Samsung, emphasizes the significance of continuous innovation for business success, highlighting that it allows consumers to experience a plethora of technological possibilities. A firm that innovates can gain a temporary lead, earning higher than average profits by being able to produce more cost-effectively or offer desirable product features before competitors catch up.

However, the caveat is that when new inventions are easily replicable, the drive to innovate diminishes, as competitors can quickly erode that temporary advantage. It is, therefore, the innovative company's ability to maintain a steady pace of innovation and protect its inventions that allows it to retain and capitalize on its competitive advantage over time.