There are many ways to define innovation. In a nutshell, however, it can be described as the act of producing something new, in order to obtain a sustainable competitive advantage that will in turn generate profit.
For decades, from the first industrial revolution all the way to the 1970s or 80s, corporations did keep their creative processes strictly internal. They were afraid competitors might steal their inventions, and thus created R&D departments, in which extreme secrecy and confidentiality were the rules. Neither outsourcing, nor sharing innovation was considered a credible alternative.
Actually, cooperation already existed. In 1890, Alfred Marshall identified what he called “industrial districts”1. Those were (and still are) places where workers and firms, specialised in a main industry and auxiliary industries, lived and worked. The idea was to achieve economies of scale, through lower production and transaction costs, and on the basis of a series of relationships that could be financial – loans or funding schemes-, informal –exchanges of information- or conducive to the sharing of teaching methods, good practices or skills. Marshall’s observations in industrial England were complemented in many other countries, including Italy. In 1978, an Italian economist called Becattini2 studied what he called “socio-territorial entities characterised by the activities of a community of people and a population of businesses in a single given geographic and historic area.” In such environments, the drivers for competitiveness were specialisation, division of labour and local know-how.
In the early 80s, however, as the economy became increasingly global, these small local communities were severely impacted. Concentration and the search for critical mass became the name of the game. But somehow, industrial districts managed to reinvent themselves, by integrating innovation and placing it at the heart of both creative and production processes. This is what, for instance, will give birth to the Silicon Valley.