Research Policy 29 Ž2000.
793–804
Editorial
Innovation in complex products and system q
1. Introduction
Over the past 5 to 10 years, empirical study has
provided a much improved understanding of how
innovation occurs in complex, high value capital
goods. Research has began to illustrate the specific
ways in which so-called complex products and sys-
tems ŽCoPS. are produced by firms, often working
together in projects, and how innovation processes in
CoPS differ from those commonly found in mass
produced goods. This is an important research en-
deavour for at least three reasons. First, CoPS play a
vital part in the modern economy and wider society.
As the major capital goods which underpin manufac-
turing, services, trade and distribution, CoPS play a
critical role in modern industrial and economic
progress. As Rosenberg Ž1976. has argued, capital
goods are a key point of entry of new technology
into the economic system. Second, because much
conventional innovation wisdom is derived from re-
search on high volume consumer products, new evi-
dence, models and concepts are needed to properly
understand innovation processes in CoPS. Third, at
the practical levels of firm strategy and government
policy, a robust understanding of innovation in CoPS
is needed to enable firms to improve their perfor-
mance and to guide the policy and regulatory agen-
cies directly involved in decision-making in CoPS.
q the industrial and wider economic system.
The research for several of the papers contained in this edition
was supported by the CoPS Innovation Centre funded by the UK
Economic and Social Research Council ŽESRC.. The editors
would also like to thank the UK Engineering and Physical Sci-
ences Research Council ŽEPSRC. for research support. Further
information on the Centre can be found at http:rrwww.
susx.ac.ukrsprurcopsr.
0048-7333r00r$ - see front matter q 2000 Elsevier Science B.V. All rights reserved.
PII: S 0 0 4 8 - 7 3 3 3 Ž 0 0 . 0 0 1 0 5 - 0
www.elsevier.nlrlocatereconbase
Drawing from recent research, the purpose of this
special issue is to provide substantial new insights
into the innovation dynamics of CoPS, dealing with
firm strategy, capability building, management prac-
tices, organisational form, product life cycles, gov-
ernment policy, measurements and conceptual frame-
works. In this introduction, we argue not only that
CoPS underpin the production of modern goods and
services, but that much conventional innovation wis-
dom derived from studies of mass produced goods
Že.g. the automobile and the semiconductor. either
does not apply or applies with substantial qualifica-
tion to CoPS. The aim of the Issue is to put innova-
tion in CoPS ‘centre stage’ in the analysis of innova-
tion.
Part 1 of the introduction provides a definition of
CoPS, highlighting the innovation and production
contrasts with mass produced, commodity goods.
Part 2 outlines key innovation issues raised by CoPS,
showing the importance of systems integration, soft-
ware and project management as core capabilities in
the production of modern systems. Part 3 briefly
summarises some of the key unanswered questions
posed by CoPS, while Part 4 shows how each of the
papers in this special issue attempt to answer some
of these questions. Finally, Part 5 maps out future
research directions, stressing the importance of build-
ing a deeper historical perspective on CoPS as a key
transmission mechanism for new technology within
2. Part 1: CoPS as an analytical category
CoPS can be defined as high cost, technology-in-
tensive, customised, capital goods, systems, net-
794
works, control units, software packages, constructs
and services.1 According to this definition, CoPS are,
strictly speaking, a subset of capital goods: the high
technology capital goods which underpin the provi-
sion of services and manufacturing — the ‘techno-
logical backbone’ of the modern economy. We use
the term CoPS here, as ‘capital goods’ fails to
adequately capture the product diversity and range of
functions of the systems and networks involved.
Because each new product tends to be different
and because development and production involves
feedback loops from later to early stages and other
unpredictable, ‘emerging’ properties, innovative
non-functional organisational structures are required
to coordinate production, particularly in the case of
uncertain and changing user requirements. The cre-
ation of a major CoPS often involves extreme pro-
duction and innovation complexity, not only because
they embody a wide variety of distinctive compo-
nents, skills and knowledge inputs but also because
large numbers of firms Žor different organisational
units of the same firm. often have to work together
in their production.
In the past 20 years or so, the physical composi-
tion of many CoPS has been transformed by soft-
ware and information technology ŽIT., leading to
new levels of risk and uncertainty in design and
production. The effect of software has been to shift
the emphasis of production from a relatively pre-
dictable ‘engineering’ task to a much more im-
precise, tacit, and design-intensive ‘development’
process, increasing the degree of uncertainty and
learning involved in the production of each system.2
As high technology customised capital goods,
CoPS tend to be produced in one-off projects or
small-batches. The key production capabilities are
systems design, project management, systems engi-
neering and integration, rather than the volume man-
ufacturing processes critical to competitiveness in
consumer goods, such as camcorders and bicycles.
1 the case in commodity goods.
See Hobday Ž1998. for full discussion of CoPS as an analyti-
cal category.
2
See Hobday and Brady Ž1998. for discussion and case evi-
dence.
Editorial
Examples of CoPS include telecommunications ex-
changes, flight simulators, aircraft engines, avionics
systems, e-commerce networks, train engines, air
traffic control units, systems for electricity grids,
offshore oil equipment, baggage handling systems,
retail networks, R & D equipment, bio-informatics
systems, intelligent buildings and cellular phone net-
work equipment.
There are many different categories of CoPS,
ranging from traditional goods Že.g. train engines. to
new IT networks Že.g. internet super-servers. to tra-
ditional goods which have been radically trans-
formed by software and IT Že.g. integrated mail
processing systems and printing press machinery..
They can be categorised according to sector Že.g.
aerospace, military and transportation., function Že.g.
control systems, communications and R & D., and
degree of complexity Že.g. as measured by the num-
ber of tailored components and sub-systems, design
options and amount of new knowledge required..
Perhaps the simplest way of illustrating the defin-
ing characteristics of CoPS is to distinguish them
from mass produced goods. There are at least three
significant differences. First, they are comprised of
many customised, interconnected elements Žinclud-
ing control units, sub-systems and components.; these
are organised in a hierarchical manner and tailored
for specific customers andror markets. Often their
sub-systems Že.g. the fan blade system for aircraft.
are themselves complex, customised and high cost.
Second, they tend to exhibit emergent properties
during production, as unpredictable and unexpected
events and interactions often occur during design and
systems engineering and integration ŽBoardman,
1990; Shenhar, 1994.. Emerging properties also oc-
cur from generation to generation, as small changes
in one part of a system’s design can call for large
alterations in other parts, requiring new control sys-
tems and, sometimes, new materials Že.g. in jet
engines.. Third, they tend to be produced in projects
or in small batches which allow for a high degree of
direct user involvement, enabling business users to
engage directly in the innovation process, rather than
through arms-length market transactions, as normally
There are several critical dimensions of product
complexity, each of which can confer task complex-
ity and non-routine behaviour in production. These
 Editorial
dimensions include the numbers of components, the
degree of customisation of both system and compo-
nents, the quantity of possible design routes, the
elaborateness of the system architecture, the breadth
and depth of knowledge and skills required, and the
variety of material and component inputs. Users
frequently change their requirements during produc-
tion, leading to unclear goals, uncertainty in produc-
tion and unpredictable, unquantifiable risks. Man-
agers and engineers often have to proceed from one
production stage to the next with incomplete infor-
mation, relying on inputs from other suppliers who
may be competitors in other multi-firm projects.
Project management often involves negotiating be-
tween the competing interests, goals and cultures of
the various organisations involved in production.
As the main CoPS production process, projects
often involve some kind of prime contractor and
systems integrators. Users, buyers, other suppliers,
small and medium sized enterprises and sometimes
government agencies and regulators are involved in
new designs, especially if public safety or national
security is a consideration Že.g. in energy systems,
military, aerospace and telecommunications.. Often,
these agents collaborate together, taking innovation
Že.g. new design. decisions in advance of and during
production, as in the case of flight simulators ŽMiller
et al., 1995.. Project organisation often involves
temporary multi-firm alliances in which highly so-
phisticated systems integration and project manage-
ment capabilities are essential to production. The
project represents a focusing device which enables
the problems of design and production to be ad-
dressed. It is also responsible for realising the mar-
ket, coordinating decisions across firms, enabling
buyer involvement and matching technical and finan-
cial resources through time.
Because most CoPS are designed to meet the
needs of large business users, the project manage-
ment task stands in sharp contrast to the mass pro-
duction task. As Woodward Ž1958, p. 23. put it in
her research into UK project-based companies in the
1950s: Athose responsible for marketing had to sell,
not a product, but the idea that their firm was able to
produce what the customer required. The product
was developed after the order had been secured, the
design being, in many cases, modified to suit the
requirements of the customer. In mass production
795
firms, the sequence is quite different: product devel-
opment came first, then production, and finally mar-
ketingB.
3. Part 2: innovation issues raised by CoPS
The financial scale and physical complexity of
CoPS raises many interesting innovation issues. We
know for example, that innovation in CoPS differs
markedly with much of the conventional innovation
wisdom derived from studies of mass produced
goods. In the paradigm of mass market commodity
goods, firms tend to be clearly defined, recognisable
entities rather than the messy multi-firm project-based
organisations ŽPBOs. which compete in the supply
of CoPS. According to the ‘conventional model’,
products and technologies undergo life cycles from
fluid immaturity states to maturity. After a dominant
design, or standard, is selected in the marketplace,
small non-competitive firms exit or are acquired by
large companies which then compete on the basis of
incremental process improvements by supplying the
same basic product in large volumes to many cus-
tomers. ŽUtterback and Abernathy, 1975; Abernathy
and Clark, 1985; Utterback and Suarez, 1993; Klep-
per, 1996.. Some argue that radical technological
innovations can destroy the value of old competen-
cies leading to industrial exit and extinction for
laggards ŽTushman and Anderson, 1986..
These features of the conventional model contrast
sharply with the innovation parameters of CoPS
ŽHobday, 1998.. For instance, at the level of physical
artifact, CoPS are made up of many customised,
interconnected control units, sub-systems and com-
ponents, rather than the smaller numbers of mostly
standardised components used in most commodity
goods. Put in another way, in CoPS the degree of
system hierarchy is comparatively high and product
architectures can be extremely elaborate, partly be-
cause designs are tailored for specific customers.
CoPS are never mass produced and their product life
cycles can extend over decades. Decisions to invest
may take months or years. Rarely, if ever, is there an
instant market transaction for CoPS as in the case of
consumer goods. In CoPS, innovation often proceeds
long after the delivery of the product, as new fea-
tures are added and systems are upgraded and modi-
fied Že.g. in IT networks and intelligent buildings..
796
While the extent of system complexity is always a
matter of degree both within CoPS and between
CoPS and consumer goods, in CoPS complexity may
increase markedly from one generation to another
leading to highly elaborate architectures with many
thousands of components, as in the case of jet en-
gines. This is sometimes due to ever-increasing de-
mands on performance and capacity. Firms often
search for simplifying mechanisms and strategies in
order to cope with product, technological and organi-
sational complexity. For example, the standardisation
of previously customised components is an important
strategy which can allow production learning, cost
reduction and new waves of innovation, as in the
case of intelligent buildings ŽGann, 1993. and air-
craft engines ŽPrencipe, 1998.. Because the span of
managerial control may be outside the boundaries of
a single firm, collaboration is an important element
of CoPS innovation. To develop new systems, inte-
grators require a deep understanding of both the
abilities of partner suppliers and the needs of de-
manding professional users, with whom they collab-
orate during innovation and production. Production
strategies must also account for the tacit knowledge
embodied in key individuals and teams, which can-
not be formalised to the same degree as in less
complex volume produced goods ŽVincenti, 1990;
Nightingale, 1997.. During the core production pro-
cess Žthe CoPS project., soft, intangible skills, such
as leadership, communications and team building are
key to good performance ŽHobday and Brady, 1998..
Because the conventional model does not capture
many of the salient features of CoPS, if applied
without modification, it can be misleading both con-
ceptually and in terms of management strategy and
practice. For example, the conventional productrin-
novation life cycle model is generally unable to
explain the determinants of the life cycle of CoPS,
which tend to remain in the fluid phase of product
innovation ŽDavies, 1998.. While CoPS do mature,
the high volume process improvement stage is sel-
dom, if ever, reached. Exit and entry patterns do not
follow from dominant designs and a remarkable deal
of long-term stability is witnessed among systems
integrators, despite radical technical change Že.g. in
telecommunications exchanges, aircraft and flight
simulators..
Editorial
Also, the conventional product vs. process inno-
vation dichotomy is unhelpful in explaining the life
cycle of CoPS where the rate of product innovation
can remain consistently high. Drawing upon the
example of mobile communications, Davies Ž1998.
suggests that some CoPS evolve through two phases
of innovation. First, the development of a new sys-
tems architecture prior to the commercialisation of
the product. In this phase, architectural designs are
powerfully influenced by system suppliers, regula-
tors, standard-making bodies and large users. Sec-
ond, the phase of new product generation, where the
rate of component and systemic innovation increases
and successive new products and components are
introduced, without fundamentally altering the estab-
lished architectural design.
While repeatable mass production learning pro-
cesses are not so important to CoPS, there may well
be scope for learning economies between product
generations and at the component level, where de-
mand may be very high Že.g. in aircraft and high
technology buildings.. CoPS suppliers often gain
strategic advantage by modifying design architec-
tures to increase the scope for using high volume
components.
At the level of system design, because of small
volumes, CoPS producers tend not to have to ac-
count for high volume production as a key design
constraint. Conversely, they do have to retain certain
types of component design knowledge in-house to
outsource effectively. Therefore, CoPS design rules
and decision procedures differ substantially from
those followed in mass produced, simpler goods
where design-for-mass-manufacture is all important
ŽUllrich and Eppinger, 1995.. As Prencipe Ž1998.
shows, strategies for outsourcing in CoPS have to
account for the elements of architectural, system and
complement knowledge which must remain within
the boundaries of the systems integrator firm, in
contrast with the ‘modular’ strategies which may be
more suitable for volume products ŽSanchez and
Mahoney, 1996; Baldwin and Clark, 1997..
4. Part 3: key unanswered questions
Much more work needs to be done to develop
convincing models of innovation in CoPS, to under-
 Editorial
stand and explain the great deal of variety observed
across CoPS sectors and the contrasts between CoPS
and other types of product. This special issue ad-
dresses several unanswered questions concerning the
effective management of innovation. It also ad-
dresses difficult issues regarding theory, policy and
measurement. Key questions concerning the manage-
ment of innovation include the following:
1. What are the most suitable organisational forms
for producing CoPS?
2. How is the shift to services in many CoPS affect-
ing the strategies, processes and organisational
structures of CoPS producers?
3. How do firms go about building the project capa-
bilities needed to produce new CoPS systems?
4. What do we know about ‘best practices’ in the
management of CoPS?
5. How can firms progressively improve their design
effectiveness, given the one-off nature of CoPS
projects?
Theoretical, measurement and policy issues in-
clude:
1. How can we measure the depth and breadth of the
capabilities of systems integrators?
2. Which frameworks can best explain the adapta-
tion of the supply network Žor web. to different
trajectories of innovation in CoPS?
3. Which kind of product life cycle models fit the
experience of CoPS suppliers, given that the nor-
mal Ashake outB patterns of industrial adjustment
do not seem to apply?
4. How do CoPS relate to the wider technological
systems in which they are embedded and vice
versa?
5. How can the notion of complexity be understood
and applied beyond the level of product to the
levels of process and organisation?
6. How can governments avoid the common prob-
lem of lock-in to major infrastructual projects
and, if necessary, extricate themselves from com-
mitments to outdated, expensive and inferior tech-
nologies?
797
5. Part 4: contribution of the special issue
The special issue brings together 11 papers which
attempt to address above questions and push the
boundaries of knowledge further by raising further
research issues. The papers are largely based on new
empirical research and lessons are drawn from a
wide range of CoPS sectors.
5.1. Organisational forms for CoPS
Hobday addresses the issue of organisation, exam-
ining the so-called Project based organization ŽPBO.,
an organisational form apparently ideally suited to
the production of CoPS. Using an in-depth case
study of a producer of particle accelerator systems,
the study compares the effectiveness of a PBO with
a more traditional functionalrmatrix organisation.
The author introduces a simple model to compare the
PBO with various matrix and functional organisa-
tions, identifying both the strengths and the weak-
nesses of the PBO. On the one hand, the PBO is able
to create and re-create new organisational structures
around the demands of each CoPS project and each
major customer. It can also cope well with emerging
properties and with integrating different types of
knowledge and skill. However, the PBO also has
inherent weaknesses. For example, it is not suitable
for coordinating resources across projects and can
fail in the area of technical leadership and organisa-
tion-wide learning, working against the wider inter-
ests of the company as a whole. Hobday outlines
some of the strategies which can be deployed to deal
with these learning and coordination problems and
identifies a new type of form ‘the project-led organi-
sation’ which can address some of the problems
inherent in the PBO.
5.2. The shift to serÕices
Turning to the issue of how CoPS producers are
responding to the new service dimensions of CoPS,
Gann and Salter explore how project-based design,
engineering and construction firms combine techni-
cal expertise from other organisations to build up
798 Editorial

their own capabilities and deliver their products and other CoPS sectors facing discontinuous learning,
services. The key to delivering service-enhanced escalating costs and high risks of failure.
products and systems, they argue, is not solely cen-
tred on the management of projects or the manage- 5.4. Building project capabilities
ment of business processes per se, but rather the
integration of project and wider business processes
Underlying many of the problems facing produc-
within the firm. The paper develops a framework for
ers is the question of how best to build organisa-
examining the dynamics of project-based firms,
tional capabilities to produce new CoPS. Davies and
showing how some firms are able to deal with the
Brady made a theoretical and empirical contribution
problems of company wide coordination raised by
to this area. They show that the large body of
Hobday. Gann and Salter argue that traditional treat-
business theory, which examines how firms move
ments of firm behaviour Že.g. project management
from their core capabilities into new lines of busi-
and single firm analysis. do not offer the method-
ness, suffers from two main limitations. First, the
ological equipment to explore the particular dynam-
emphasis is generally on top–down, strategic man-
ics of innovation in project-based enterprise, because
agement rather than on capabilities at different levels
they generally fail to explore the important link
Že.g. processes and projects. within the firm. Second,
between project and wider business processes.
the focus on capabilities appropriate for high-volume
production and marketing of consumer goods is not
appropriate for the systems integration and project
5.3. Best management practices management capabilities required for CoPS projects.
They draw on the work of Penrose Ž1959., Richard-
son Ž1972., and Chandler Ž1990. and contingency
Pursuing the theme of how best to produce CoPS,
theorists such as Burns and Stalker Ž1961. and Gal-
Barlow presents a case study of a high value
braith Ž1973. to build an alternative analytical frame-
offshore oilfield construction project Žthe ‘Andrew
work for examining capability building in CoPS.
Project’. to analyse how this particular sector is
They distinguish between strategic, functional and
managing the challenge of increasing complexity and
project capabilities and illustrate the dynamics of the
uncertainty. Two of the difficulties confronted in this
capability building process using two company cases
sector are Ža. how to improve the performance and
from the telecommunications industry as examples.
productivity of projects and Žb. how to ensure long-
The proposed organisational capability framework
term learning and innovation at the wider organisa-
embodies a cost capability model which shows how
tional level. A modern ‘best practice’ approach to
CoPS firms migrate from first project to achieve
this problem in construction and other sectors such
‘economies of repetition’ by putting in place organi-
as aerospace is ‘partnering’, defined as a bundle of
sational changes, routines and learning processes to
business processes deployed to achieve non-
provide a growing number of similar projects at
hierarchical communications, the integration of dif-
lower cost and greater effectiveness.
ferent kinds of knowledge, and effective coordina-
tion at the project level. The partnering approach is
particularly useful in CoPS where, because of the 5.5. Design effectiÕeness under uncertainty
project-based nature of activities, organisational and
technological learning is discontinuous. Barlow Ensuring effectiveness and efficiency in design is
shows how in the Andrew Project partnering worked another problem common to many CoPS producers.
to achieve good results in terms of project perfor- However, CoPS are characterised by a large varia-
mance, shared risk taking, communications and tion in the success of development, with larger more
learning. The author points to other sub-sectors within complex capital goods showing very high levels of
construction Že.g. housing. where barriers to use of failure. As Nightingale shows, part of the difficulty
partnering have prevented such gains and suggests confronting systems integrators is that, within pro-
that, with modification, the method could be used in jects, the interactions between knowledge, technol-
 Editorial
ogy and organisational form are all closely related.
These three elements must be properly aligned to
enable firms to control and reduce the number of
redesign cycles in project execution, thereby produc-
ing quality products which satisfy customer needs
within schedule and budget. A simple framework is
developed to illustrate the interactions between
knowledge, technology and organisation and, using a
case study from the aeroengine sector, Nightingale
shows how firms can reconfigure organisational
knowledge to reduce uncertainty about the effects of
design changes and enable more informed choices
between different design options. The paper high-
lights key features of the design process in complex
capital goods, focusing on the important function of
systems integration.
5.6. Measurement of CoPS capabilities
Problems of measurement, both for research and
practical improvement purposes, are extreme in
CoPS. For example, because each product and pro-
ject tends to be different, normal performance bench-
marking techniques are not applicable. While some
progress has been made in developing CoPS project
benchmarking techniques ŽHobday and Brady, 2000.,
much remain to be done, especially in the measure-
ment of the technological capabilities of major CoPS
suppliers. Prencipe offers a combination of qualita-
tive and quantitative indicators to construct measures
of two key dimensions of technological capability of
systems integrators, namely their breadth and depth.
Using the case of the aircraft engine control system,
Prencipe provides a detailed picture of the evolution
of the three major engine makers’ capabilities. The
paper shows that, despite the literature on core com-
petencies and frequent recommendations that firms
outsource key components, engine makers develop
and maintain a wide and deep range of capabilities in
house in order to retain their systems integration
capability. Indeed, major firms have extended their
breadth of capabilities in response to the expansion
of technologies underlying control systems, both
through dedicated in house investments and through
links with universities and specialised suppliers. In
addition, he shows that engine makers maintain deep
799
technological capabilities, not only in the systems
design, architectural and integration capabilities, but
also in most of the critical components required. The
paper implies that in CoPS systems integrators must
be very wary of component and technology outsourc-
ing. At the very minimum, firms must retain in-house
both the capability to outsource effectively to spe-
cialist suppliers and to contribute to future compo-
nent innovations.
5.7. The notion of complexity
The concepts of depth and breadth not only apply
to technological capability but also to the notion of
‘complexity’ itself. On this issue, Wang and Tun-
zelemann provide useful conceptual insights into the
nature and implications of complexity not only at the
product level, but also at the technology, process and
organisational levels. Their paper examines trends in
the co-evolution of product, technology, process and
organisation, assessing the extent to which the move
towards greater complexity in functional areas are
complementary or in conflict with one another.
Adopting a processual view of the firm, they exam-
ine the dynamics of organisational complexity, argu-
ing that in an increasingly complex environment a
firm will naturally search for strategies, rules and
procedures for simplification, in order to render the
complexity manageable. Like Prencipe, their re-
search shows the limitations of vertical disintegration
and outsourcing as a means of reducing intra-
organisational complexity, arguing that the effective-
ness of external linkages remains dependent on the
in-house resources and capabilities not only for se-
lecting among suppliers and technologies but also for
exploiting external collaborations for the purpose of
implementing corporate strategy.
5.8. The adaptation of CoPS supply networks
The issue of how firms collaborate together to
master complex products and technologies is at the
heart of innovation management in CoPS. On this
issue, Cash and Rycroft provide a useful theoretical
framework to explore the adaptation of the supply
chain Žor ‘web of innovators’. in relation to different
800 Editorial

trajectories of innovation in CoPS. Their ‘framework returns to R & D, manufacturing or marketing com-
for adaptive networks’, embodies three major types monly found in CoPS industries.
of innovation trajectory: Ža. the normal pattern; Žb.
the transition pattern; and Žc. the transformational 5.10. A large technical systems (LTS) perspectiÕe
pattern. Using data from six case studies of CoPS,
they illustrate the differences between each pattern,
Another important historical issue concerns the
and show how each pattern relates to each other.
relationship between CoPS and the wider technologi-
They argue that at the levels of firm strategy, CoPS
cal systems in which they are embedded. Adressing
network and national policy, strategic benefits can be
this issue, Davies and Guyer draw upon Hughes’s
gained from being able to identify when and which
concept of a LTS ŽHughes, 1983, 1987, 1992., in
kind of pattern changes are approaching. Successful
order to develop a theoretical framework for
strategies continuously achieve a fit among network
analysing the relationship between the CoPS project
learning, core capabilities and complementary assets
and the evolution of the wider system, focusing on
located in diverse organisations. When a good fit is
large railway projects in the UK and Germany as
achieved, the knowledge and capabilities held by
examples. The framework helps to explain Ža. the
different organisations complement and reinforce
evolution of technical and organisational change in
each other. The trajectories defined by Cash and
LTS and Žb. the way CoPS shape, and are shaped by,
Rycroft offer a company or network a way of identi-
the evolution of the LTS. Applying the framework,
fying where it might wish to be positioned in the
the paper shows how the shift in the 1990s from
next series of innovations. In this way, technology
vertically integrated national rail monopolies to new
strategy can be viewed in terms of a choice of
forms of vertically separated market structures led to
position in relation to a trajectory, with each strategic
the emergence of new patterns of cooperation be-
decision related to a desired change.
tween LTS operators and the railway supply indus-
try. Under the traditional vertically integrated regime,
5.9. Product life cycle theories for CoPS each large project in the UK and Germany was
usually specified ex ante in great technical detail.
The CoPS supplier’s role was often solely that of a
A second paper dealing with broader issues of
manufacturer, with the train operators providing
industrial evolution and structural adjustment asks
much of the design and engineering inputs. The
the specific question: which kind of product life
creation of vertically separated railway markets led
cycle models fit the experience of CoPS suppliers,
to the emergence of new feedback loops that bridged
given that the normal ‘shake out’ patterns of indus-
railway projects and railway operations. CoPS sup-
trial adjustment do not seem to apply? To develop an
pliers were forced to assimilate systems integration,
alternative to the standard productrinnovation life
design and new service capabilities in order to meet
cycle models Že.g. Utterback and Abernathy 1975;
the needs of the LTS.
Klepper, 1996., Bonnacorsi and Giuri use data from
the history of the turboprop engine industry from
1948 to 1997, offering this as an example of a 5.11. GoÕernment policy and lock-in
‘non-shakeout pattern’ of industrial transition. They
show that the persistence of high concentration is not One key area of research into CoPS concerns
associated with the exit of smaller manufacturers, government policy. This has many dimensions. For
confirming and extending the findings of Miller et al. example, is the CoPS analytical category a useful
Ž1995. on the history of the flight simulation indus- one for policy purposes? What is the national com-
try. Bonnacorsi and Giuri go on to operationalise the petitive position in CoPS supply, and can it be
relevant economic and technological variables to enhanced through policy? Government is a major
provide a more general theory of industry life cycles regulator of several complex systems industries and
than currently available. This new model is able to in some cases the final customer for the CoPS in
take into account the lack of significant increasing question Že.g. in the case of military equipment,
 Editorial
energy, transportation systems, urban developments
and IT systems for government agencies.. One espe-
cially vexing issue is dealt with by Walker, who
analyses the question of how governments can un-
derstand and avoid the problems of sub-optimal
lock-in Žor ‘entrapment’. in major projects. Walker
shows that the timely death Žand effective adapta-
tion. of large infrastructural projects cannot be taken
for granted, especially when the systems are being
constructed over long periods and absorbing scarce
public resources which could be deployed more ef-
fectively elsewhere. Walker demonstrates his argu-
ment using an extreme case of entrapment, namely
the THORP reprocessing plant and associated infras-
tructural developments. Although brought in to pro-
duction in 1994, THORP’s redundancy in conven-
tional market terms was already apparent in the
mid-1980s, long before its foundations had been laid.
Walker provides rich insights into precisely why this
occurred by focusing on the ways in which commit-
ments were made, adapted, re-made and unmade.
Not only do lock-in and path-dependency exist, but
they are essential Žif dangerous. facets of complex
infrastructural innovations. The challenge to policy
makers then becomes an issue of how to provide
warning of undesirable entrapment, how to institute
regular and effective reviews and how to ensure,
wherever possible, that alternatives develop and sur-
vive so that extrication becomes a real policy option.
6. Part 5: future research directions
While this special issue has made valuable head-
way in analysing innovation in CoPS, many gaps
exist, several of which are highlighted in the various
studies presented here. We conclude with a brief
discussion of potential new lines of research, build-
ing on the studies presented here and previous re-
search into CoPS
6.1. InnoÕation within the firm
In order to develop a more robust understanding
of how to organise CoPS projects, more research
needs to be done to explore and test suitable organi-
sational forms and to tackle the issue of how major
CoPS projects influence the building of wider busi-
ness strategies and capabilities and vice versa. Future
801
research would benefit not only from cross-sector
comparisons but also an assessment of how different
types of CoPS firms Že.g. prime contractors, systems
integrators, users, component suppliers and SMEs.
go about building project capabilities for conceptual-
ising, designing and making CoPS. This would help
show how project capabilities complement the strate-
gic and functional capabilities of CoPS suppliers.
Because the papers here were only able to touch
briefly on modern management and design practices,
more work is needed to illustrate how suppliers
deploy strategies to work with and learn from partner
firms with different organisational cultures and ob-
jectives, often under conditions of uncertainty. Case
study research needs to be complemented with more
systematic measurements wherever possible. As
shown by Prencipe, patents can be a useful measure-
ment tool for analysing the long-term evolution of
the depth and breadth of capability of systems inte-
grators. However, the limits of patents are well
known and need not be repeated here. Other mea-
sures need to be developed to compare and contrast
innovation strategies, dynamics and practices at both
project and firm level ŽTidd et al., 1996; Tidd, 2000..
6.2. Corporate strategy
One issue only touched on this issue is that of
corporate strategy. Internationalisation, liberalisation
and privatisation in CoPS industries have led to
acquisitions, mergers and joint ventures of various
kinds. In areas such as aerospace, military, IT and
telecommunications, new corporate strategies have
been adopted to deal with the changing innovation
environment. For example, more firms within the
European Union have gone beyond their traditionally
protected national markets to compete in other coun-
tries. They, in turn, face more competition in their
home markets from foreign suppliers. At the same
time, trends such as increasing systems development
cost and risk, rapid technological change and the
shift to services are effecting the ways systems inte-
grators think about, and respond to, threats and
opportunities. More needs to be known about how
strategies towards new markets, changing technolo-
gies and capability building Žoften in collaborative
ventures. are proceeding. Increasingly, firms have to
resolve the tension between protecting their intellec-
tual property and the need to offset risk and cost via
802
collaboration ŽTidd and Trewhella, 1997.. This ten-
sion poses strategic difficulties, especially within
traditional systems industries where the cultures and
practices of vertical integration run deep and conflict
with the need to collaborate in technological and
marketing efforts.
6.3. Industrial structure and adjustment
At the level of industrial network, the model of
supply chain adaptation proposed by Cash and
Rycroft needs to be further tested to reveal the scope
for ‘strategic manoeuvre’ at the level of firm, net-
work and national policy. Further empirical evidence
on CoPS product life cycles would also help validate
and extend the basic CoPS life cycle model proposed
by Bonaccorsi and Giuri, based on the aerospace
sector. It is clear from existing studies that the scale,
nature and complexity of the product in question
shapes organisational form and technological pro-
cesses ŽTidd, 1997; Hobday, 1998.. Product charac-
teristics may also shape industrial and innovation life
cycles. To better understand the links between
product and industrial evolution, more precise
taxonomies of CoPS are needed which relate the
composition Žor ‘morphology’. of the product Žor
category of product. in question to product and
innovation life cycles.
6.4. GoÕernment policy
Regarding government policy, Walker indicates
why governments must address the risk of lock-in,
present in major infrastructural projects. However,
more research needs to be done to assess whether
CoPS is a useful analytical category for policy pur-
poses. It may be that sectoral differences preclude
policy generalisations at the national level. Similarly,
trends towards privatisation and deregulation might
suggest that government should increasingly ques-
tion their traditional role of direct involvement in
innovation Že.g. in military, aerospace, rail systems
and telecommunications. and leave as many deci-
sions as possible to the market place. The policy
issue for these types of sectors then becomes how to
formulate a regulatory framework which promotes
competition, ensures safety andror addresses na-
tional security and environmental concerns. In other
sectors Že.g. government agency IT procurement, air
Editorial
traffic control and nuclear energy. governments may
continue to play a direct role in innovation, in which
case policy research could be used to help advise on
how to avoid the risks of entrapment and how to
stimulate innovation.
6.5. Latecomer issues
Turning to the international level, we see attempts
by latecomer economies such as South Korea, Tai-
wan and Malaysia to acquire the technological ca-
pacity to produce more complex products Že.g. in
nuclear power, aircraft and semiconductor manufac-
turing equipment.. This occurs as latecomer firms act
as sub-contractors to major foreign systems integra-
tors, as domestic CoPS industries emerge in their
own right Že.g. in regional aircraft. and as firms seek
to support existing export industries by producing
related capital goods Že.g. in electronic consumer
goods, personal computers, footwear and semicon-
ductor production.. It also occurs as governments
seek to support strategic and high technology indus-
tries for national purposes Že.g. military aircraft in
Malaysia and India.. At the present time, we know
very little about the success or otherwise of these
attempts at industrial deepening by developing coun-
tries ŽTidd and Brocklehurst, 1999.. Future research
could assess patterns of catch up in various industri-
alising economies and examine successes, setbacks
and failures.
6.6. A contemporary historical perspectiÕe on CoPS
From a historical perspective, the role of CoPS as
major capital goods in diffusing modern technology
throughout the economic system, remains to be anal-
ysed. As Rosenberg Ž1976. argues in his study of the
US machine tool industry Ž1840 to 1910. referring to
capital goods, ‘technological change enters the econ-
omy through a particular door’ Žp. 31.. Specialisation
in the machine tool industry was generated by new
production demands which led to periods of ‘techno-
logical gestation’ centred on the capital goods indus-
tries. No doubt many such waves of gestation have
occurred during the 20th century and recent new
demands Že.g. for personal computing and internet
services. on the software, IT and telecommunications
industries have created qualitatively different waves
of diffusion. Future research could assess the pro-
 Editorial
cesses of convergence and specialisation in CoPS
and the role of CoPS suppliers in developing and
diffusing within the economy.
Another aspect of the economy-wide, historical
role of CoPS is their functioning in the evolution of
the LTS discussed by Davies and Guyer in this issue.
CoPS are not only the ‘technological backbone’ of
modern manufacturing industry but also are key
parts of the large infrastructural networks Že.g. elec-
tricity, rail, air travel and the internet. described by
Hughes Ž1983, 1987. and others. CoPS function as
the command, control and communication compo-
nents of LTS, shaping, facilitating and, in some
periods, constraining the development of LTS. By
the same token, LTS place new demands on CoPS
projects, deeply influencing their conceptualisation,
design and implementation. Bringing together work
on LTS and CoPS therefore represents a very
promising line of research for the future.
In conclusion, this special issue has sought to
tackle several of the key issues concerning innova-
tion in CoPS, covering technological, organisational,
methodological, theoretical and policy issues. The
new ideas, empirical studies and practical policy
guidance presented here provide a solid foundation
for future research on the role of CoPS within the
organisation, the economy and wider society.
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E-mail address: h.j.rush@bton.ac.uk

Mike Hobday )
Complex Product Systems (CoPS) InnoÕation Cen- Joe Tidd
Imperial College Management School, 53 Princes
Gate, Exhibition Road,
)
Corresponding author. Tel.: q44-1273-686758; fax: q44- London SW7 2PG, UK
1273-685865. E-mail address: j.tidd@ic.ac.uk