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Locus of Innovation

Another step in identifying a valuable opportunity lies in figuring out what organizations undertake the innovation that creates the opportunity that you intend to pursue. Innovation occurs in different entities that can be thought of as a chain that runs from universities and public research laboratories, which conduct most basic research, to end customers. In the middle are the set of suppliers that provide inputs and other raw materials to companies that produce a good or service, followed by producers.

Understanding this innovation chain is important for three reasons. Different types of innovations tend to occur at different stages in the chain. Therefore, the entities that undertake the innovation that results in entrepreneurial opportunities are different for different industries. For example, universities often undertake the innovation that results in the creation of new scientific instruments. However, semiconductor firms themselves are the entities that typically undertake the innovation that results in improvements in that industry.[9]


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