Skip to main content

The Virtual Utility: Some Introductory Thoughts on Accounting, Learning and the Valuation of Radical Innovation

  • Chapter
The Virtual Utility

Part of the book series: Topics in Regulatory Economics and Policy Series ((TREP,volume 26))

  • 159 Accesses

  • 5 Citations

Abstract

This paper examines the problems associated with the application of traditional capital budgeting practices to the valuation of radically new processes and technologies in an environment of rapid technological change. It focuses on a restructured utility industry, and the possible emergence of the Virtual Utility.

Different types of technological innovation are discussed. The paper then illustrates how capital budgeting, by virtue of its accounting orientation, often fails to identify important benefit categories associated with emerging technologies. Finally, the paper offers suggestions for enhancing the capital budgeting process by making qualitative assessments to better understand the benefit implications of architectural innovations such as the Virtual Utility.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Institutional subscriptions

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

Similar content being viewed by others

References

  • Abernathy, William and Kenneth Wayne, “Limits of the Learning Curve”, Harvard Business Review, September–October, 1974.

    Google Scholar 

  • Anderson, Philip and Michael Tushman, “Technological Discontinuities and Dominant Designs: A Cyclical Model of Technological Change”, Administrative Science Quarterly, Volume 35, 1990, pp. 604–633.

    Article  Google Scholar 

  • Argyris, Chris and Donald Schon, Organizational Learning: A Theory of Action Perspective, Addison Wesley, 1978.

    Google Scholar 

  • Awerbuch, Shimon, “Depreciation and Profitability Under Rate of Return Regulation”, Journal of Regulatory Economics, Volume 4, 1992a, pp. 63–70.

    Article  Google Scholar 

  • Awerbuch, Shimon, “Depreciation For Regulated Firms Given Technological Progress and a Multi-Asset Setting”, Utilities Policy, Volume 2, No. 3, July, 1992b, pp. 228–239.

    Article  Google Scholar 

  • Awerbuch, Shimon, “Measuring the Costs of Photovoltaics in an Electric Utility Planning Framework”, Progress in Photovoltaics: Research and Applications, Chichester: John Wiley and Sons, Volume 1, No 2, April 1993a.

    Google Scholar 

  • Awerbuch, Shimon, “The Surprising Role of Risk in Integrated Resource Planning”, The Electricity Journal, Volume 6, No 3, April 1993b, pp. 20–33.

    Article  Google Scholar 

  • Awerbuch, Shimon, Tom Mouck, Jesse Dillard, and Alistair Preston, “Capital Budgeting, Technological Innovation and the Emerging Competitive Environment of the Electric Power Industry”, Energy Policy, Volume 24, No 2, February, 1996.

    Google Scholar 

  • Baldwin, Carliss Y., “Capital budgeting: A Deterrent to Innovation,” Division of Research, Harvard Business School, 1989.

    Google Scholar 

  • Baldwin, Carliss Y. and Clark, Kim, “Capabilities and Capital Investment: New Perspectives on Capital Budgeting,” Journal of Applied Corporate Finance, 1992, pp. 67–82.

    Google Scholar 

  • Betz, Frederick, Strategic Technology Management, McGraw Hill, Engineering Series, 1993.

    Google Scholar 

  • Bierman, Harold and S. Smidt Haas, The Capital Budgeting Decision, MacMilan, 1988.

    Google Scholar 

  • Carayannis, Elias, “The Strategic Management of Technological Learning: Transnational Decision Making Frameworks and their Empirical Effectiveness,” Ph.D. Dissertation, School of Management, Rensselaer Polytechnic Institute, Troy, NY, August 1994.

    Google Scholar 

  • Carayannis, Elias, “Technology Transfer through Technological Hyperlearning: A Self-Organizing, Dynamic Systems Approach and Typology”, 12th EGOS Colloquium, Istanbul, Turkey, July 6–8, 1995.

    Google Scholar 

  • Carayannis, Elias, “Re-engineering High Risk, High Complexity Industries through Multiple Level Technological Learning: A Case Study of the World Nuclear Power Industry”, Journal of Engineering and Technology Management, Volume 4, no. 12, 1996.

    Google Scholar 

  • Clark, Kim “Investment in new Technology and Competitive Advantage” in David J. Teece (Ed.) The Competitive Challenge; Strategies for Industrial innovation and Renewal, Ballinger Division, Harper and Row, 1987.

    Google Scholar 

  • Clark, Kim, “The Product Development Challenge: Competing through Speed, Quality and Creativity,” Harvard Business School Press, 1994.

    Google Scholar 

  • DeGarmo, Paul, William Sullivan and John Canada, Engineering Economy, Macmillan, 1984.

    Google Scholar 

  • Dodgson, Mark, “Technological Learning, Technology Strategy and Competitive Pressures,” British Journal of Management, Volume 2, No 2, 1991a, pp. 133–149.

    Article  Google Scholar 

  • Dodgson, Mark, The Management of Technological Learning, Berlin: De Gruyter, 1991b.

    Google Scholar 

  • Dodgson, Mark, “Organizational Learning: A Review of Some Literature,” Organization Studies, Volume 14, No 3, 1993, pp. 375–394.

    Article  Google Scholar 

  • Federal Power Commission, Uniform System of Accounts Prescribed for Public Utilities and Licensees, U.S. Government Printing Office, DC, 1973.

    Google Scholar 

  • Fiol, Marlene and Marjorie Lyles, “Organizational Learning,” Academy of Management Review, Volume 10, No 4, 1985, pp. 803–813.

    Google Scholar 

  • Foster, Richard, Innovation: The Attacker’s Advantage, Simon and Shuster, 1986.

    Google Scholar 

  • Garvin, David, “Building a Learning Organization,” Harvard Business Review, July–August 1993, pp. 78–91.

    Google Scholar 

  • Giffi, Craig, A. Roth and G. Seal, Competing in World Class Manufacturing: America’s 21st Century Challenge, National Center for Manufacturing Sciences, Business-One Irwin, 1990.

    Google Scholar 

  • Hatten, K.J. and M.L. Piccoli, “An Evaluation of a Technological Forecasting Method by Computer-Based Simulation,” Fourth Annual Academy of Management Proceedings, August 1973, pp. 60–66

    Google Scholar 

  • Hayes, Robert and William Abernathy, “Managing Our Way to Economic Decline,” Harvard Business Review, July-August, 1980.

    Google Scholar 

  • Hayes, Robert, and David A. Garvin, “Managing as if Tomorrow Mattered,” Harvard Business Review, May–June, 1982, pp. 71–79.

    Google Scholar 

  • Henderson, Rebecca, ““Generation” Innovation: the Reconfiguration of Existing Systems and the Failure of Established Firms, Alfred P. Sloan School of Management, Massachusetts Institute of Technology, 1989.

    Google Scholar 

  • Henderson, Rebecca and Kim B. Clark, “Architectural Innovation: The Reconfiguration of Existing Product Technologies and Failure of Established Firms” Administrative Science Quarterly, Volume 35, 1990, pp. 9–30.

    Article  Google Scholar 

  • Henderson, Rebecca, “Underinvestment and Incompetence as Responses to Radical Innovation: Evidence from the Photolithographic Alignment Equipment Industry”, The International Center for Research on the Management of Technology, Sloan School of Management, Massachusetts Institute of Technology, 1990.

    Google Scholar 

  • Hirsh, Richard, Technology and Transformation in the American Electric Utility Industry, Cambridge University Press, 1989.

    Google Scholar 

  • Howell, Robert A. and S. Soucy, “Capital Investment in the New Manufacturing Environment,” Management Accounting, Volume 69, November, 1987, pp. 26–33.

    Google Scholar 

  • Kaplan, Robert, “Must CIM Be Justified by Faith Alone?” Harvard Business Review, 64, No. 2, March-April, 1986, pp. 87–95.

    Google Scholar 

  • Kaplan, Robert, Measures of Manufacturing Excellence, Harvard Business School Press, 1990.

    Google Scholar 

  • Kuhn, Thomas, The Structure of Scientific Revolutions, The Free Press, 1971.

    Google Scholar 

  • Loft, Anne, “Towards a Critical Understanding of Accounting,” Accounting, Organizations and Society, Vol._, No._, 1986, pp. 137–169.

    Google Scholar 

  • Milgrom, Paul and John Roberts, “The Economics of Modern Manufacturing: Technology, Strategy, and Organization,” The American Economic Review, Volume 80, No 3, 1990.

    Google Scholar 

  • Navarro, Peter, “Electric Utilities: The Argument for Radical Deregulation,” Harvard Business Review, January-February, 1996, pp. 112–125.

    Google Scholar 

  • Preston, Alistair, “The Birth of Clinical Accounting: A Study of the Emergence and Transformation of Discourses on Costs and Practices of Accounting in U.S. Hospitals,” Accounting, Organizations, and Society, 1992, Vol._, No._, pp. 63–100.

    Google Scholar 

  • Preston, Alistair and Shimon Awerbuch, “The Importance of Activity-Based Costing for Electric Utility IRP”, Unpublished, University of New Mexico, 1993.

    Google Scholar 

  • Senge, Peter, The Fifth Discipline, Doubleday, 1990.

    Google Scholar 

  • Smith, Howard and M. Fottler, Prosective Payment, Rockville, MD: Aspen Publications, 1985.

    Google Scholar 

  • Starr, Paul, The Social Transformation of American Medicine, New York: Basic Books, 1982.

    Google Scholar 

  • Stigler, George, “Production and Distribution in the Short Run,” in: Readings in the Theory of Income Distribution, American Economic Association, Philadelphia: The Blakiston Co., 1949.

    Google Scholar 

  • Teece, David, et al, “Dynamic Capabilities and Strategic Management”, UC Berkeley, 1990.

    Google Scholar 

  • Utterback, James and L. Kim, “Invasion of a Stable Business by a Radical Innovation,” in Paul Kleindorfer, (Ed.) The Management of Productivity and Technology in Manufacturing, Plenum Press, 1985.

    Google Scholar 

  • Williamson, Oliver, Markets and Hierarchies: Analysis and Anti-trust Implications, The Free Press, 1975.

    Google Scholar 

Download references

Author information

Authors and Affiliations

Authors

Editor information

Editors and Affiliations

Rights and permissions

Reprints and permissions

Copyright information

© 1997 Springer Science+Business Media New York

About this chapter

Cite this chapter

Awerbuch, S., Carayannis, E.G., Preston, A. (1997). The Virtual Utility: Some Introductory Thoughts on Accounting, Learning and the Valuation of Radical Innovation. In: Awerbuch, S., Preston, A. (eds) The Virtual Utility. Topics in Regulatory Economics and Policy Series, vol 26. Springer, Boston, MA. https://doi.org/10.1007/978-1-4615-6167-5_5

Download citation

  • DOI: https://doi.org/10.1007/978-1-4615-6167-5_5

  • Publisher Name: Springer, Boston, MA

  • Print ISBN: 978-1-4613-7827-3

  • Online ISBN: 978-1-4615-6167-5

  • eBook Packages: Springer Book Archive

Keywords

These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Publish with us

Policies and ethics