What Do we Know About Innovation?

The study of innovation is a still a relatively young field but one that interacts with several other disciplines including management, economics and sociology.

Understanding how innovation happens and the impact those processes have are vital to both individual businesses and to national economic development. During the past 50 years, innovation scholars have made major contributions in challenging existing ideas and reconfiguring perceived assumptions about the sources and determinants of innovative ideas.

Based on the book chapter ‘The Nature of Innovation’ by Ammon Salter and Oliver Alexy (in Mark Dodgson,  Nelson Phillips and David Gann editors, The Oxford Handbook of Innovation Management, Oxford University Press, 2014) we summarise the key findings in the field, applicable to most settings in which innovation occurs.

Innovation Studies, once concerned solely with technological change and developing metrics, is now expanding interest in how information is sourced and combined, as well as in the process of creativity. Recognising that the firm is not always the central agent in the innovation process is also driving a research agenda that focuses on wider collaborative efforts with external ‘others’ including users, universities, firms and governments. Successful innovation therefore is increasingly understood as the result of such relationships and the management of external knowledge and resources, meaning the firm is not always able to control it’s developmental path.

Innovation shapes economic growth
Establishing effective measures for the relationship between technological innovation and growth - most recently the focus has expanded to include the contribution of 'intangibles' like R&D, orgainsational change and marketing.
Innovation combines pre-existing elements
Innovation itself is rarely novel but combines existing elements in new ways. Thus innovation itself emerges from a specific context and is often the result of material availability and trial and error, building on previous successes and failures. (see Joseph Schumpeter - the father of innovation studies)
Innovation is found throughout the economic system
Innovation was previously only thought to exist in technology-based industries but research has demonstrated its presence in various sectors - particularly in developments to process and working practices.
Innovation is usually evolutionary and incremental
Firms usually shy away from risky radical innovations and instead concentrate on evolutionary developments to their existing knowledge and technology that offers sureity and short-term gains.
Radical innovation is rare and hard to manage
Radical innovations occur infrequently (approximately every 30 years in most sectors) and it is hard for firms to estimate their future effects. Consequently firms are not always able or willing to alter their internal structures to maximise the benefits of radical change.
Innovation means collaboration
Individuals rarely develop innovations in isolation and need to use their social capital to interact with different teams or functions among their personal contacts. Those with resources outside the firms have greater potential to develop valuable efforts that create consumer or business demand.
Creativity and invention are not the same
Some individuals have greater proclivity to be creative based on their experiences, levels of motivation, training and effort. Creativity is a personal ability that is part of the innovation process, whilst invention is the application of those novel ideas.
Creativity and capturing returns from innovation are different skills
Maximising the benefits of an innovation can be difficult and often it is a competitor who is better able to manage the innovation environment and profit first. (This is known as the ‘appropriability regime’ - managing the knowledge itself, IP protection and related assets such as marketing or manufacturing facilities).
Innovation has different types
New categories of innovation are being developed and accepted all the time. Classic distinctions currently exist between radical and incremental innovation; product innovation (creating goods and services) and process innovation (operational change and new working practices); architectural innovation (how elements combine) and modular innovation (altering one component).
Innovative activity has regular patterns
When innovating, firms alter their focus on product or process innovation according to the stage of development - the model for this is called the Product Life-Cycle which some scholars use to relate economic growth to innovative activity. More recently the PLC has been criticised in relation to service innovation, as stronger similarities exist between types of innovation
Geography and innovation are inter-related
Innovation largely remains a face-to-face process where proximity can be vital in maximising knowledge exchange. Therefore, much innovative activity centres around particular international hubs that facilitate interation and competition.
Innovation needs organisational routines
This can be the most difficult aspect for firms - designing structures that support creativity and freedom for inventors, whilst facilitating the judgement, execution and management of a portfolio of activity. One way to achieve this is to have one department that explores radical innovation and another that maximises the development of incremental innovations