What is innovation ?
Combination of creativity, novelty and market.
According to OECD definition two types of technological innovation: product and process
- Product innovation= implementation and commercialization of a product with improved performance characteristics as to deliver objectively new or improved services to the consumer.
- Process innovation=implementation or adoption of new significantly improved ways of production methods: changes on equipment, HR, working methods and combination of these.
The value of innovation cannot be reduced to the only utility: The value of technology is the combination of technological utility but also the customers. A minimum group of customers makes it possible for the product to get to the market: for it toget to the market and pass from a niche product to a mass market product. The third component is the availability of complementary goods or services.
Innovation is also seen as a sequence going from invention through innovation to imitation. Imitation, because if innovation brings competitive advantage, other firms will want to diffuse the same.
Inputs in the process
Evaluated through new products or goods put on the market, number of patents, intellectual property rights, which give the right to choose how to exploit an invention. But this indicator gives information on inventions and not on innovations.
What would be the optimal allocation of resources to get the best performance of innovation?
Innovation should not be considered as a result ofsomething but as a process:
- Firms are the location of innovation and should have the ability to translate R&D into market designed products.
- Innovation is a social process: there is interaction between science, research, technology and market.
- Innovation is a complex interactive process
2 levels of infrastructure are needed to make this happen: research and knowledge and thereshould be feedback between each phase of the chain.
Innovation is also a cumulative process because it results from existing innovation.
Innovation is more than the production of information because knowledge is not just innovation.
Innovation is a cumulative learning process- it is based on interactive learning, a need has to be identified and a product or service should fulfill to thisneed. Moreover, the learning has to be stocked and from all this knowledge stock come innovative ideas.
Innovation is also a resource consuming process and its economic value depends on the strategies of firms and on their ability to protect innovation. There are not only legal types of protection but also technological barriers: complexity of the technology, new technological standards, etc.Classification of innovation
Taking into account
- Product: what’s the offer
- Process: how do we create/ deliver the offer
- Position: strategy to bring the offer to the market
- Paradigm: in what way the innovation is done
Questions we can ask ourselves are: does the innovation create new market, is the innovation an isolated product or an architectural one; what isthe degree of novelty.
Why is innovation important
- Source of competitive advantage
- Participates in economic development
- Brings new ideas
On the micro level= a source of sustainable competitive advantage because it is rare, ideally the company is the only one having it, should be difficult to imitate, socially complex. Most important types of competitive advantage are:quality, price and ability to lock in the technology in a standard.
Companies should innovate expecting a competitive advantage. But innovation is uncertain in. So the challenge for the company is to make this uncertainty a manageable risk
The hypothesis is that innovation leads to economic growth and investment in learning has increase returns. There are also strong externalities in innovation:...