I have been asked to share some of my work on innovation. Below is a short piece from a publication that I am working on dealing with innovation systems.
While product and process innovation is better known and often receives the most attention, competitive advantage often emanates from organisational and business model innovations that emerge within societies. Innovation is a powerful explanatory factor behind differences in performance between firms, regions and countries.
According to Fagerberg et al. (2005:4-5), invention is the first occurrence of an idea for a new product or process, while innovation is the first attempt to carry it out in practice. Thus invention and innovation could be closely linked, although in most cases it is separated in time (sometimes decades or centuries), place and organisation. However, the fact that innovation typically emerge within a complex system is often overlooked. For instance, Schumpeter explained that the innovator that invented the steam locomotive still had to wait for others to develop the different aspects of the rail system before the locomotive could be commercially viable. The steam engine was initially invented in a completely different context, again illustrating how inventions are dependent on the context in which it arises.
While many innovations can be linked to well-funded research programmes, this is not always the case. Firms usually innovate because they believe there is a commercial benefit to the effort and costs involved, and this process typically starts by reviewing and re-combining existing production factors (Schumpeter, 1964/1911). Sometimes increased competition, changes in market structure or market demand, or changes in technological performance also affect the innovation process. To turn an invention into an innovation, a firm typically needs to combine several different types of knowledge, capabilities, skills and resources from within the organisation and the external environment. The role of this knowledge and learning interaction will be described in the next sub-chapter. The willingness or interest of an individual in tinkering and exploring better solutions is influenced in part by the organizational context of the innovator, but is also influenced by factors such as education or qualifications, meta-level factors such as culture, personal characteristics (such as patience, inquisitiveness or tolerance of failure) and the institutional environment. Other factors, such as competitive pressure, problem pressure, or social and economic incentives also play a role.
Frequently, policy makers, universities and technological supporting institutions erroneously describe innovation in a linear model that assumes that innovation is applied science. It is assumed to be “linear” because it is believed that there are a series of well-defined stages that innovations go through from research (science), followed by development and finally production and marketing. In this linear model scientific research is deemed to be the most important step as it is the first step in the process. Although there are some cases that followed this path, these are the minority. Very often this line of reasoning is brought by people wanting to justify larger research budgets.
 The “linear” innovation process was first criticized by (Kline & Rosenburg, 1986)
FAGERBERG, J., MOWERY, D.C. & NELSON, R.R. 2005. The Oxford handbook of innovation. Oxford ; New York: Oxford University Press.
KLINE, S. & ROSENBURG, N. 1986. An overview of innovation. In The positive sum strategy: harnessing technology for economic growth. Landau, R. & Rosenburg, N. (Eds.), Washington, DC: National Academies Press, pp. 275-305.
SCHUMPETER, J. 1964/1911. Theorie der wirtschaftlichen Entwicklung. Eine Untersuchung über Unternehmergewinn, Kapital, Kredit, Zins und den Konjunkturzyklus. Berlin: Duncker und Humblot.