Concepts related to innovation

Innovation

Innovation has been conceptualized in a variety of ways in the literature. The definitions can be divided into two categories: those pertaining to innovation as a process and those relating

to innovation as an outcome (Crossan and Apaydin, 2010; Jiménez-Jiménez and Sanz-Valle, 2011).

There are various definitions of innovation as a process. Wan et al. (2005, p. 262) have defined innovation as “a process that involves generation, adoption and implementation of new ideas or practices within the organization.” Tidd et al. (2005, p. 66) consider innovation as “a process of turning opportunity into new ideas and of putting these ideas into widely used practice.”

The conceptualizations that consider innovation as a process have some common dimensions.

Crossan and Apaydin (2010) define the dimensions as follows: driver, source, locus, view, and level. Dimensions pertaining to innovation as a process should answer the question

‘how.’ Driver and source of innovation can be either internal or external. An internal driver of the innovation can be available knowledge and resources, whereas an external driver would be a market opportunity or imposed regulations. An internal source of innovation is ideation, whereas an external source of innovation is adoption of innovation invented elsewhere. The locus dimension is present if innovation is a closed process or open process. The view dimension considers how the innovation process starts and develops—whether it is top-down or bottom-up. The level dimension delineates the split between individual, group, and firm processes (Crossan and Apaydin, 2010).

Also, a variety of divisions of innovation outcomes have been presented. For example, Schumpeter’s (1934, p. 66) innovation concept covers five areas: (i) the introduction of a new good or a new quality of a good (product innovation); (ii) the introduction of a new method of production, including a new way of handling a commodity commercially (process innovation); (iii) the opening of a new market (market innovation); (iv) the conquest of a new source of supply of raw material or intermediate input (input innovation); and (v) the carrying out of a new organization of industry (organizational innovation). Damanpour (1991) presented the following innovation types: innovation can be radical, incremental, product, process, administrative, or technical.

Innovation, when referred to as an outcome can also be divided into several dimensions, which include referent, form, magnitude, type, and nature (Crossan and Apaydin, 2010).

Dimensions pertaining to innovation as an outcome should answer the questions ‘what’ or

‘what kind.’ The referent dimension defines the newness of innovation as an outcome; it can be new to the firm, to the market it serves, or to the industry. Scholars differentiate three forms of innovation: product or service innovation, process innovation, and business model

innovation. The magnitude dimension indicates the degree of newness of the innovation outcome, usually distinguished between incremental and radical innovation. In terms of type, division can be made between technical and administrative innovations. Finally, nature (tacit or explicit) can be applied to both innovation as a process and innovation as an outcome.

While innovation as a product is largely tacit, innovation in a service or process may remain unarticulated (Crossan and Apaydin, 2010).

The distinction between innovation as a process and as an outcome is sometimes blurred (Crossan and Apaydin, 2010). Thus, in this research two definitions of innovation are drawn together. Wan et al. (2005) defined innovation as a process that involves generation, adoption, and implementation of new ideas or practices within the organization. Damanpour (1991) utilized a theoretical base where innovation is the adoption of an idea or behavior new to the adopting entity, which involves all dimensions of firm activities, such as a new product or service, a new production process technology, a new structure or administrative system, and a new plan or program within the firm. By drawing these two definitions together, innovation in the context of this research work can be thought of in its broadest sense, considering innovation as a process and outcome.

Innovation capability

The organizational capability view of innovation holds that firms do not merely compete with new products or services, but rather with their own unique capabilities underlying their product market activities (Liao et al., 2009). Compared to resources, routines and capabilities are embedded in the dynamic interaction of multiple knowledge sources and are more firm specific and less transferable, thus leading to competitiveness (Peng et al., 2008). A capability can be defined as “the proficiency of a bundle of interrelated routines within firms for performing specific tasks” (Ngo and O’Cass, 2013, p. 1135). Capabilities do not reside in individual routines but emerge from the integration of multiple interrelated routines and processes. This implies that capabilities are built through managerial choices in identifying, developing, and integrating routines and processes to undertake specific functionally oriented behaviors (Ngo and O’Cass, 2013). Capabilities require that multiple characteristics be already embedded in a firm (Grant, 1997).

Lawson and Samson (2001, p. 384) define innovation capability as “the ability to continuously transform knowledge and ideas into new products, processes and systems for the benefit of the firm and its stakeholders.” Hogan et al. (2011, p. 1266) define innovation capability as “a firm’s ability, relative to its competitors, to apply the collective knowledge,

skills, and resources to innovation activities related to new products, processes, services, or management, marketing or work organization systems, in order to create added value for the firm or its stakeholders.” According to Bullinger et al. (2007), innovation capability is a holistic, corporate-wide potential of a firm to generate new and unique values. Innovation capability relates to a variety of areas and is influenced by different factors inside and outside the organization. Similarly, Ngo and O’Cass (2013) conclude that innovation capability is embedded within the application of knowledge and skills embedded within the routines and processes of the firm to perform innovation pertaining to technical innovations (develop new services, service operations, and technology) and non-technical innovations (managerial, market, and marketing).

Also in this present research, a broader conceptualization of innovation capability is adopted.

Thus, innovation capability may relate to creating a new product or service, a new production process technology, a new structure or administrative system, or a new plan or program. This study adopts the view of Ngo and O’Cass (2013) that suggests that innovation capability is manifested in innovation-related business processes (technical and non-technical), is something beyond resources, and is a valuable input for firms to develop and maintain competitiveness. On the basis of earlier definitions of Bullinger et al. (2007) and Ngo and O’Cass (2013), innovation capability is defined in this study as organizational routines and processes affecting an organization’s ability to perform innovation. It consists of determinants that influence an organization’s ability to perform innovation, and innovation capability is thus a predictor of innovation, both process and outcome.