Analysis of sources of innovation, technological innovation capabilities

and performance
1. Sources of innovation (both in individuals and organisations)
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Challenging as the nature and definition of innovation is complex

and can be found in a variety of ways

Embodied by individuals with a broad range of characteristics and

backgrounds

3 components:

1. Knowledge relevant understanding, in depth experience and

long-term focus allows people to build the technical expertise
required to innovate. Successful innovators use knowledge to
combine previously distinct elements in new ways thus a breadth of
understanding in multiple disciplines and in depth expertise are
crucial in order to maximise innovation and creative thinking.
Sources of knowledge universities, research etc.

2. Creative thinking relates to how people approach problems

and depends on personality and thinking/working style. Key aspects
of creative thinking are comfort in disagreeing and trying to
solutions that depart from the status quo, ability to persevere
through difficult problems and dry spells the dip, incubation,
synthetic (generating new ideas/ ways of thinking), analytical
(ability to judge and evaluate their strengths and weaknesses and
suggest ways to improve them, practical (ability to sell ideas)

3. Motivation generally accepted as key to creative production,

most important motivators are intrinsic passion and interest in work
itself. Dedicating time, energy, effort and emotion to a problem to
reach success (e.g. Jobs)

Amabiles provides a general framework in which many theorists

viewpoints are categorised

Brainstorming is one of the most popular techniques used to induce

creativity and innovation studies show that fewer ideas are
generated in brainstorming groups than would be generated if
participants thought alone (importance of creating the right
environment)

Entrepreneurial spirit idea generation involves insight, the ability

to perceive an opportunity where others may not

Workplace targets focus on methods to foster organisational

climates conductive to innovation

Management holds the power and plays a key role in whether a

company with innovative or not. Management must ask for

technical innovation, demand it, encourage it, stimulate it, fund it

and reward it (Hastie p. 156)
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Kim and Mauborgnes value innovation study of 30 companies over

a 5 year period to attempt to understand what differentiates highgrowth companies from their less successful competitors found
managements approach to strategy to be significant average or
unsuccessful competitors followed the conventional strategic logic
of attempting to beat the competition while high-growth companies
reduced their competition by breaking established industry
boundaries to create new sources of value for customers while
often lowering costs at the same time -> re-shape the industry

Innovation sources and opportunities (Drucker, The discipline of innovation

Internal
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Unexpected occurrences: unexpected successes and failures are

mostly overlooked, however, businesses should look out for
unexpected uses of their products or services

Incongruities: inconsistences between expectations and results

can create opportunities for innovation

Process needs: process improvements can open up new

opportunities e.g. invention of the Linotype -> quicker printing of
large volumes of newspaper opening up efficiency in mass media

Industry and market change: when an industry grows quickly

there are often many opportunities to address the new needs of the
fastest-growing segments that dont necessarily fit with the way the
industry has traditionally done business innovators will have
advantage over most companies that overlook these new
opportunities

Demographic change: change in population, age distribution,

education, occupations

Changes in perception: understanding customer perceptions is key

to exploiting opportunities.

New knowledge: knowledge-based innovations are the superstars

of entrepreneurship

External

http://www.skillscommission.org/wpcontent/uploads/2010/05/SourcesInnovationCreativity.pdf

There are several sources of innovation. According to Peter F. Drucker the

general sources of innovations are different changes in industry

structure, in market structure, in local and global demographics, in

human perception, mood and meaning, in the amount of already
available scientific knowledge, etc. Also, internet research, developing
of people skills, language development, cultural background, skype,
Facebook, etc.

In the simplest linear model of innovation the traditionally recognized

source is manufacturer innovation. This is where an agent (person or
business) innovates in order to sell the innovation.

Another source of innovation, only now becoming widely recognized,

is end-user innovation. This is where an agent (person or company)
develops an innovation for their own (personal or in-house) use because
existing products do not meet their needs. MIT economist Eric von
Hippel has identified end-user innovation as, by far, the most important
and critical in his classic book on the subject, Sources of Innovation.

The famous robotics engineer Joseph F. Engelberger asserts that

innovations require only three things: 1. A recognized need, 2.
Competent people with relevant technology, and 3. Financial support

The Kline Chain-linked model of innovation places emphasis on

potential market needs as drivers of the innovation process, and
describes the complex and often iterative feedback loops between
marketing, design, manufacturing, and R&D.

Innovation by businesses is achieved in many ways, with much attention

now given to formal research and development (R&D) for
"breakthrough innovations." R&D help spur on patents and other
scientific innovations that leads to productive growth in such areas as
industry, medicine, engineering, and government.

Informal: on-the-job modifications of practice, through exchange and

combination of professional experience and by many other routes.

The more radical and revolutionary innovations tend to emerge from R&D,
while more incremental innovations may emerge from practice but there
are many exceptions to each of these trends.

An important innovation factor includes customers buying products or

using services. As a result, firms may incorporate users in focus groups
(user centred approach), work closely with so called lead users (lead user
approach) or users might adapt their products themselves. The lead user
method focuses on idea generation based on leading users to develop
breakthrough innovations. U-STIR, a project to innovate Europes
surface transportation system, employs such workshops. Regarding
this user innovation, a great deal of innovation is done by those actually
implementing and using technologies and products as part of
their normal activities. In most of the times user innovators have some
personal record motivating them. Sometimes user-innovators may become

entrepreneurs, selling their product, they may choose to trade their

innovation in exchange for other innovations, or they may be adopted by
their suppliers. Nowadays, they may also choose to freely reveal their
innovations, using methods like open source. In such networks of
innovation the users or communities of users can further develop
technologies and reinvent their social meaning.

1. Technological innovation capabilities (TIC)

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A firms TIC is becoming a critical factor in its ability to meet the

demands and challenges emerging from market globalization,
technological advances, and intensification of knowledge
(Lefebvre & Lefebvre, 1993).

TIC is considered the main driver of competitiveness and long-term

economic development

TIC can be broadly defined as a firm-specific collection of

equipment, skills, knowledge, aptitudes and attitudes, which
refers to the ability to operate, understand, change and create
processes and products (Marcelle, 2005).

Fransman (1984:10) defined TICs as all those abilities required to:

Search and select the most appropriate technology; Master
the selected technologies and successfully use them in
production; Adapt those technologies to specific conditions of
production and local demand; Achieve subsequent improvements
through incremental improvement ;

Resources are required to manage the generation of technical

change. These resources are accumulated and embodied in people
(skills, knowledge and experience) and organizational systems (Bell
and Pavitt, 1993)

Absorptive capacity consists of four distinctive capacities:

Acquisition the search for new knowledge; Assimilation
understanding new knowledge; Transformation seeing how new
knowledge can be used in the context of the firms issues and
exiting knowledge; Application implementation of actions
enabled by the new knowledge (Zahra and George, 2002)

3 sets of technological innovation capabilities: investment,

production, linkages (Lall, 1992)

Investment Capabilities are defined as skills needed to identify,

obtain technology for design, construction and commission of new
products/ facilities. They determine the capital costs of the project,
the appropriateness of the scale, technology and equipment
selected.

Investment capabilities have two elements: pre-investment and

project execution. Under each element there are sub-elements to
measure those ranging from routine to innovative activities. The
spending that a firms make in different innovation activities (e.g.
in-house R&D, purchasing license and patents etc.) show its
commitment to the accumulation of knowledge that will give rise to
new products/process or other kinds of innovation. The positive
relation between firms investment in technological innovation and
firm performance has been supported by various arguments: it
enables firm to achieve greater capability to meet the demands of
its changing domestic and international market (Zahra and
George, 2002), thus give firm a good performance. It also enables
firm to exploit the intangible technological assets, which can be
beneficial to the learning process (Xie, 2004)

Production Capabilities influence the productivity of labour

and capital as well as efficiency in material and energy used.
They have three elements: process engineering, product
engineering and industrial engineering. Process engineering
includes necessary activities for production. Product engineering
contains activities required to produce products or improve product
specifications, such as assimilation of product design, improvement
in product quality, and basic research. Industrial engineering
involves monitoring and control functions for process and product
engineering. So technological production capabilities include all the
skills related to the handling of these three engineering process,
product and industrial, along with supervision functions associated
with production process

A firms external linkages or networks also play an important role.

External linkages may increase a firms ability to appropriate returns
from innovation and help to stimulate creativity, reduce risk and
accelerate or upgrade the quality of the innovations mad. linkages
capabilities can be defined here as the ability to transmit
information, skills and technology, and to receive them from other
departments of the company, clients, suppliers, consultants,
technological institutions and so on. Scanning external information
and cooperating with external organizations is key to knowledge
flow. The external knowledge that firms may seek access to can be
categorized into two groups: knowledge from other firms and
knowledge from research institutions

The firms ability to develop different skills leading to technological

innovation is highlighted by the TIC approach. The technology
strategy is usually considered as a continuous knowledge
accumulation process leading to new products and processes
(Pavitt, 1990)

Argued rapid technical change has produced very steep entry

barriers in sectors where its implementation requires huge and
rising R&D investment, and where economies of scale and learning
are important (Soete, 1985)

However, it is also argued that leapfrogging is also a likely

strategy, particularly in newly industrialised countries who learn and
imitate from market leaders in industrialised countries (Ernst and
OConnor)

http://www.cirmap-fea.org/fichiers/shan-and-jolly-2010-accumulation-of-tic-andcompetitive-performance-in-chinese-companies.pdf
1. Performance
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TIC impact on firm competitive performance: innovation

performance, sales performance and product
competitiveness -> Positive relationship between the
accumulation of the firms TIC and its competitive performance;
Investment in in-house R&D has a positive relationship on all three
performance indicators- in-house R&D not only generates
innovations, but also enable firms to assimilate external
technological knowledge better ; All 3 TIC have a positive influence
on product performance

The two major performance measures used are accounting

measures and market value. Accounting measures include sales
growth, return on sales (ROS), return on assets (ROA), and return on
equity (ROE). http://www.cirmap-fea.org/fichiers/shan-and-jolly2010-accumulation-of-tic-and-competitive-performance-in-chinese-

companies.pdf

http://mail.imb.usu.ru/docs/Bank
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