Innovation (literally “innovation” or “ renewal ”; derived from the Latin innovare “renew” ) is used in everyday language in the sense of new ideas and inventions and for their economic implementation. In a narrower sense, innovations only result from ideas when they are implemented in new products, services or processes that are actually used successfully and penetrate the market ( diffusion ). The complementary process to innovation is exnovation , the abolition of no longer effective or desired processes, products or technologies.
The term was introduced into economics by Joseph Schumpeter with his theory of innovations; here it is defined as the establishment of a new production function. Innovation is a deliberate and targeted process of change towards something first-time, “new”. Economy and society change when factors of production are combined in a novel way.
The term innovation is also used in the humanities and culture . The searching search for new knowledge or artistic solutions and solutions requires curiosity, creativity and a desire for renewal. A characteristic of artistic avant-garde is to find and use previously unknown (“innovative”) forms of expression.
Historically, there are times when innovations appeared in spurts. In this case, pressure to develop as a result of social conditions or negative factors, for example in the form of wars, poor harvests or overpopulation, caused innovations to emerge (“necessity makes inventive”). Innovations arise through " research and development " (R&D, English R&D for research and development ).
“Traditionally, Western cultures tend to emphasize the actively creating aspect of creativity in the sense of the Latin 'creare', which means creating , producing and designing . In contrast, in ancient Egypt and in Eastern cultures, creativity appears as an insertion into a natural growth process, which is echoed in the second linguistic root of creativity: 'crescere' ('become', 'happen', 'let grow'). "
An invention is not yet an innovation. Inventions include new ideas up to and including prototype construction or specific concept development in the pre-market phase. Of innovation in the economic sense can only speak when their usefulness detected and the product, production process or business model is accordingly introduced or changed. It may be that the benefit or value of an innovation is only discovered after a long phase. Many manufactured objects are still "nonsense" at the moment of their creation. What is produced only makes sense in an interpretation and application process.
In other words: the innovation must also produce its own validity requirements by finding recognition in a social interaction and meaningful process. So it is far from over with the creative act of creation. The value of the innovation can also be further increased through the interaction process with the users. The users can also see the value of an innovation in properties that the creative creator could not foresee. Originally , Thomas Alva Edison wanted to use the telephone to broadcast operas.
In this sense, new can mean a real world novelty or, from the point of view of an individual company, employee, etc., a subjective novelty. An innovation is not just about novelty; rather, it must also meet a need, i. that is, it must appear useful from the user's point of view. A distinction is made between a large number of innovation categories, basically 3 superordinate categories can be formed:
- Product service innovations
- Process innovations
- Concept innovations:
- Management and organizational innovations
- Business model innovations
Innovations can also be differentiated according to subject area.
- Social and societal innovations (such as the creation of the dual training system)
- Design innovations (art innovations, such as the depiction of cartoon characters as art like Roy Lichtenstein did)
- Legal innovations (such as the introduction of Swiss banking secrecy in 1934)
- System innovation.
In addition, innovations can also be divided into:
- closed innovation (the innovators are exclusively within an organization) and
- open innovation ( " Open Innovation "): Organizations can rely on in an increasingly diversified world wide distributed knowledge not only to their own innovation, but are more on the integration and use of external information and skills dependent.
- Transfer innovations : Organizations adopt existing knowledge and apply it to their products or processes.
Another way of categorizing innovations is the degree of novelty:
One considers the combination of the purpose of the object or product and the means by which the purpose is achieved. According to these two dimensions, the following forms of innovation can be differentiated:
- An invention is the first appearance of a novelty.
- If an innovation achieves high values in both dimensions, one speaks of a radical, disruptive, revolutionary or Leap innovation in contrast to incremental innovation.
- If an innovation is fundamental for an entire field of technology, it is referred to as a basic innovation .
- Successor innovations are based on basic innovations, four types can be distinguished:
- Improvement innovations: In an already existing product, individual or several benefit parameters are improved without changing the basic functions and properties.
- Adaptation innovations: problem solutions are specially adapted based on specific customer requirements or customer conditions.
- Sham innovations: in the case of a product, only the design is changed without any additional product properties being optimized for the customer. These pseudo-improvements do not represent any additional benefit for the customer.
- Imitations: Solutions to problems that other companies are already successfully using are deliberately imitated by other companies.
Economic and social science use
According to Joseph Schumpeter ( Theory of Economic Development , 1911), innovation is the implementation of a technical or organizational innovation in the production process, not the corresponding invention.
For Schumpeter, the innovator is the “creative entrepreneur” (as opposed to the arbitrage entrepreneur who only exploits existing price differences to make a profit) who drives the process of creative destruction in search of new fields of action . Its mainspring are short-term monopoly positions based on innovation , which provide innovative entrepreneurs with pioneering pensions. These are pecuniary benefits (including innovation prices ) that result from the innovative improvements, for example through the higher productivity of a process innovation or through higher monopoly prices for a product innovation.
According to Jürgen Hauschildt , innovation is basically about something “new”: new products, new markets, new procedures, new approaches, new processes, new sales channels, new advertising messages and much more. The result of innovations is something “new” that differs noticeably from the previous state. This novelty must be perceptible; only those who perceive the innovation can it be an innovation. The novelty consists in the fact that ends and means are linked in a previously unknown form. This link must prove itself on the market or internally (economically). A given purpose (e.g. driving a car) can be achieved with new means (hydrogen, LPG, natural gas, etc.) or a new purpose can be created with given means (e.g. an existing telephone line) (use also for data transmission for the Internet). The mere creation of an idea is not enough - only sale or use differentiates an innovation from an invention (invention).
Peter Drucker was one of the first scientists to investigate what sources of innovation exist. In 1986 he identified seven sources of innovation plus the "big idea". The latter has charm, but fails most often.
Clayton Christensen is considered to be the discoverer of disruptive innovation. This aims to address new markets or new customer groups by radically changing the products. Internet companies in Silicon Valley in particular try to use this principle to find new product solutions and open up new markets.
Innovation competition is understood to mean the competition for monopoly rents, which arise from the development of process and product innovations. This always exists when companies have the prospect of monopoly profits and therefore compete with other companies for these profits.
In order to better understand the innovation competition, it makes sense to take a closer look at the levels on which economic activity takes place.
- Level of consumption (consumption of existing goods)
- Level of production (production of goods)
- Level of innovation (creation of new goods or production processes)
At the first level it is necessary to have the right of ownership to a good, e.g. B. to have a smartphone or a bread roll to consume. This restricts the consumption of other people and at the same time opens up the possibility of a market. The possession of goods, the right to property in a thing, can be exchanged or bought and sold between individuals.
The production level serves to expand the level of consumption, since the goods are only available in limited numbers. In turn, ownership of the goods produced, now intended for sale, enables the expansion of consumption on the first level. The potential profit of the manufacturer sets the incentives to produce and sell at all.
The third level has the purpose of restricting competition on the second level. This happens through the privilege to the innovation for the inventor or the innovator. So one has to imagine that an innovator who does not have any privilege to his innovation and therefore cannot realize any profits from it has no incentive to strive for such an innovation. Suppose an entrepreneur invests a lot of money to design and develop a new product. Many customers would like to buy this and the entrepreneur's profits would be correspondingly high. However, without ownership or the right to manufacture this product, any other company may manufacture and sell this product. The inventor of the product cannot recoup the development costs incurred, as he is now faced with strong competition . Without this competition (restriction on the second level), he could demand a higher price for the product and thus generate the investment costs. Therefore, for a functioning innovation competition, the granting of property rights, e.g. B. in the form of a patent , a prerequisite for product and process innovations.
Incentives and Market Structure - The Value of an Innovation
In economics, some economists have dealt with the question of how high the value of an innovation is for a company or for a society. In the following, only the “pure” value of an innovation is considered and strategic considerations are disregarded for the time being.
A company that is exposed to strong competition has to adjust its price to the level of the other companies, otherwise it would not sell any products. A process innovation could lower his production costs to such an extent that he could become a monopoly. This of course only on the assumption that its monopoly price is below the price level of its competitors. But even if the entrepreneur cannot become a monopoly through process innovation , but can only lower his production costs, he has a (cost) advantage over his competitors. Accordingly, the monopoly rent or the cost savings represent the value of an innovation for the entrepreneur.
In a market with only one provider (monopoly), the incentive structures for innovations are very weak. The monopolist is faced with the decision to bring a product onto the market that would replace his own product (= replacement effect) or not to bring a new product onto the market and continue to produce and sell the old product. However, since he can obtain a monopoly price for his previous product due to his monopoly position, which gives him enormous profits, the monopolist has no incentive to obtain a (further) competitive advantage through an innovation. It should be noted here that the incentive to bring about a process innovation, with the result of cheaper production, is also present with the monopolist.
If you now include strategic considerations, it turns out that the monopolist can definitely have an interest in producing an innovation or a new product. Namely when the monopolist is exposed to potential competitors. Another entrepreneur could bring about a process innovation, produce more cheaply with it and thus snatch customers away from him. In the resulting duopoly, the profits of the two providers would be lower than if the monopoly was retained (= efficiency effect). This leads to the conclusion that the monopolist is very keen to try to innovate or to ensure that the potential competitor does not produce any innovation. The same consideration would apply to an innovation in the form of a new product. Because then the new company would be the monopoly in the market. The effort to acquire property rights only so that potential competitors cannot penetrate the market, i.e. the hoarding of patents without the intention to use them, is also called patent shelving .
These conclusions can be applied to a multi-vendor market. There, companies almost always have the incentive to gain a competitive advantage with the help of a new product or more cost-effective production processes.
Patents from the point of view of welfare theory
As mentioned above, the granting of property rights to certain processes and products is to be seen as a necessity for innovation competition. This can be done in the form of a patent. Here are some considerations about the welfare impact :
It has been shown that the granting of (time-limited) patents results in a welfare gain for society. This results from the welfare gain of the development of a new product per se (product variety / novelty) and after the patent expires through the higher consumer surplus. The higher consumer surplus results from the price reduction of the product as a result of the then prevailing competition. Added to this is the producer surplus, which is also a part of welfare.
Without the granting of patents, no investments would be made in research and development, or not to the extent that would be desirable from the point of view of society as a whole.
There is always a trade-off between the advantages and disadvantages of granting a temporary patent. The longer the term of a patent, the greater the incentives for companies and the faster customers have access to new products or technologies. However, this is only based on the assumption that higher R&D expenditure increases or accelerates the innovation process. On the other hand, there are the high monopoly prices, a higher expenditure of resources for R&D and the slower diffusion of innovations. It can even come to the point that the total research investment of all companies is higher than the associated welfare benefit. The term of the patent should be limited in any case, since otherwise the incentive distortion would be too great and thus the welfare would be damaged.
The number of definitions of the term innovation seems to have grown even faster than the number of innovation researchers since its invention. One observes the most contradicting approaches: Innovation seems to be able to describe new products as well as the process of manufacturing or distributing new products.
After all, there is agreement that innovation, at least in terms of the root of the word, has to be related to the new. "New" does not only refer to a time horizon, but also refers to a factual and a social dimension:
- Innovation as novelty: In the factual dimension of innovation, we observe the uniqueness of previously unknown and for the time being unprecedented artifacts such as products, methods or services.
- Innovation as change: In the time dimension of innovation, innovations appear to us as new processes (which in turn lead to novel artifacts) in the sense of transformations, diffusions or simply changes.
- Innovation as a lead: In the social dimension of innovation, we refer to new forms of advantage that go hand in hand with new forms of address management (e.g. in the form of choosing new, attractive products and using them as status symbols) and also as a lead can be observed.
Typically, innovation management is divided into three phases:
- Impulse phase: observation of trends , identification of future-oriented technologies
- Evaluation phase: suitability for the respective industry
- Technology transfer: Project goes into series
On the one hand, innovation research deals with the question of under which conditions and in which socio-economic processes innovations come about, i.e. the genesis of new combinations of problem-solving applications and the formation and development of a regional and / or national innovation system .
This can concern a product innovation , but also a new form of organization, technology, a process or a new field of application. On the other hand, innovation research is interested in how these goals can be achieved; it deals with innovation processes and thus with the question of the transition of the relevant subject / object from state t0 to state t1. The focus of the process consideration is on process forms, for example consciously controlled, self-organizing or informal or in-passing processes, as well as the possibilities and limits of targeted design or influencing. The following factors play a role in the diffusion (implementation) of innovations (according to Everett M. Rogers ):
- The subjective advantage of an innovation (e.g. gain in prestige, etc.)
- Compatibility with an existing value system
- The complexity or the simplicity felt at first contact
- The ability to try (possibility of experimenting with the innovation)
- The visibility of innovation
Within the target groups, a distinction is made between the following groups of people according to their enthusiasm for innovation or the process of accepting the innovation:
- Innovators - the first 5 to 10% who adopt a product
- Early adopters - the next 10 to 15%
- Early majority - another 30%
- Late majority - another 30%
- Laggards (latecomers) - remaining 20%
Recently, research attention is increasingly the path dependence (English: "path dependence" ) of innovation processes and their results. The focus is on the assumption that the development past of an organization, a product, a technology etc. influences and limits future development possibilities and procedures ( "history matters" ). Taking into account the respective history, it would not be possible to achieve every desired innovation goal.
If the previous findings harden, this has consequences for innovation practice in companies: They no longer have to chase after short-lived trend concepts if they want to innovate. Rather, they focus more on their own potential and its historical formation in order to develop competitive advantages on the basis of real unique selling points.
This contrasts with findings from innovation research, according to which innovation occurs primarily at the interfaces between systems and cultures or in the dialog between different actors ( open innovation , contact innovation ) and that it is not static core competencies but the ability to dynamically exchange resources that are decisive for innovation.
The importance of individual actors or employees in the innovation process is increasingly recognized. A global survey of top managers reveals that employees are among the most important sources of innovation. Since the origin of every innovation are initially creative ideas that are brought up and driven by individuals or teams, the innovation behavior of employees plays a decisive role in the success of innovation.
Beyond the economic focus, the research itself increasingly focuses on participatory methods of generating innovation. The social process nature of creative action is also used as a basis for the development of scientific innovations. Above all, qualitative research methods (such as grounded theory ) play a more important role because they focus more on social action and can therefore be used with regard to various innovations (technical, economic, social, ecological etc.).
The innovation behavior is reflected in different phases of the innovation process. It includes the development of new ideas, their specification or further development as well as their implementation. As a result, the innovation behavior differs from creative behavior or creativity, which only relates to the generation of ideas.
The previous findings in innovation research indicate that the management style in particular has a decisive influence on the innovation behavior of employees. While innovation behavior is predominantly associated with positive effects on innovation success, it can also lead to conflicts and declining performance. One of the reasons for this is that superiors and colleagues are critical of the changes in proven behavioral patterns and processes associated with innovative approaches and ideas.
According to IW-Trends of the Cologne Institute for Economic Research (2005), based on data from 2004 in a comparison of 15 industrialized countries, Germany achieved 11th place with an innovation value of 41.7 (with a value range from zero to 100). Further places: 1st USA (value 77.9), 2nd Great Britain (value 64.0) and 3rd Sweden (value 63.9).
The Innovation Indicator Germany with 150 examined individual indicators of well-established on breitesten indicator to measure innovation in Germany. It is compiled annually by the Fraunhofer Institute for Systems and Innovation Research ( ISI) in cooperation with the Center for European Economic Research (ZEW) on behalf of acatech - German Academy of Engineering Sciences , the Deutsche Telekom Foundation and the Federation of German Industries (BDI) . In the innovation indicator Germany 2008 , Germany again achieved 8th place in the competition of the 17 leading industrial nations, but increased its distance to the front runners. In addition, Germany fell two places to 15th in the individual education indicator.
The reverse innovation model has been increasingly discussed since 2009 . It describes the increasingly occurring phenomenon that innovation is no longer only exported from industrialized nations to the less developed rest of the world, but that developing and emerging countries are also beginning to develop their innovative strength and increasingly penetrate developed markets.
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