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Scholars working on the national systems of innovation have a different strand of definitions than of those analysing innovation at the firm level. In Lundvall’s (1992) narrow definition, innovation is defined in the context of its facilitators R&D departments, technological institutions and universities whereas in his broader definition, the system of innovation includes all parts, structures and institutional set-ups influencing learning, searching and exploring. Nelson and Rosenberg (1993) believe that innovation is not restricted only to the acts of firms creating cutting edge technology or to organisations operating at the frontiers of scientific knowledge, but also more generally on the factors affecting national technological capabilities. In their worldview, thus, the study of innovation should include both its generation as well as its diffusion. Carlsson and Stankiewicz’s (1991) definition is confined to technological innovation, though they also consider the emergence and development of new organisational set-ups as innovation.
A parallel and overlapping effort to define innovation is to construct taxonomy of innovations. The creation of such taxonomy is considered necessary and important, as disaggregation is crucial for progress with regard to identifying the determinants of innovation (Edquist, 2001).
Figure : Edquist’s Taxonomy of innovation
Source: Edquist, 2001
The following types of innovation emerge from this effort
A very common taxonomical effort has been to differentiate between technical and organisational innovation (Daft, 1978). Technical innovation refers to development of new products, services and production processes (Daft, 1978; Damanpour and Evan, 1990 and Knight, 1967). Organisational innovation, on the other hand, refers to innovations that are related to alteration in an organisation’s structural and administrative procedures (Daft, 1978; Damanpour and Evan, 1990; Kimberly and Evanisko, 1981 and Knight, 1967). Adam Smith’s (1776) analysis of the division of labour is an early example of organisational innovation and the study of its impact on productivity. In the food industry context, the most relevant organisational innovations are those that relate to logistics and supply chain management.
Product innovation deals with the production of new products and services to create new markets or to satisfy current customers. Process innovation is reflected in the improvements or introduction of new production technology (Knight, 1967 and Utterback, 1971).
Radical innovation represents a completely new product or process and incremental innovation a significant improvement in an existing product or process. Radical innovations have the power to result in significant and rapid transformation of production whereas the effects of incremental innovation are felt more slowly, though their cumulative impact may be just as significant (Frenz and Oughton, 2005). Radical innovation brings about a non-routine change to the very core on how activities are carried out while incremental innovation is usually part of routine changes that do not deviate much from present organisational activities (Dewar and Dutton, 1986 and Ettlie et al., 1984).
This refers to the diffusion of the innovation from innovator to imitators. It is understood that most of the benefits from innovation arise from the diffusion of the innovation rather than its introduction (Vyas, 2005) and as the notion of innovation-span earlier articulated in this chapter explains, the full economic benefits from research are only realised after the processes of invention, innovation and diffusion are complete (Hollander, 1965). The economic effects of innovation are strongly influenced by the speed of its adoption by follower firms and/or consumers (Frenz and Oughton, 2005) which in turn, is determined by network effects, the costs of adopting the new technology, the availability of finance, investment in fixed capital, proximity, cooperation between firms, market size and structure as well as, institutional, social and cultural factors (Hall, 2005)