Types of innovation

July 22, 2012 Editor 0

In his work on economic development J. Schumpeter distinguished between five different types of innovation:
 new products
 new methods of production
 new sources of supply
 the exploration of new market
 new ways to organize business

Most of the definitions focus on the first two of these: new products and methods of production (processes) as the most distinctive ones for the purpose economic impact analysis of the innovation.

The argument for focusing particularly on the distinction between product and process innovation often rests on the assumption that their economic and social impact may differ. While the introduction of new product is commonly assumed to have a clear, positive effect on growth of income and employment, it has been argued that process innovation, doe to its cost-cutting nature, may have more ambiguous effect.

From the private sector, managerial point of view innovation can be defined as a: development and creation of new or improved, in consumer understanding, products or services. The pro innovation conditions under that definition are created by the changes which impose new consumer needs or offer solutions for existing needs.

In accordance with the communication of the European Commission COM(1995) 688, consistent with the Lisbon European Council’s perception of the innovation and competitiveness, innovation is “the renewal and enlargement of the range of products and services and associated markets; the establishment of new methods of production, supply and distribution; the introduction in changes in management, work organization, and the working conditions and skills of workforce.”

For the purpose of statistics more harmonised product and process innovation definition was introduced. It was proposed by the OECD, European Commission and Eurostat in the guidelines for collecting and interpreting technological innovation data (Oslo Manual).

Technological product and process (TPP) innovations comprise implemented technologically new products and processes and significant technological improvements in products and processes. A TPP innovation has been implemented if it has been introduced on the market (product innovation) or used within a production process (process innovation). TPP innovations involve a series of scientific, technological, organisational, financial and commercial activities. The TPP innovating firm is one that has implemented technologically new or significantly technologically improved products or processes during the period under review. This definition is called Technological Product and Process (TPP) definition, and is a basis framework for all the legal innovation definitions in the EU states.

According to the National Institute of Standards and Technology, an agency of the U.S. Commerce Department’s Technology Administration , we can distinguish between two types of innovation: technological and commercial. Technological innovation is the successful implementation (in commerce or management) of a technical idea new to the institution creating it. A commercial innovation is the result of the application of technical, market, or business-model ingenuity to create a new or improved product, process, or service that is successfully introduced into the market.

The broad US innovation definition which could be compared in the most appropriate way with the OECD and European Union definition was created by the 21’st Century Innovation Working Group in the National Innovation Initiative paper (2004). It states that: Innovation is a process through which the nation creates and transforms new knowledge into useful products, services and processes for national and global markets – leading to both value creation for stakeholders and higher standards of living.

Categories: Topics

Tags: definition, Innovation, methods of production, product and process