The main purpose of the report is to examine different dimensions of innovation and the factors that contribute towards the growth of small start up entrepreneurs. In order to achieve, this aim, there is a need to attain the following objectives.
- To evaluate different international trends and developments in innovation and technology and their relationship with international business.
- To analyze different normative questions related to technology, people and marketplace in 21st
- To evaluate the importance of innovation and different strategic issues associated with it.
- To examine the importance of process innovation to customers and end users of the products and services offered by the firms.
- To evaluate different contingency factors that influences the choices of processes.
Besides this, it does not include information related to the concept of innovation along with its different types.
There is an increase in the investments and business fluctuations due to occurrence of innovation in the companies. Innovation refers to the changes occurred in the methods and procedures adopted by the company for the purpose of entering into a new market, change in the industrial organization, production and transportation for the purpose of attaining increased market share and competitive advantage over other players in the market (Alabbas and Razek, 2016).
The Schumpeter’s theory of innovation takes into consideration the sociological factors rather than economic factors. Besides this, there are other factors also that bring fluctuations in the economic activities but this theory only considers innovation as a major factor that influences economic activities of the country. There are broadly two categories of innovation such as radical innovation and incremental innovation. There are mainly four dimensions in which the innovation will take place in the organization in order to accelerate growth and development such as product, process, paradigm and position (Matthews and Brueggemann, 2015).
Significance and dimensions of innovation
In the views of Morris (2013), nowadays, businesses focuses on implementing innovation in order to attain competitive advantage over other players in the market in terms of product mix, customer relationships, location, size and technology. Bringing innovation in different elements helps in the maintenance and development of existing and new advantages of the businesses. Innovation in a company takes place in two manners namely continuous and discontinuous. Continuous innovation facilitates in keeping pace with the changes bring by its competitors. Along with this, discontinuous innovation helps in differentiating the portfolio of the companies from that of other companies. Innovation is considered as a only source for achieving sustainable competitive advantage.
As per the views of Alabbas and Razek (2016), the dimensions of innovation is classified in two categories namely one dimensional innovation type and multidimensional innovation type. On the basis of one dimensional innovation type, the innovation can be done in process, product, paradigm and position. The product innovation occurs when there is an occurrence of changes in the performance capabilities, improvement in characteristics of products in a way of adding and modifying the features offered in the existing products. The process innovation takes place when a company adopts new technology in terms of new machines and changes in the production methods to offer existing products to its customers. The position innovation takes place when a company offers products to new market segments. The paradigm innovation occurs when a company discovers new way to reframe its image in the market.
As per the report by PWC (2017), there is an increased competition among the businesses due to emergence of globalization due to which, their top priority is to exercise innovation in order to meet the changing needs of the customers. There are also some economic challenges such as reduction in the budgets due to increased costs. Companies make efforts towards discovering new ideas in order to create value for customers by the way of personalization. This helps in increasing the customer loyalty towards the organization. The companies that focuses on innovation are indulge in creation of new business models and the development of new products and services.
According to Morris (2013), some of the businesses consider innovation as a business process. The main reason behind it is that they provide the definition of the innovation that would take place along with the method to measure its performance in the organization. The companies which give priority to implement innovation in the business collaborate with other players in the industry in order to provide high quality new products and services to its customers in order to gain high level of customer satisfaction. This also results in the optimum utilization of the available resources and increases its productivity. In this manner, the company is able to gain sustainable competitive advantage.
International trends and developments in innovation and technology
As per the views of Nepelski and Prato (2015), in terms of knowledge intensive activities, there is an existence of intense competition among developing countries. There is an existence of increased potential for innovation among the developing countries which helps in making them important producers of technology demanded by other countries. The occurrence of vertical fragmentation of value chains and division of labour in an increased manner in East Asian countries helps them to enter into new markets. Apart from the dissemination of the knowledge, the developments in information and communication technology also plays a vital role for innovation.
In the views of Cantwell (2017), the adoption of new information and communication technology help middle and lower level income group of businesses to overcome barriers related to technology and innovation by broadening the group of innovators. Innovation helps in accelerating the economic growth of the countries by addressing different socio-economic challenges like health and poverty. Emergence of globalization has resulted in opening the domestic market to foreign players which results in gaining access to know-how and technologies adopted by foreign players in order to become competitive. This also results in attaining economies of scale and specialization in certain sectors of the economy.
According to Ndesaulwa and Kikula (2016), there are different factors that are relevant for building innovation capacity such as access to finance, and provision of suitable skills. In addition to this, inclusive innovation helps in providing solutions for the gaps exists between different richest and poorest groups. This can be done by implementing innovation to produce cheap goods in a sophisticated manner so that low income groups can purchase it. This type of innovation boosts the welfare of the poor people by addressing their nutritional and health needs.
According to Dodgson, Gann and Phillips (2014), process innovation is considered as the significant facilitator of the product innovation. The product innovation takes place when the manufacturing processes are outsourced. This has resulted in gaining access to the new processes which are adopted by the producers to produce existing products. The suppliers make investments in research and development to enhance their processes in a constant manner.
In the views of Hyard (2014), there are several companies that consider process innovation as an alternative to product innovation. This helps in provision of high quality products at low cost to its customers. Process innovation facilitates in gaining solution to the problems faced and performance of an existing business process in a radical manner. This helps in increasing the production capacity and productivity of the company. Process innovation facilitates in generating value for the employees of the organization. The implementation of the process innovation facilitates in reducing the time incurred in producing the product. This helps in increasing the volume of goods and services to meet the demand of customers in a quick manner.
It is found out that companies focuses on making investment in research and development to bring innovation in the processes and products in order to gain competitive advantage. There are certain companies that are successful in bringing innovation in their practices and products but finds difficulty in maintaining their performance such as Polaroid, Yahoo, and Sun Microsystems. In order to sustain the innovation by the company, there is a need to establish and implement innovation in the company, for example Corning is a leading manufacturer of components that are used in telecommunications systems, life sciences instruments and electronic displays. This company has transformed its business processes for the purpose of grabbing the new target markets or market segments (Pisano, 2015).
Along with this, Zara has adopted process innovation in order to gain sustainable competitive advantage. Zara did not spend money on commercials and spread awareness among the target customers through the verbal communication with customers. The company has implemented innovative manufacturing process that helps them to respond to the changing needs of the customers in a quick manner. The company has adopted the manufacturing process that helps in producing the clothes as per the customized needs of the customers. Approximately half of the production of the clothes is done during the season (Winden, Braun, Otgaar and Witte, 2014).
The process innovation adopted by the company has facilitates in meeting the changes occurred in the market in a fast manner. This has helped in making it one of the top fashion brands at the global level. In contrast to this, evolution of electronics contract manufacturing results in the loss of the competitive advantage of major original equipment manufacturers like Dell, Motorola, Apple, IBM, HP and so on. The main reason behind it is that these companies has outsourced their manufacturing processes which has resulted in reducing the cost of producing the product but it also results in losing the edge over its competitors as suppliers gain an economies of scale due to the use of electronics contract manufacturing (OECD, 2012).
These companies has outsourced circuit board layout design, component procurement and so on due to which they do not have the knowledge regarding the changes taking place in different technologies used to perform such tasks. The other example is American Connector Company that has established strong relations with equipment manufacturer for the purpose of the development of a new state of art assembly machine which is sold to its competitor. This has resulted in losing of the competitive advantage over its competitors. This is the reason that ACC should not give full control to the suppliers to manufacture the equipments. This may result in losing the capability of innovate processes that may lead to attain competitive advantage (Winden, Braun, Otgaar and Witte, 2014).
It is requisite for the companies to have some control over certain processes otherwise, the new firms can easily enter into the market attain a high market share. Samsung is an electronic company that manufactures its products in-house due to which it has gained a dominant place in the market. Along with this, outsourcing of the processes does not provide the information to the company regarding different newer capabilities that the supplier’s have through process innovation. This is the reason that the companies are unable to gain a full advantage of the newer capabilities adopted by its suppliers. The main drivers of innovation in the firm include social trends and specific customer needs (Piper, 2008).
The different factors that influences the implementation and occurrence of innovation in the firm is broadly divided into two categories namely internal and external factors. Internal factors include leadership style and corporate culture, availability of finance, future expectations, and availability of skilled labour and nature of the firm. There are firms that are conservative towards bringing change in the organization. This inhibits the occurrence of innovation in the firms. The managers who support investment of large amount in research and development and are able to take more risks results in bringing innovation in its processes and products to attain high market share and remain competitive in the market (OECD, 2012).
In addition to this, if there is an increase in the economic growth in future then the management can sanction increased spending on innovation. Presence of availability of liquidity and finance provides an opportunity to increase the investment in research and development and innovation. There is also a significant impact of the skills and abilities of the employees on the occurrence of product and process innovation in the company. There is a need of providing proper training to the employees in order to develop the required skills and abilities so that product and process innovation can take place in the company in an effective and efficient manner (Cantamessa and Montagna, 2015).
The nature and size of the firm has also affects its innovative capacity as the firm has a history of entrepreneurial and innovative solutions get success in research and development and provides freedom to innovate different practices in the firm. In relation to this, the different external factors that affect the innovation capability of the firms include nature of market, intensity of competition, government policy, economic state, ability of the investors to provide funds and legal constraints. Increase in the level of competition in the market leads in increasing the opportunity of investing in research and development and innovation for the purpose of building and retaining increased market share (Smith, Busi, Ball and Meer, 2008).
In the technological sector, there is a need to make constant change in the processes and products of the company in order to satisfy the needs of customers for example, the technology company has make investment in research and development for the purpose of providing smart phones and devices through incremental innovation. This has helped in inducing demand for superior products among the customers (Galende and Fuente, 2003).
Along with this, the government has also put efforts in promoting innovation in the firms by the way of providing grants and tax subsidies for the purpose of promoting international competitiveness and economic growth. The government has also promote innovation by the way of taking different initiatives towards education to provide training to labour for the purpose of the development of the skills. Besides this, there is an occurrence of increased investment by the firms towards different innovative efforts at the time of reliable and steady economic environment (Chryssochoidis, 2003).
Companies decrease their investment in research and development during the recessionary periods to bring innovation in its processes and products to differentiate them from the competitors as they have to increase their budget for performing activities related to innovation. The occurrence of recession affects the purchasing power of customers due to which investors are not willing to provide funds to the company for the purpose of discovering new processes and products that helps in attaining competitive advantage over other players in the market (Smith, Busi, Ball and Meer, 2008).
It is also found out that the company needs to make or bring changes in its products and services for the purpose of remaining ahead of the competitors. It is beneficial for the businesses to become the source of changes that has to be brought in the company and industry instead of adoption of the changes brought by other players in the market. For example the auto manufacturers in auto industry is lagged behind other manufacturers at the global level in terms of quality several years ago but has innovated new processes and technologies to improve the quality of the small cars in the market by becoming a leader in the quality management in the international markets (Galende and Fuente, 2003).
Japan has gained approximately 37% of the sales in the US market in small car segment. Besides this, the Japanese companies have established different manufacturing plants in various countries across the globe and lead in quality management. These companies have adopted improved processes such as total quality management, and just in time approach which helps in making them the leader in the global context. Such type of innovation helps in gaining a competitive edge over other players in the market (Dahlander, Frederiksen and Rullani, 2014).
There is also a requirement of establishing strong relations with customers and suppliers as it facilitates in gaining knowledge regarding the changes that have been taking place in the business environment so that the companies can bring appropriate methods and techniques to meet the changing requirements of the business environment. Along with this, firms that have increased number of customers and suppliers focuses more on bringing innovation in its products and processes for the purpose of retaining the customers (Gruber and Ogut, 2014).
Companies invest their resources in innovating new methods and procedures for the purpose of differentiating it from other players in the market. This facilitates in gaining a first mover advantage. This has helped in receiving a premium prices from the customers that helps in increasing the costs and sales of the company. Along with this, it also helps in improving the efficiency of the employees in the organization and results in reducing the overall cost of the company as it drives economies of scale (Chryssochoidis, 2003).
It can be concluded that emergence of globalization and changes in the tastes and preferences of the customers forces companies to make investment in research and development for bringing innovation in products and services. It is also be summarized that Schumpter has identified four types of innovation that is done by the companies namely product, process, paradigm and position. In addition to this, there are two types of innovation takes place in the organization namely incremental and radical innovation.
Along with this innovation is defined as the changes made in the existing methods and techniques and features of the products or developing new products and services to cope up with the changes taking place in the business environment. Along with this, as per the theory of innovation of Schumpter, the firm takes into consideration the social factors rather than economic factors to accelerate innovation in the activities carried out by the businesses.
Firms that make investment for bringing innovation in different activities attain a competitive edge over other players in the market. It is required by the firm to have a control over some of the manufacturing processes instead of outsourcing all of it as it facilitates in gaining information related to the innovation made by the suppliers and remain ahead of other firms.
Earlier, the Japanese firms lagged behind other global firms in an automobile sector as they adopt changes made in the methods and tools and techniques to manufacture small cars due to which nowadays, these firms invest funds to innovate new processes that can be used to enhance the quality of the cars. Now, Japan has attained a leading position among global players in small car segment. In addition to this, there are certain factors that affect the process innovation such as size of the firm, competition and so on.
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