Innovation – Definition and Use of Term (Literature Review)

Before talking about innovation, a definition of the term will may be helpful. While numerous definitions can be found in academic literature, innovation is generally understood as the creation or use of something “new” in almost any sphere of today’s life such as politics, business, science, society etc. Since innovation has become much of a buzzword used in so many different contexts and situations, it is sometimes hard to draw a strict line to avoid misunderstanding.

A short overview may be presented by Dichtel et al. (1994, p.994), according to whom innovation in the narrowest sense is the very first introduction of an objectively “new” product or process to the market. It therefore constitutes the first economic effects of technological advance on its environment. A broader perception of innovation includes the element of time and describes innovation as the process from invention to market entry and on to market diffusion. Further extensions of the term abandon the criteria of objective novelty, and include other aspects of entrepreneurial behavior such as products, processes, organizational design, development of new markets and resources.

While most authors agree on the fact, that Innovation has to do with the introduction of “new” products or processes which differ from the antecedent and serve a certain purpose, several questions arise that result from the different perceptions of “novelty” and “product”. While the use of a modern computer system might be common practice in large firms, it might probably be entirely “new” in smaller ones. But is this computer system an innovation? Furthermore the question of what is to be considered a product must be answered, and when taking a process related approach to innovation it must be defined where this process begins and where it ends. Hauschildt (1993, p. 5-7) summarizes common definitions and suggests a characterization of innovation along four dimensions by trying to answer the following questions: What is the object of novelty or, what is new? For whom is it new (objective or subjective novelty)? Where does the “new” (innovation) start and where does it end? Does new imply successful?

A similar approach has been taken by Klein (2002, p.11-12) who identifies an object-related dimension and a process-related dimension of innovation. While the objectrelated point of view sees innovation as the result of a renewal process and also tries to answer the question: what is new, and for whom?, the process-related view sees innovation as the renewal process itself and tries to identify where innovation begins and where it ends. Therefore it also includes the element of time in its argumentation (cp. the above definition of Dichtel et al.)

On these pages innovation will be seen as “the mechanism by which organizations produce the “new” products, processes and systems required for adapting to changing markets, technologies and modes of competition (Lawson et al. 2001, p.378). This definition offers a broad range of innovation possibilities for organizations and does not only focus on technological aspects. It supports the approach to innovation from an organizational point of view. However the above mentioned questions need further examination and will be addressed in the following, starting by introducing the concept of objective and subjective novelty, proceeding with identifying the most common “types of innovation” and then finishing with the introduction of the “innovation process”.