This post is copied from a chapter in a book that I am working on about the fundamentals of innovation systems. I am responsible for the thematic area of innovation systems within the knowledge consultancy mesopartner that I am a partner of. If you want to stay abreast of the work I am doing on this topic then I urge you to subscribe to my blogsite so that you can receive an e-mail every time I add some content (click on the sign me up button on the top right).
We often find that development practitioners, business people and policy makers are not clear about the distinctions between innovation and invention.
A widely accepted distinction between invention and innovation is provided by Fagerberg et al. (2005:4). According to Fagerberg et al., invention is the first occurrence of an idea for a new product or process (first to the world), while innovation is the first attempt to carry it out in practice within a specific context (by, for instance, introducing a machine from another country into a local manufacturing process). Thus invention and innovation could be closely linked, although in most cases they are separated in time (sometimes decades or centuries), place and organisation. However, the fact that innovation typically emerges within a complex system is often overlooked. For instance, as Schumpeter (1964/1911) explained, the innovator who invented the steam engine still had to wait for others to develop the different aspects of the rail system before it could be commercially viable. The steam engine was initially invented in a completely different context, again illustrating how inventions are dependent on the context in which they arise.
While many innovations can be linked to well-funded research programmes, funding is not a pre-condition for innovation. In fact, in many cases a lack of resources could stimulate people to innovate. Firms usually innovate because they believe there is a commercial benefit to the effort and costs involved in innovating. This commercial benefit could be measured in terms of return on investment or profits, but it could also be about cost saving, resource optimisation, solving a recurring problem or responding to the demands of a customer. Often increased competition, changes in market structure or market demand, or changes in technological performance also affect the innovation process. However, innovation requires taking or at least managing risks. Therefore, firms with low capital or with tied up resources are less likely to innovate.
To turn an invention into an innovation, a firm typically needs to combine several different types of knowledge, capabilities, skills and resources from within the organisation and the external environment (Schumpeter, 1964/1911). The interaction between knowledge and learning will be discussed in more detail in the next section.
The willingness of an individual to tinker and explore better solutions is influenced in part by the organisational context of the innovator, but also by factors such as education, qualifications, meta-level factors such as culture, personal characteristics (such as patience, inquisitiveness or tolerance of failure) and the institutional environment. Other factors such as competitive pressure, problem pressure, or social and economic incentives also play a role. Locations with a more diverse economic and social make-up are more likely to be conducive to innovation, as actors interact with people with similar and different interests. The proximity of other actors and the density of interactions make imitation, cross-pollination of ideas, learning from others and the combination of different ideas into new products and services more viable (and less expensive). This feature could explain why urban areas are often hotbeds of innovation – there are more people with different ideas and perspectives that stimulates and often absorbs new innovations.
Why does this matter? Well, many countries (including South Africa) over emphasize “invention” (even when they say “innovation”). Many financial incentives, loans and support programmes prioritize novelty as opposed to absorption. Absorption is important for innovation, as it indicates how ready firms, industries or societies are to not only learn from their own mistakes (and success), but to also learn from the mistakes and the success of others.
Therefore innovation stimulation is about getting our developing countries ready and willing to absorb insights and ideas from others, as much as it is about getting our entrepreneurs to be creative.
As someone famous once said: “why re-invent the wheel?”. With our small budgets we are highly unlikely to out-invent our international peers on many of the topics that are now seen as “sexy” like climate technology etc.
Our priority should remain to get our entrepreneurs and enterprises to be innovative at product, process and business model level. Only once we improve our absorptive capacity will we be able to become inventive.
FAGERBERG, J., MOWERY, D.C. & NELSON, R.R. 2005. The Oxford handbook of innovation. Oxford ; New York: Oxford University Press.
SCHUMPETER, J. 1964/1911. Theorie der wirtschaftlichen Entwicklung. Eine Untersuchung über Unternehmergewinn, Kapital, Kredit, Zins und den Konjunkturzyklus. Berlin: Duncker und Humblot.