Innovation and R&D Concepts

Conceptual Framework: Innovation, R&D, and Technological Change

• Innovation is the key driver of business competitiveness, productivity, economic growth, and sustainable development.

Definition of Innovation

• An innovation is a new or improved product or process (or combination thereof).
• It differs significantly from a unit's previous products or processes.
• It has been made available to potential users (product) or brought into use by the unit (process).
• Source: Oslo Manual (2018, p. 20)

Related Concepts

• Invention is not the same as innovation. Innovation includes invention plus the diffusion through commercialization or public provision.
• Technology is a subset of scientific knowledge with practical applications.
• Research and Development (R&D) is creative work to increase knowledge and use it to create new applications.
• R&D is easier to measure than innovation.
• Source: OECD's Frascati Manual

R&D Activities

• Basic Research: Develops new scientific knowledge without specific applications in mind (curiosity-driven research). Usually conducted in labs and universities.
• Applied Research: Uses existing scientific knowledge to solve specific problems. Can lead to new technologies and patents.
• Experimental Development: Focuses on solving technical problems related to new products or processes to improve performance. Can produce prototypes that can potentially lead to innovation.

Innovation as New Combinations

• Innovation involves new combinations of ideas and elements. Examples are illustrated in images of new technology.

Innovation Implications

• Essential for business competitiveness and corporate growth (including start-ups).
• Generic technologies (like steam power, electricity, and IT) can create and destroy industries.
• Important for national economic growth through productivity.
• Drives economic diversification and structural change.
• Crucial for sustainable development.

Joseph Schumpeter (1883-1950)

• The fundamental driving force of capitalism comes from new goods, production methods, transportation, markets, and forms of industrial organization.
• Creative Destruction: New technologies and organizations challenge the existing economic system, forcing adaptation or elimination of firms. This leads to renewal and higher economic development.

Types of Innovation

• Product (services)
• Process (organizational)
• Incremental vs. radical innovation
• Social innovation, inclusive innovation, frugal innovation, green innovation (eco-innovation)

Process Innovation

• Changes the way a product is made without changing the product.
• Aims to improve effectiveness/efficiency, such as reducing defect rates or increasing production quantity.

Product Innovation and Technological Trajectories

• Product life cycles are becoming shorter.
• Replacing products with better versions or varieties is crucial.

Relationship Between Product and Process Innovation

• New processes facilitate the development and production of new products (e.g., engineering, cars).
• New products allow for the development of new processes (e.g., new software).
• Product and process innovation are intertwined.

"Softer" Forms of Innovation

• Increasing importance of organizational, non-physical innovations.
• Includes:
  • Process: improved technologies in manufacturing; use of information
  • Product: R&D based innovations in new/improved products
  • Organizational: new production concepts; networking/supply-chain management
  • Service: value-added services supporting products

Innovation and Sustainable Development

• Green/eco-innovation: Protect environments and addresses climate change.
• Inclusive innovation: Creates opportunities for poor and marginalized members of society, enhancing their social and economic well-being.
• Grassroots innovations: Developed by lower-income groups.
• Frugal innovation: Affordable, using fewer resources.
• Pro-poor innovation: Innovation for the bottom of the pyramid.

Innovation for Sustainable Development Goals (SDGs)

• Signed by 194 countries in September 2015.
• Agenda 2030 roadmap for sustainable development goals.

Radical vs. Incremental Innovation

• Radical: "do something different," creates new categories (new software, hybrid car engines, online share-trading).
• Incremental: "do what we do better," improvements to existing products (Windows Vista, improved phone services).