Schumpeter (1934, p. 160) was among the first economists to study the broad subject of innovation. He went ahead to make a clear distinction between innovation and invention, where he defined invention as the discovery of a new idea or a previously unknown fact.
Innovation, according to him, is the ability to successfully apply a new idea or previously known fact into practice (Schumpeter 1934, p.162). Therefore, innovation may be defined as “a change in the thought process for doing something, or the useful application of new inventions or discoveries” (McKeown 2008, p. 74).
Drucker (2007) elucidates that innovation is a vital tool of all entrepreneurs. This is because innovation acts as a means by which entrepreneurs exploit changes in the market, which provides the opportunity for different businesses or different services.
Drucker (2007, p. 56) postulated that entrepreneurship and innovation were the main activities that lead to the creation of wealth. According to him, innovation is a resource and entrepreneurship is a catalyst through which the much-needed change in the society can be achieved.
Drucker (2007, p. 229) asserts that innovation is indispensable for all growing and evolving businesses that invest in any type of capital such as machinery, plant, human resource, equipment, and processes or brands.
He emphasizes that creative destruction was the key to achieving a competitive advantage in business through transformation of ideas and dreams into creation and development of new goods. This is achieved by the introduction of new consumer goods and application of new production methods.
According to Drucker an entrepreneur will always be on the look for changes, act on them, and utilize them as an opportunity (2007, p.121).
According to Freeman (1981), the national system of innovation is defined as, “The network of institutions in the public- and private-sectors whose activities and interactions initiate, import, modify and diffuse new technologies” (Freeman 1987, p.42).
Novelty and technology advancement are due to a set of associations among actors in the organization that include national research institutions, universities, and ventures.
A better indulgent of the government innovation organizations by legislators can aid in pointing out proficiencies therefore upholding groundbreaking execution and competitiveness. This can also aide in highlighting shortcomings within the system, both in institutions and in relation to government policies, which can obstruct innovation and technological development.
Schumpeter (1934, p.84) agrees with the argument of many development scholars that a successful industrial and economic development has always been linked to a nation’s ability to develop or acquire, absorb and disseminate advanced technologies. He continues to say that innovation systems serve the purpose of improving or maintaining already established level of competitiveness and growth in developed economies.
In the context of innovation systems, policies that encourage networking among the stakeholders in the system, focused at promoting innovative abilities of organizations specifically their ability to select and acquire technologies are the most vital (OECD 1997, p. 28).
According to the OECD (1997, p. 28), the national innovation systems can be analyzed using many approaches, some of which include firm-level innovation surveys that questions organizations on their sources of knowledge, which are relevant to innovation.
The other approach is the cluster analysis. This advance underscores the relations between specific variety of subdivisions and firms that can perhaps be clustered depending on to their networking and technical distinctiveness. OECD (1997, p. 28), continues to assert that innovation systems may also be analyzed at different levels with sub-regional, pan-regional, national, and international being examples.
For example, the national innovations system facilitated the growth of the Taiwanese pharmaceutical biotechnology and agricultural biotechnology company, as a result of the support by government and partnerships with other local and international Chinese biotech firms, thereby increasing the numbers of expertise used to manufacture transfers and raising capital.
The partnerships also promoted disruptive innovations where the partner firms were able to come up with new ideas and put them into action and rendering existing practices obsolete.
Through this, simpler, affordable, and more convenient approach, products and services were availed. Improved healthcare, increased food production, advanced treatment and diagnosis of diseases, as well as improved environmental management was also achieved (Bessant & Tidd 2007, p. 226).
Bessant and Tidd (2007, p. 230) argue that bio entrepreneurs found in the pharmaceutical companies usually operate in both a knowledge-based and science based industries.
Here, competitive advantage is a vital component and is achieved through efficient and effective management of intellectual property that originates from good science.
The bio entrepreneurs at the Taiwanese pharmaceutical biotechnology and agricultural biotechnology company for example, were researchers and scientist-turned entrepreneurs who wanted to see their research successes being adopted through commercialization thereby making the company to undergo significant development and advancement in the first half year.
However, most of its successes were attributed to the government policy support. Bessant and Tidd (2007, p. 235) emphasize that it is important to understand innovation as this shapes the way in which we may try to manage it.
This theory identified two approaches to innovation, which are technology push and demand pull. The technology push model approaches innovation as being solemnly driven by advances in the world of science, while the demand pull model refers to innovation as a positive response to demand for new products and processes.
According to Mensch (1979, p. 69) and Myer and Marquis (1969, p.133), these models could not stand empirical scrutiny and therefore were later replaced by other models. As a critic, Mensch (1979) used computers that were being produced in the UK during the 1960s as an example to explain why the traditional models did not hold any water.
He found out that the lifecycle of the computers created a foundation for preceding technological change. This is to say that there are a few feedback effects in the innovation process, which the linear representations of innovation processes did not capture.
Due to the failure to capture feedback, Kline and Rosenberg (1986, p. 57) developed the chain-linked innovation model. This model captured all the technical activities that take place during innovation process, market place external forces, and the complex interactions between the various stages of innovation.
This model also allowed for the visualizing of the different possible stages of the innovation process, their determinants and their interrelationship. Novelty and technology advancement are due to a set of associations among actors in the organization that include national research institutions, universities, and ventures
Chain-linked Innovation Model
Source: Kline and Rosenberg 1986, p. 5
As shown above in this model, Kline and Rosenberg identified five main paths that the innovation process follows. The first being the central chain of innovation C where invention/ production of a design begins, based on market signals or technological advances D, which will be developed, produced and then marketed.
“F, f in the process represents feedback loops iterating the steps and controls for perceived market signals and users’ needs, and also the linkages between science and innovation” (Kline and Rosenberg 1986, p. 128). K represents the recourses to various knowledge stocks accompanying the whole process.
The innovator seeks knowledge to try and solve a problem 1, then returns back with the knowledge and proceeds along the innovation chain if the required knowledge is available (2) or opts to research (3) if it is not. The results of the research activities are then applied in the innovation chain (4).
In the end, innovation results in feedback fed into the scientific arena (S). This model highlights the interdependence between the market pull and technology push aspects of innovation (Kline and Rosenberg 1986, p. 128).
In conclusion, the national system of innovation focuses on national mobilization of efforts through cooperation and co-ordinates policy efforts so as to enhance learning abilities that are required in order to achieve new dynamics in countries. In order to achieve this, the national system of innovation needs to bring up activities that will mobilize all the regions or sectors of the economy.
However, the national innovation systems faces a misinterpretation risk were it may be assumed to be promoting particular science-based institutions and activities that may yield very limited socio-economic impact (Hine & Kapeleri 2006, p. 51).
Therefore, there is need to concentrate more resources in promotion of the learning capabilities that will focus on educating people on the importance of the national systems of innovation.
In addition, more research into innovation systems should be administered so as to better understand how to construct in the current environment of global competition and networking, a more complete innovation and competence building systems (OECD 1997, p.43).
Freeman (1981) agrees that the national innovation system facilitated a major shift that constituted ‘international competitiveness’ as far as economists and policy maker’s views were concerned.
Freeman (1981, p.42) asserts that the shift also facilitated the focus of attention towards national policy strategies that created simpler, affordable, and more convenient products and services to both the international and domestic markets.
He postulates that the ‘system’ dimension in the term national systems of innovation has facilitated the shift of attention of the policy makers who are in charge of research, innovation and industrial development, from the traditional linear which had its limitations as stated earlier to interactive thinking of innovation which emphasis on destructive innovation.
As far as Lundvall and Borras (2004, p.98) are concerned, this shift in thinking may be referred to as a shift from ‘Science Policy’ and ‘Technology Policy’ to ‘Innovation policy’.
The national innovation systemic approach is also arguably better suited for policy-makers and all other stakeholders as it offers a more realistic picture of development processes.
This is because the NIS views innovation efforts as being closely linked to wider policies, both macroeconomic and educational therefore facilitating innovation and destructive innovation to be specific.
List of References
Bessant, J & Tidd, J 2007, Innovation and Entrepreneurship, John Wiley and Sons Ltd, London.
Drucker, F 2007, Innovation and Entrepreneurship for Economic Cooperation and Development, Elsevier Publication, New York.
Freeman, C 1981, Technological Innovation and National Economic Performance, Aalborg, Paris.
Hine, D & Kapeleri, J 2006, Innovation and Entrepreneurship in Biotechnology: An international perspective, Pinter Publishers, London.
Kline, S & Rosenberg, N 1986, The Positive Sum Strategy: Harnessing Technology for Economic Growth, National Academies Press, Washington.
Lundvall, B & Borras, S 2005, National systems of innovation: Towards a theory of innovation and interactive learning, Pinter Publishers, London.
McKeown, M 2008, The truth about innovation, John Wiley and Sons Ltd, London.
Mensch, J 1979, Successful industrial innovation, National Science Foundation, Washington.
OECD 1997, The Measurement of Scientific and Technological Activities, third edition, Paris
Schumpeter, JA 1934, Capitalism, socialism, and democracy, Harper & Brothers, New York.