«A typology of innovation»

Aalborg University. Denmark. Inno Resource

«Invention and innovation

»An important distinction is normally made between invention and innovation. Invention is the first occurrence of an idea for a new product or process, while innovation is the first attempt to carry it out into practice.

»To be able to turn an invention into an innovation, a firm normally needs to combine several different types of knowledge, capabilities, skills and resources. For instance, the firm may require production knowledge, skills and facilities, market knowledge, a well-functioning distribution system, sufficient financial resources and so on.

»It follows that the role of the innovator, i.e. the person or organisational unit responsible for combining the factors necessary, also called the ‘entrepreneur’ by innovation-theorist Joseph Schumpeter, may be quite different from that of the inventor. Indeed, history is replete with cases in which the inventor of major technological advances fails to reap the profits from his breakthroughs.

»Long lags

»Sometimes invention and innovation are closely linked, to the extent that it is difficult to distinguish one from the other (biotechnology for instance). In many cases, however, there is a considerable time lag between the two. In fact, a lag of several decades or more is not uncommon. Such lags reflect the different requirements for working out ideas and implementing them.

»Long lags between invention and innovation may also have to do with the fact that some or all of the conditions for commercialisation may be lacking. There may not be a sufficient need for the product (yet) or it may be impossible to produce and/or market because some vital inputs or complementary factors are not (yet) available.

»For instance, although Leonardo da Vinci is reported to have had some quite advanced ideas for a flying machine, these were impossible to carry out in practice due to a lack of adequate materials, production skills and – above all – a power source. In fact, the realisation of these ideas had to wait for the invention and subsequent commercialisation (and improvement) of the internal combustion engine. Hence, as this example shows, many inventions require complementary inventions and innovations to succeed at the innovation stage.

»Innovation as a continuous process

»What we think of as a single innovation is often the result of a lengthy process involving many interrelated innovations.

»For instance, the car, as we know it today, is radically improved compared to the first commercial models, due to the incorporation of a very large number of different inventions/innovations.

»In fact, the first versions of virtually all significant innovations, from the steam engine to the airplane, were crude, unreliable versions of the devices that eventually diffused widely.

»Kline and Rosenberg (1986), in an influential paper, point out:

»‘It is a serious mistake to treat an innovation as if it were a well-defined, homogenous thing that could be identified as entering the economy at a precise date – or becoming available at a precise point in time. (…) The fact is that most important innovations go through drastic changes in their lifetimes – changes that may, and often do, totally transform their economic significance. The subsequent improvements in an invention after its first introduction may be vastly more important, economically, than the initial availability of the invention in its original form’. (Kline and Rosenberg 1986, p. 283)

»A typology of innovation: Schumpeter’s five types

»Innovations may also be classified according to ‘type’. Schumpeter distinguished between five different types: new products, new methods of production, new sources of supply, the exploitation of new markets and new ways to organise business. In economics, most of the focus has been on the first two types.

»The terms ‘product innovation’ and ‘process innovation’ have been used to characterise the occurrence of new or improved goods and services and improvements in the ways to produce these good and services, respectively. However, the focus on product and process innovations, although useful for the analysis of some issues, should not lead us to ignore other important aspects of innovation.

»For instance, many of the innovations that, during the first half of the twentieth century, made it possible for the United States to ‘forge ahead’ of other capitalist economies were of the organisational kind. Many of the most important organisational innovations there took place in distribution, with great consequences for a whole range of industries.

»Radical innovation, technological revolutions and ‘creative destruction’

»Another approach, also based on Schumpeter’s work, has been to classify innovations according to how radical they are (see Freeman and Soete 1997).

»From this perspective, continuous improvements are often characterised as ‘incremental’ or ‘marginal’ innovations, as opposed to ‘radical’ innovations (such as the introduction of a totally new type of machinery) or ‘technological revolutions’ (consisting of a cluster of innovations that together may have a very far-reaching impact). In recent writings on the subject the latter type is often called ‘general purpose technologies (GPTs)’ (Lipsey et al. 2005).

»Schumpeter focused in particular on the latter two categories – radical innovation and technological revolutions – which he believed to be of greater importance. It is a widely held view, however, that the cumulative impact of incremental or marginal innovations may be just as great (if not greater), and that to ignore these would lead to a flawed understanding of long-run economic and social change. In fact, the realisation of the economic benefits from ‘radical’ innovations in many if not most cases (including those of the airplane and the automobile) requires a series of incremental improvements.

»Innovation may strengthen – or threaten – existing business models. Schumpeter used the notion ‘creative destruction’ to characterise the process through which innovation, especially of the market creating and/or organisational type, ‘revolutionizes the structure from within, incessantly destroying the old one, incessantly creating the new one’ (Schumpeter 1942). More recently, Christensen (1997, 2003) has suggested the term ‘disruptive innovation’ for innovations that via the exploitation of new markets or market niches gradually undermine the position of existing business models.

»Innovation and imitation

»The distinction between innovation and imitation, although clear enough in theory, is often difficult to draw in practice. This has to do with the fact that something that is well-known in one context may be new in another etc. For example, if A for the first time introduces a particular innovation in one context, and B later does exactly the same in another, would we characterise both A and B as innovators?

»A common practice, to some extent based on Schumpeter’s work, is to reserve the term innovator for A and characterise B as an imitator. But one might also argue that it would be correct to call B an innovator as well, since B is introducing the innovation for the first time in a new context. This is, for instance, the definition adopted by the European Union’s Community Innovation Survey (see Smith 2005).

»Moreover, introducing something in a new context often implies considerable adaptation (and, hence, marginal innovation) and, as history has shown, organisational changes (or innovations) that may significantly increase productivity and competitiveness.


»Christensen, Clayton M. (1997), The innovator’s dilemma: when new technologies cause great firms to fail (Boston, Massachusetts, USA: Harvard Business School Press).

»Christensen, Clayton M. (2003), The innovator’s solution : creating and sustaining successful growth (Harvard Business School Press).

»Freeman, C. and L. Soete (1997), The Economics of Industrial Innovation Third Ed. (London: Pinter)

»Kline, S.J. and N. Rosenberg (1986), ‘An Overview of Innovation’ in R. Landau and N. Rosenberg (eds.), The Positive Sum Strategy: Harnessing Technology for Economic Growth (Washington D.C.: National Academy Press) pp. 275-304.

»Lipsey, R. G, K. I. Carlaw, and C. T. Bekar (2005), Economic Transformations: General Purpose Technologies and Long-Term Economic Growth.

»Schumpeter, J. A. (1942), Capitalism, Socialism and Democracy (New York: Harper).

»Smith, K. (2004), ‘Measuring Innovation’ in Fagerberg, J., D. C. Mowery and R. R. Nelson (eds.), Oxford Handbook of Innovation (Oxford: Oxford University Press) pp. 148-178.»

Innovation Typologies
Thematic Readings

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