Innovation Management

A Research Overview

Mark Dodgson

• Publisher: Routledge
• Year: 2017
• ISBN:
  9781351240161
• Edition: 1
• Topic: Business
• Subtopic: Gestione industriale
• Index: Business

Innovation is the means by which organizations survive and thrive in uncertain and turbulent conditions. Innovation management has become a well-established field of research, teaching and practice, with a substantial literature. As a broad-based research field, contributions stem from an array of perspectives including science, economics, engineering and psychology. Innovation is crucial for economic and social progress, and it needs to be managed in order to be beneficial.

Innovation Management: A Research Overview provides a concise introduction to the best research on innovation management. It covers four main themes: foundational studies, key concepts and frameworks, important empirical studies, and current and emerging themes. The research discussed includes classic studies, with core insights in the field, key thinking on strategies and processes for innovation, well-established and novel research methods, and issues of greatest contemporary importance.

This shortform book provides direction through the maze of research on the nature, processes and outcomes of innovation management, and provides an invaluable introduction to the literature on innovation management for students and professionals.

1
Introduction

It is very common nowadays to hear the word ‘innovation’ in the speeches of business leaders and politicians. The innovation strategies of firms and innovation policies of governments aim to improve corporate and national capacities to be innovative, thereby to achieve desired aims such as enhanced competitiveness, productivity, growth and profitability. It is therefore recognized as an important concern, but what is meant by innovation, and importantly how can it be managed to assure the outcomes sought? Innovation is a term used very broadly, and is commonly misused. On the one hand, it refers to revolutionary changes, such as the internet, and on the other, small incremental changes, such as the latest version of an app. It is confused and conflated with issues such as invention and creativity that are important contributors to innovation, but missing an essential definitional element: innovation is the successful application of new ideas. Because many attempts to innovate fail, innovation is also something that often requires some form of intervention in its encouragement and formulation, and the way it is managed is critical to its success. There is a huge variety of approaches and tools for its management, and there are many issues surrounding their appropriateness. So innovation and its management are matters that are hugely important, but are also contentious and problematic and therefore require deep analysis and understanding. This book offers an overview of the core academic literature on innovation and its management, highlighting the implications this literature has for the practice of innovation.

The book will draw on the author’s lengthy experience of researching and teaching innovation, and his experience of advising companies and governments on its encouragement and application. This interest in the subject goes back to his undergraduate degree, studying Society and Technology in 1974, and his PhD on innovation in small firms completed in 1984. As well as writing numbers of books and articles on the subject, he has edited substantial volumes which have collected, in his opinion, the best broad-ranging thinking on innovation. These go back to The Handbook of Industrial Innovation, Mark Dodgson and Roy Rothwell (eds.), Cheltenham, Edward Elgar, 1994. More recently he co-edited The Oxford Handbook of Innovation Management, Mark Dodgson, David Gann and Nelson Phillips, Oxford, Oxford University Press, 2014, and the four-volume collection upon which this book mainly draws: Mark Dodgson, Innovation Management: Critical Perspectives on Business and Management (ed.), Volume 1, Foundations; Volume 2, Concepts and Frameworks; Volume 3, Important Empirical Studies; Volume 4, Current and Emerging Themes, London, Routledge, 2016. Although there were many important historical contributions to the field, over the past 40 years in particular there has been a massive increase in interest in innovation management. Imperfect though it might be, it is illustrative that a simple Google search of the term innovation management produces over 20 million results. It is the intention of this book to select within this universe of interest, and identify and explain the contributions that the author believes provide the most valuable insights into the issue of innovation and its management.

The study of innovation management is an applied field, driven by its practice. Diverse theories can, however, help explain various aspects of innovation management as a social and economic process. Psychology researchers can explain the motivations of innovative individuals, sociologists explain the power relationships between and within groups and organizations that affect innovation as a social endeavour, and political scientists enlighten the influences institutions can exert. Organization theorists explain how new fields of knowledge and effort are formed and institutionalized, and how practices are negotiated and become embedded. Without underestimating the contributions of these approaches, this book’s focus is on the organization and on theories within economics and strategic management, with a common concern to explain how value from innovation is created, captured and deployed.

What is innovation, and why is its management important?

Innovation is the means by which organizations survive and thrive in uncertain and turbulent conditions. Technological change, globalization and changing patterns of consumption are compounding the complex and rapidly changing circumstances in which organizations operate. Innovation reflects the ability of organizations to understand, respond to and lead the changes needed to endure and succeed in such environments. Innovation contributes centrally to economic performance, corporate competitiveness, environmental sustainability, levels and nature of employment, and in the final analysis, overall quality of life. There are widespread social and economic benefits from innovation, but the organizational returns from it are skewed towards those better at managing its risks and complexities.

The challenges of innovation management are summarized by Dodgson, Gann and Phillips (2014: 3):

The risks, costs, and timescales of innovation often conflict with the financial objectives, operational routines, and managerial incentives found in most organizations. The best returns to innovation may be accrued not by the innovator, but by those that emulate and copy. Innovation disrupts markets, technologies, and workplaces. It requires levels of collaboration across professional and organizational boundaries, and tolerance of failure, that organizations find difficult to coordinate and sanction. In many instances it involves efforts to manage activities and events that are beyond the control of even their most influential contributors.

At the same time, and despite these difficulties, they argue innovation can be the most stimulating and rewarding of all organizational activities.

Innovation does not happen automatically. The positive consequences of innovation result from its successful management, which can also mitigate some of its negative results. The positive consequences can include growth, competitiveness and productivity. Innovative organizations have energy and drive and can be fun and stimulating places to work in. The negative consequences can include loss of existing jobs, environmental damage and the debilitating effect of continual change and workplace insecurity.

Innovation is a very imprecise word. It is an outcome (a new service or way of organizing, for example) and a process (the way resources and capabilities are combined over time to produce innovative outcomes). Innovation can be radical, transformative and disruptive to existing ways of doing things, or it can be small, incremental steps in improving what is already being done: just doing things a little bit better. These wide-ranging differences have great significance for defining the scope of innovation management. In this book, the focus is on innovations that are substantially novel, and involve change and risk, as these are the most challenging and arguably the most consequential for organizations and management. The book considers innovations in products, services and processes, in ways of organizing and getting to the market, and in business models: the ways organizations construct the means to deliver value. Although the focus is mainly on the organization, consideration is given to the broader context in which they operate, such as nations, industries, sectors and technologies. Most of the research addressed here explores technological innovation, and while this is important in and of itself, it also holds lessons for other forms of innovation in the way it reveals some of the challenges and solutions of, for example, strategy formulation and implementation, organizational learning, and overcoming institutional rigidities and introspection.

Innovation management has become a well-established field of research, teaching and practice, with a substantial literature. Like innovation itself, innovation management is broad-based in the issues it addresses, ranging from its connection with science, on the one hand, to understanding of customers and markets on the other. It is concerned with research and development (R&D) and new product and service development, and the supportive organizational forms and practices, and strategies, which create, capture and deliver value from innovation. It is studied by, among others, economists, management and business academics, engineers, geographers, psychologists, organization theorists, intellectual property lawyers and those who increasingly identify as working in the field of innovation studies.

Innovation has become a central interest for firms and organizations, with regular reference to their development of innovation strategies and processes. There are innovation directors and managers, innovation committees and boards, innovation budgets and prizes. Yet there is considerable variation in what these various initiatives constitute and their quality. Similarly, there has been a significant increase in the number of consultants proffering advice on innovation, with markedly different levels of competence. Within academia, innovation has become a core interest, especially in the business and management fields, yet questions arise about the depth of expertise possessed by some of those purporting to research and teach in the area. This all points to the need to recognize and appreciate the foundations and core aspects of the field, an endeavour to which this book aims to contribute.

The book covers well-established ‘classic’ articles, and some newer research judged to be helpful and influential. Innovation management, like much management research, is prone to trends and over-excitement about the ‘next big thing’. The focus here is on robust, insightful research; it assumes that there is much to be learned from the past, and the best contemporary thinking about innovation is cognizant of and builds upon accumulated knowledge. The book aims to provide direction through the maze of research on the nature, processes and outcomes of innovation management, and will be an invaluable source for those studying and researching the subject.

Chapter 2 addresses prominent foundational articles in the area, upon which the field has built. Many have a historical basis. There is considerable value in scholars reflecting on the lessons from history, and considering the present and future challenges of innovation management in the light of those lessons. Many are written by economists, and while they are very critical of the ability of conventional neo-classical economics to explain innovation, the insights these economists provide are very revealing of the macro forces that influence the formation and direction of innovation. This chapter considers the dynamics of innovation, the forces behind it and their outcomes, and the different types of innovation. The difficulties of innovation will be considered: how the diffusion of new ideas can be slow, how the best technology does not always win, how organizations often resist it, and at a more macro level, how politics and culture can constrain it. It analyzes the importance of collaboration and social networks for innovation, and the strategic and managerial challenges of innovation and how they have been confronted.

Chapter 3 introduces some of the major analytical tools in the field. There is no theory of innovation management, but there are some useful frameworks and concepts. These range from the somewhat abstract and aggregate (i.e. discontinuities and disruption) to generic analytical tools (i.e. absorptive capacity, dynamic capabilities, complementary assets, appropriability, core capabilities and core rigidities) to specific means for managing innovation (i.e. lead users, brokerage, stage gate systems, teams and platforms). The chapter will also include concepts that help us better understand the nature of innovation, such as architectural innovation and markets for technology, and the features of innovations that further their diffusion and imitation, including organizational learning. It also includes reference to the new tool of social network analysis.

Chapter 4 includes a selection of the most important empirical studies, both quantitative and qualitative (case studies). The research methods used range from econometric analysis of large databases to rich explanations of the contributions of individuals. Contributions reflect on the shortcomings of their various data sources, and there remain some profound difficulties in empirical studies of innovation management. Some of the earliest empirical studies revealed sectoral differences in the challenges of innovation, and these remain crucially important determinants of innovation management practice. Research shows the important contributions of science and marketing, of entrepreneurship and building on existing institutions. It reveals the importance of organizational culture and leadership, different organizational forms, and measuring the returns to innovation. This chapter also addresses the innovation management issues associated with intellectual property, technical standards, and mergers and acquisitions.

Chapter 5 addresses the most current topical issues in innovation management and its future challenges. It considers ‘open’, ‘business model’ and ‘inclusive’ innovation, and the question of ‘design-led’ innovation. Innovation is considered in service sectors, social innovation and large complex projects, and in its relationship with corporate and environmental sustainability. The way that technology is affecting the ways innovation is managed is addressed, as are the different patterns of innovation management we are seeing in new important players in Asia, Latin America and elsewhere. An enduring lesson of innovation management is that it is a global activity and its good practice can be found all around the world.

In a final reflection in this introduction, it is possible to speculate upon the influence that the study of innovation has had more broadly on the study of business and management. Certainly the subject has attracted interest from a wide range of management academics, from among others strategy, organizational behaviour, international business, marketing, finance and accounting, and information systems. It is presumptuous to claim that innovation management has changed these areas of study, but it is perhaps justifiable to suggest that there are certain elements of its study which may be interesting for other areas to reflect upon and consider their comparative performance (if only to confirm their superiority). The first is that innovation management is deeply engrained in practice, and although there are some fundamentals which haven’t changed over time, the practice of innovation changes rapidly. Understanding and theorizing in the field therefore requires deep engagement with current structures and processes. Second, and relatedly, innovation is fundamentally complex and uncertain, and hence there is a need to account for emergence, disruption, evolution and non-scalability. When management studies address phenomena that are unpredictable and unstable, there are perhaps lessons from those that study innovation, for whom these conditions are normal. Third, the field emphasizes the centrality of collaboration between and within organizations. As this often involves combinations of different capabilities and perspectives (i.e. scientific/technological, operational and marketing), it necessitates an interdisciplinary approach. Explanations from within particular disciplinary boundaries are likely to be limiting. Fourth, innovation management is shaped by the interaction between levels of analysis, and recognition that what occurs within the organization is deeply affected by its external environment (and occasionally vice versa). This not only includes issues such as forces of competition, industry dynamics, geography, and policy settings, but also changing patterns of consumption and broader social attitudes. Innovation management requires rich, diverse and evolving interpretation, with the lesson for any study of management that is restricted, narrow and static that it has yet to catch up with contemporary realities.