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Archived updates for Friday, September 10, 2004

Theories of Innovation Management

According to "Innovation Management and the Knowledge Driven Economy," from the European Commission Directorate-general for Enterprise (above), the evolution of theories of innovation management can be explained by the increasing importance of social ingredients in the explanation of innovation, which was originally based solely on tangible forms of capital. This progressive inclusion of social ingredients can be illustrated by reviewing five successive theories that have been deemed important by innovation specialists:
1. Innovation derived from science (technology push).
2. Innovation derived from market needs (market pull).
3. Innovation derived from linkages between actors in markets.
4. Innovation derived from technological networks.
5. Innovation derived from social networks.
The first explicit theory of innovation management is the "technology push theory" or "engineering theory of innovation." In this theory the innovation opportunities,i.e. the opportunities to improve the products or the manufacturing processes, are found in the uptake of research results.
According to this theory, basic research and industrial R&D are the sources of
new or improved products and processes. The production and uptake of research follows a linear sequence from the research to the definition of a product and specifications of production, and the application of technology to make a product that conforms to the specifications defined by research that has also produced patents and scientific publications.

The limitations of engineering solutions were recognised in the 1960s, resulting
in an alternative view that sources of ideas for solutions should originate from
the market. This alternative view gave birth to the "market pull theory" of innovation. This theory still gives a central role to research as a source of knowledge to develop or improve products and processes. This theory sees the first recognition of organisational factors as contributors in innovation theory; the technical feasibility was still considered as a necessary condition of innovation, but no longer sufficient in itself for successful innovation. Organisational competency had to be taken into account to ensure successful innovation.

A new generation called the "chain-link" theories of innovation then emerged to explain the fact that linkages between knowledge and market are not as automatic as assumed in the engineering and market pull theories of innovation.There were two phases:
1. At the beginning of the 1980s, more attention was given to linkages between research and the market via engineering, production, technology development, marketing and sales.
2. Later in the 1980s, the focus laid the stress on the information generated through the linkages existing between the firm and its customers and suppliers.
In these theories, innovation management is explained by combinations
of tangible forms of capital in conjunction with one intangible form of capital: data about customers and suppliers.

At the end of the 1980s and during the 1990s, a technological networks theory of innovation management was developed by a new group of experts under the
label of "systems of innovation." Here the theorists assumed that innovative
firms are linked to a highly diversified set of agents through collaborative networks and the exchange of information. This view stressed the importance of sources of information that are external to the firm: clients, suppliers, consultants, government laboratories, government agencies, universities, etc.

Finally, the "social network" theory of innovation management is based on two
earlier ideas and one new insight. The earlier ideas are that innovation is determined by research (technology push theory) and by unordered interaction between firms and other actors (technological networks theory). The insight is that knowledge plays a more crucial role in fostering innovation. The growing importance of knowledge as a production factor and as a determinant of innovation can be explained by the continuous accumulation of technical knowledge overtime, and by the use of communications technologies that make that knowledge available very rapidly on a worldwide scale.

The evolution from a technological network perspective of innovation management to a social network perspective has been led by the challenge to transform information into knowledge (e.g. information contextually connected to the development or improvement of products or processes). Knowledge-based innovation requires not one but many kinds of knowledge. Furthermore, it requires the convergence of many different kinds of knowledge retained by a variety of actors.
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