How Do Different Types of Innovation and Technology Complement Each Other - Literature review Example

HOW DO DIFFERENT TYPES OF INNOVATION AND TECHNOLOGY COMPLEMENT EACH OTHER? al Affiliation LITERATURE REVIEW 1. DIFFERENT FORMS OF INNOVATION The importance of innovation in both the internal and external mechanisms of an organization is well highlighted by sequential models developed by Sharapova & Kuttuman (2010). Such models examine the effect of innovation on the performance of a firm establishing that firms can achieve positive performance by utilizing organization, product, and process innovations. Several empirical studies have consequentially established that indeed there is a relationship between innovation and the performance of a firm. For example Zinger (2002), Strube & Resende (2009), have established that innovative strategies have a significant impact on a firm’s performance. Swann, (2009) goes further to show empirical evidence related to this relationship. However, “ the extent into which innovations complement or substitute each other as a production function still remain largely undocumented” (Martinez, 2000). Most of the research related to whether different types of innovation complement or substitute each other is mostly focused on innovation as a strategy in the management as opposed to examining innovation as a function of production. It might explain why most studies remain inconclusive regarding the relationship between innovation and growth. Forfas, (2008) and Freeman, (1995) examine the nature of relationship between innovation as a function of production where the studies establish that other aspect relating to economic of scope are largely ignored in both previous and subsequent studies in management. One might expect that the different types of innovations will no doubt complement each other. However, this is not the case. In most cases, each of the sub-type in relation to the different types of innovation is distinct and has a distinct impact on a firm’s performance. However, there are cases where different forms of innovations that is; process innovation; organizational innovation and the product innovation complement each other. The application of various types of innovation is thus dependent on the scope of application and the specific type of innovation used. Cassiman & Veugelers, (2006) established that when a firm introduces product innovation, the firm is subsequently forced to change the organizational and process innovation strategies. Under such a circumstance, the different forms of innovations act as a substitute and do not conform to a singular organizational model that can work complementarily. 1.2 PREVIOUS STUDIES ON RELATED FIELDS Over the years, organizational innovation has always had a positive impact on technological innovation. However, it is not clear whether different types of organizational innovation operate as substitutes or they complement each other. Documented evidence suggests that whether innovation and technology complements each other is dependent on the type of innovation in use, for example if it is process or product innovation. In the current business set-ups, business organizations have recognized the need to implement resource-based strategies that promote business growth. The effects of globalization have led to a paradigm shift where the rapid development in information and technology has seen an emergence on new knowledge in business organizations particularly on issues to do with competition and market leadership. The hypothesis implies that the firm’s innovation capabilities are based on the ability to develop both internal and external strategies that reinforce the innovation process (Athey & Schmutzter, 1995). In terms of complementing each other, the competitiveness of the firm is determined by the viability of innovation and technology strategies employed by the firm. How then do different types of innovation and technology complement each other? From a general perspective, the aspect of complementing in an organization implies that one several processes done together add value to subsequent processes depending on the context of use within a business environment. There are several types of innovations ranging from product to process innovations. However, “the current empirical studies have consequently failed in examining different innovation strategies particularly those related to non-technological fields” (Burns et al., 1996). Cohen & Klepper are of the view that there is a need to analyse innovation beyond the technological domain a situation that would lead to in-depth knowledge regarding how the scope of innovation affects an organization (1996). Recent studies have established that firms that incorporate both technological and organizational innovations establish a competitive advantage of competing firms in the same industry or a different sector. Non-technological activities related to innovation are thus regarded highly despite having been ignored in previous years. Analysts are of the view that there are synergistic effects that arise as a result of various organizational processes complementing each other. Most of the effects are felt on new business organizations, human resource management, and external relations. However, there has existed a systemic ignorance of other forms of organizational innovation such as partnership, sub-contracting, and outsourcing practices. These processes have a significant impact on the overall organizational performance, and it is just that the said processes have not received the attention they deserve. In view of the findings, the relationships between organizational and technological innovations as both of these innovations have an overall impact on organizational strategies. What is fundamental in this analysis is that there are innovations that complement each other while others act as a substitute depending on the application within an organization. When the implementation of various organizational innovations take place, most organizational practices become more effective. The concept of organizational innovation is a broad concept that has never been adequately defined by previous studies. The reason for this is because organizational innovation is defined on the premise of structural, behavioural and strategic dimensions within an organization. 1.3 CLASSIFICATION OF INNOVATION According to Bonanno & Haworth, innovation is defined as “an iterative process initiated by the perception of a new market and/or new service opportunity for a technological-based invention which leads to the; development, production and marketing for the commercial success of the invention” (1998). The definition of innovation suggests that there are different types of innovation and that innovation occurs at different levels within the organization. The same author suggests that the sub-groups of product innovation include incremental innovation, radical innovation, and new innovation. Process innovation, on the other hand, is more concerned with improving both internal and external operations of the organization. The overall objective of the firm when applying process innovation is to reduce the cost of production and increase output (Laursen & Salter, 2006). 1.4. INNOVATION AND PERFOMANCE Technology is considered very pivotal when to organizational performance. This hypothesis is based on an argument by Brynjolfsson & Hitt, (2000) stating that research and development are the main factors that contribute to organizational growth. Freeman (1996) observes that there are various ways in which organizational performance can be influenced by innovation. This hypothesis is supported by the organizational impact by various types of innovation. Different types of innovations have a distinct impact on the performance of a firm. Product innovation affects a firm’s turnover the most while process innovation has a lasting effect on the cost of production. Organizational innovation, on the other hand, affects a firm’s internal structures and processes. Crepon et al., are of the view that firms that use innovation effectively have a higher turnover per employee as opposed to firms that do not use innovative strategies (1998). Innovation according to Garcia & Calantone, (2002) also increase the value added per employee by encouraging efficiency in the internal structures of a firm. 1.5 WHAT IS COMPLEMENTARY Griffith et al., (2006) state that the term complementary or complementing can have diverse meanings depending on the context in which the term is used. From an organizational perspective, the concept of complementary or complementing task is defined as a group of activities that have a common relationship (Miravete & Pernias, 2006). Under such a set-up, an increase in any activity leads to a rise in the subsequent activity. It is important to note that from an economic perspective, the concept of complementing should not prelude to a circumstance where; if a firm adopts one activity, it is not possible to undertake another activity under the same process or structure. Under circumstances, the two activities are said not to complement each other. Another way to look at it is that when saying that activities are complementing, the benefits of doing a single activity do not, surpass those of doing the two activities together (Kim et al., 2012). 1.6. ARE DIFFERENT FORMS OF MOTIVATIONS COMPLEMENTS? Different firms have different ways of applying product and process innovation. Most essentially is the ability to incorporate the two in the internal organizational mechanism and ensure continuity to growth. For different types of innovation to interact, there is a need to treat the different forms of innovations as unique systems that have unique effects on a firm. The hypothesis is supported by documented evidence that suggests that innovation has a positive impact on the quality management practice within a firm. “The internal organizational structures should, therefore, aim at achieving innovative strategies by ensuring that any innovative strategy adopted leads to higher returns when combined with a different form of innovation,”(Garud & Kumaraswamy, 1995). Martinez & Labeaga, (2009) conceptualize and put into perspective the key reasons why most organizations have started to pay more attention to innovation performance. Other authors have come forward to support the concept of innovation in business practice particularly in the field of quality management. Mol & Birrkinshaw give empirical evaluation on firms that have succeeded in implementing organizational flexibility to achieve optimum business performance (2009). A practical example of this adoption is that an innovative strategy such as lean product is considered as a form of process innovation while most of the process entails the introduction of a new product. Judging from the interpretation of process and product innovation, lean product would thus appear to be a product innovation as opposed to being a process innovation. Such organizations include Toyota, Boeing, and Benetton. However, most of the relationship between the different types of innovation and their overall effect on technology is still under-researched (Camison, & Villar-Lopez, 2014). Roper et al., (2008) observe that the different types of innovation should be approached simultaneously in an attempt to find out the overall impact of such innovations on organizational changes. Several advances that have been made in the field of quality management have succeeded at examining some of the relationship between different forms of innovations. However, it is the literature relating to innovation that is still lacking in terms of research and development. Most of the research related to innovation and organizational theory is highlighted in the works by (Milgrom & Roberts, 1990), (Monhenn & Roller, 2005). Galunic & Rodan, (1998) have conducted several studies to establish a relationship between the different forms of innovations. However, most of these studies are inconclusive of whether these forms of innovations complement or substitute each other. However, recent studies have shown a consistent relationship in terms of the various forms of innovations complementing each other. Bhoovaraghavan & Vasudevan, (2006) acknowledge the fact that in some instances, a radical change in one form of innovation might necessitate the need to change the rest of innovation strategies. Drucker notes that a single form of innovative strategy is not independent, and thus performance on one strategy is likely to affect the other (1996). In addition, (Freeman, 1995), (Freeman & Soete, 1997) note that in the manufacturing process, the introduction of a new product is likely to cause an introduction of a new process that complements the new product. However, Casimann & Veugelers, (2006) state that “firms that are involved in process innovation do not necessarily have to engage in product innovation.” Similar studies by Roper & Du, (2008) have further reinforced the hypothesis that a change in product, process or organizational innovation is likely to affect each other meaning that different types of innovations complement each other. The complementary relationship is further supported by Swann, who concludes that firms that adopt process innovation are more likely to change their product and organizational innovative strategies and vice-versa (2009). References Athey, S., and Schmutzler, A. (1995). Product and Process Flexibility in an Innovative Environment. The Rand Journal of Economics 26 (4), 557. 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