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The Economics and Governance of Innovation and Institutions - Term Paper Example

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This paper “The Economics and Governance of Innovation and Institutions” discusses the reasons why innovation processes may exhibit different features in different industries. The source of innovation can generate a difference in terms of the type of innovations an organization will engage in…
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The Economics and Governance of Innovation and Institutions
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Download file to see previous pages Innovations are associated with basic and radical transformations in an organization’s operations and can be triggered by factors such as technological advancement, increased competition and quality standards among other aspects of the external environment. Through innovation, firms are able to capitalize on strengths and to take the opportunity over competitors’ weaknesses.
Innovation- a process of transforming an idea into a product or service. This forms the foundation of this paper:
- Consumer decision-making process- a process through which consumers make decisions on whether to buy a product or service. It affects the acceptance of innovative products.
- Product differentiation- production of distinct products allowing consumers a wide variety of products to choose from. It results from product innovation.
Pavit (1984) established that innovation originates from the application of creative ideas to develop marketable products from the existing ones. This process begins through invention whereby the new ideas are generated in relation to the performance targets of the business. Products usually have a life cycle that decreases over time and requires enhancement through constant innovations to maintain competitiveness in the market. Richard & Nelson (1991) noted that innovations can be accomplished through the development of fresh knowledge or new products in the market that increases a firm’s leverage through increased profits and consumer satisfaction. Customer preferences change with time and therefore continuous assessment of the market is needed. Innovations targeted at consumer satisfaction depend on research that helps managers to determine market dynamics in terms of consumer preferences.
Malerba & Orsenigo (1997) present a perspective of constant brand extension to maintain a firm’s performance. Brand extension is a significant strategy used by firms in marketing whereby the name of a popular brand in the market is used to market an innovative brand from the same company. The spin-off, which is the new product, is unlikely to be known by consumers on its own. The brand name under which it is sold may encourage consumers since they associate it with the quality of the original product. Brand extension raises a firm’s profitability since it deals with various products. The attitude of consumers towards a particular brand determines the success of the firm in extending it.
The higher the value attached to the brand, the more a firm is likely to succeed in its extension. Moreover, the satisfaction derived from both products matters since the more related the products are in terms of utility, the more consumers are likely to accept the extended brand. The brand extension also revitalizes the diminishing image of the original brand. Consumers in most situations are attracted to an innovative firm whereby they are presented with creative products that they believe are an advancement of the old brand.  ...Download file to see next pagesRead More
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