Death and renewal lead to a constant innovative cycle of the market generated by new firms that prosper until a new substitutive technology is introduced to the market.
Consequently, in order to remain competitive companies must combine the existing resources in order to create a new use of current resources,
create combinations, or, simply, innovate. Schumpeter views innovation as the driving force of economy; going even further, the concept of innovation encompasses emergence of new products and strategies, new sources of supply of raw materials, markets, and organizational changes. As such, business strategy cannot be viewed net of innovative processes, as innovation influences companies and markets both externally and internally transferring innovative strategies of companies into competitive advantages.
Innovative activities took different forms and led to various consequences both locally for companies and economy overall. For instance, the U.S. innovative revolution was characterized by growth of managerial education resulting from separation between ownership and control. Being started at the beginning of the 20th century, industrial corporations by the end of World War II created strong managerial organizations for further development of new technological solutions. In the late 1970s and later on in 1980s, Japanese companies gained competitive advantage in the industries previously occupied by U.S. companies. Three different kinds of institutions led to success of Japanese companies: lifelong employment, banking system, and cross shareholding. As such, the innovative approach on organizational level tends to vary significantly from country to country and is a factor of the historical period and technological solutions applied within this period.
When it comes to speaking about firm innovation, there are three major facts, as highlighted by scholars. Firstly, technological knowledge is embodied in minds of individuals and is evident in the routine operations of every organization. Secondly, innovative knowledge is dynamic and evolves over time as individuals gain experience and are able to create new approaches. Going even further, innovative solutions are the products of intra and inter organizational interactions; as, innovation is a collective act. Thirdly, operations of companies are characterized by highly unstable and mobile environment. Having limited access to information and natural doubt, companies do not interpret and process the same information in a homogenous manner. Consequently, there is heterogeneity in technological capabilities of companies operating in industry. Going even further, heterogeneity is the driving force of innovation.
Innovation has also been viewed from a systematic approach, which resulted in emergence of the term Innovation Systems, or IS. The concept was introduced in 1980s as a result of extraordinary growth of Japanese and East Asian economies that received particular attention from scholars. At the same time, United States and European economies were in stagnation. The IS approach attempted to explain the dynamics of the changing configuration of economy. Two theoretical frameworks for the study have been introduced: the historical – empirical approach and interactive learning based approach. The two approaches are essentially different in that interactive learning based offers primarily a theoretical foundation, whereas historical – empirical approach establishes a framework for empirical research to examine performance of individual companies in varying national contexts.
As such, the concept of innovation has been discussed from three perspectives – organizational, systematic, and firm levels. Consequently, when discussing implications for business performance in the 21st century, it is crucial to consider all three dimensions.
About The Author:
Jennifer Burns is a staff academic writer at Custom-Writing.org, college level essay writing service. Jennifer provides writing help and support to students who buy essay assignments and custom written research paper.
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