INNOVATION

 As with entrepreneurship, there is a wide spectrum of views on how to define innovation and what is the exact relationship between innovation and entrepreneurship (Zhao, 2005).  OECD (2018, 20) defines an innovation as “a new or improved product or process (or combination thereof) that differs significantly from the unit’s previous products or processes and that has been made available to potential users (product) or brought into use by the unit (process)”.

 Important aspect of innovation is its implementation as the economic and social benefits are created only after it is made available and put into use by other people and organizations (OECD 2018). This differentiates an innovation from just an idea or from an invention.

• Idea- something imagined or pictured in the mind (Schilling, 2013)
• Invention – creation of new process or product from the idea.

 An invention is not an innovation until it has proceeded through production and marketing and has been diffused in the market and adopted by its end-customers (Garcia & Calantone, 2002). Thus, innovation can be viewed as a combination of theoretical conception, technical invention and commercial exploitations (Trott, 2017).

 Technological innovation can be defined as the act of introducing a new device, method or material for application to commercial or practical objectives (Schilling, 2013).

 Innovation as a process can be defined as a multi-stage process to “transform ideas into new and improved products, service or processes, in order to advance, compete and differentiate themselves successfully in their marketplace” (Baregheh, Rowley, & Sambrook, 2009, lk 1334). The relationship between innovation and entrepreneurship can be viewed as complementary as innovation is the source of entrepreneurship and entrepreneurship provides vehicle for the innovation to proceed and to capture the economic value (Zhao, 2005).

 Innovation is driven by developments in enterprise’s external environment and its ability to respond to those. The main drivers for the innovation in the last decades have been (Dodgson, Gann, & Phillips, 2013; Schilling, 2013; Dekkers, Talbot, Thomson, & Whittam, 2014; OECD, 2018; Silvestre & Tîrcă, 2018):

• Globalization of markets and increase of foreign competition increasing the pressure to find competitive advantages
• Shifts in technologies, business and cost models
• ICT development that has sped up the innovation process by lowering the costs, ease and time for designing, testing and manufacturing
• ICT and data availability that as eased the collection and processing of information
• Overall shortening of product life cycles and old products become very quickly obsolete
• Shifts in consumer demand for more and newer products
• Prioritization of innovation and innovative enterprise in policies with the expectation of economic and social benefits from innovation
• Increased public and political concerns related to environmental sustainability and innovation as the main solution for achieving those
• New regulations and technical standards
• Public image of innovators as heroes

 Innovations rise from knowledge-based activities that involve the practical application of existing or newly developed information and knowledge (OECD, 2018). Important aspect is the ability to understand and utilize (Schilling, 2013, lk 19):

• Complex knowledge that is knowledge that has many underlying parts and interdependencies between components.
• Tacit knowledge that is knowledge that cannot be easily codified.