Innovation and Innovativeness: Difference and

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The capacity of the firm to innovate has also brought about other research interests. Subsequently, there is diverse understanding of these two constructs by ...
Innovation and Innovativeness: Difference and Antecedent Relationship† Ahmed Mohammed Kamaruddeen*, Nor Aini Yusof** and Ilias Said*** Housing developers, just like firms from other industries, are facing competition and pressure to provide better quality products and services to improve speed in the market, organizational agility and innovation. Trade liberalization and rapid fall in communication costs, global communications, technological and scientific understanding, and the increasing knowledge and demand from clients are some of the reasons why innovation is even more urgent today. Innovation has been recognized as a prerequisite for better satisfaction of consumer needs, to stay ahead of the competitors, explore new markets, and is vital for firm survival and growth. This recognition has spurred numerous studies in many disciplines such as marketing, sociology, psychology, management and economics. The capacity of the firm to innovate has also brought about other research interests. Subsequently, there is diverse understanding of these two constructs by scholars in various fields, resulting in various definitions and inconsistent terminologies. The lack of consistent terminology has resulted in interchangeable uses of the constructs of innovation and innovativeness. This conceptual paper seeks to discuss the difference between innovation and innovativeness, and it also suggests the antecedent relationship between the two constructs. Keywords: Housing developers, Innovation, Innovativeness, Antecedent relationship

Introduction A crystal clear understanding of the relationship and difference between innovation and innovativeness is imperative for researchers, policymakers and managers of large and small firms in housing industry. Lack of a clear understanding between the two constructs can influence the focus of innovation studies. For this reason, Garcia and Calantone (2002) noted that the lack of consistent terminology results in †

Paper presented at the Management in Construction Researchers Association (MICRA, 2009 Conference) Universiti Sains Malaysia.

*

Research Scholar, School of Housing, Building and Planning, Universiti Sains Malaysia, Malaysia; and is the corresponding author. E-mail: [email protected] * * Associate Professor, School of Housing, Building and Planning, Universiti Sains Malaysia, Malaysia. E-mail: [email protected] *** Lecturer, School of Housing, Building and Planning, Universiti Sains Malaysia, Malaysia. E-mail: [email protected] © 662010 IUP. All Rights Reserved.

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the interchangeable use of constructs of innovation and innovativeness. As a result of inconsistency in defining these constructs, there have been studies which deliver inconsistent and sometimes conflicting results. For this reason, it is important that researchers recognize the distinction between these two constructs. Also Wolfe (1994) noted that firm innovativeness has been studied in a variety of ways, and the results were found to be inconsistent. The proliferation of innovation research began during the early 1960s and continues to advance. The focus of innovation research during the 1970s, like any other specialized field of management research, was on conceptualization and theory building. In that period, the studies were more of a descriptive nature, analyzing the association between various contextual factors and characteristics of organization. In the 1980s and 1990s, the interest of scholars in innovation research led to the broadening of innovation theory and offered prescriptions towards designing innovative organizations. The motivation for this study lies on the ground that innovation is generally recognized nowadays as one of the important factors for economic development and social well-being. As market competition intensifies, innovation is viewed as a vital means of firm survival (Crespell et al., 2006). The paper first provides the concept of innovation followed by the concept of innovativeness in an organization from the existing literature. Then it presents an argument on whether innovation is antecedent to innovativeness or vice versa. Finally, the difference between the two constructs is presented. The definitions provided in this paper are specific for the context of housing industry, but may also be applicable to other related industries.

Concept of Innovation The word innovation is derived from the Latin word ‘innovare’ meaning ‘to renew, to make new or to alter’. In order to sustain achievement, a firm needs to survive the competitive and turbulent market, in which products’ life cycle, technologies, competitors, laws and even whole societies exhibit rapid change of nature. Firms need to protect their tangible and intangible assets against the market uncertainties (Davila et al., 2006). Innovation gives the organization the ability to adapt and evolve to meet the changing market conditions and customer demands. It is generally and widely acknowledged as a key ingredient of productivity success and involves People, Process and Product. Gronhaug and Reve (1988) traced back the first innovation research to the work of Joseph Schumpeter. Thereafter, several researchers (Kimberly and Evanisko, 1981; and Meyer and Goes, 1988) conceived innovation as a product. They tried to determine the conditions under which an organization would innovate. Looking at innovation from a different perspective, other researchers (e.g., Van de Ven et al., 1989) Innovation and Innovativeness: Difference and Antecedent Relationship

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understood innovation as a process to determine how innovativeness becomes a part of the organization. Schumpeter (1934) identified five possible types of innovation: 1. The introduction of a new product or a qualitative change in an existing product; 2. Process innovation new to an industry; 3. The opening of a new market; 4. Development of new sources of supply for raw materials or other inputs; and 5. Changes in industrial organization. Subsequently, innovation researchers like Anderson and King (1993), and Totterdell et al. (2002) viewed innovation as a complex phenomenon, and classified it into the following forms:

• Technical innovation (e.g., new production methods); • Nontechnical aspects of innovation (e.g., new markets, new forms of organization);

• Product innovations (e.g., new products or services); and • Process innovations (e.g., new production methods) The classifications of innovation given by innovation researchers are based on their understanding and the perspective from which they perceive innovation. It is on the basis of the work of Anderson and King (1993) and Totterdell et al. (2002), that Armbruster et al. (2008) distinguished four different types of innovations and grouped them into: 1. Technical product innovations; 2. Nontechnical service innovations; 3. Technical process innovations; and 4. Nontechnical process innovations, also called organizational innovations. From whichever perspective one is looking at innovation, there appears to be a common understanding of the types of innovation mentioned by the respective researchers. Their classification shows that innovation can either be classified as technical or nontechnical. The technical form can be process, product or services, the nontechnical can be process, organization, m arketing and nontechnical services. 68

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Definition of Innovation A recent definition by Knowles et al. (2008, p. 24) defines innovation as the introduction of new products, processes, or business systems. Such introduction could be as a result of adoption or creation of new products, processes or business systems. Rogers (2003) defined innovation as “an idea, practice, or object that is perceived as new to an individual or another unit of adoption.” From the definitions provided, innovation can be inferred as a new product, process or business system. The Organization for Economic Cooperation and Development (OECD) in the current edition of the Oslo Manual identified and defined four types of innovation and provided their definitions. Innovation is the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organizational method in business practices, workplace organizations, or external relations. A product innovation is the introduction of a good or service that is new or significantly improved with respect to its characteristics or intended uses. This includes significant improvements in the technical specifications, components and materials, incorporated software, user-friendliness or other functional characteristics. A process innovation is the implementation of a new or significantly improved production or delivery method. This includes significant changes in techniques, equipment, and/or software. A marketing innovation is the implementation of a new marketing method involving significant changes in product design or packaging, product placement, product promotion or pricing, while organizational innovation is the implementation of a new organizational method in the firm’s business practices, workplace organizations or external relations (OECD, 2005). Dodgson and Bessant (1996) also define innovation in terms of changes in production and process, whereby firms seek to acquire and build upon their distinctive technological competence and transforming the firms set of resources by innovative capability. Innovation at the level of an individual firm might be defined as the application of new ideas to the firm, regardless of whether the new ideas are embodied in the products, processes, services, or work organizations and management or marketing systems (Gibbons et al., 1994). Innovation in business is something that is new or improved significantly, done by an enterprise to create added value either directly for the enterprise or indirectly for IT customers (Business Council of Australia, 1993). Innovation and Innovativeness: Difference and Antecedent Relationship

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The paper defines innovation as an interactive, dependent, systematic, problem solving and strategic process of adoption or creation or improvement in product, process, technology and management and market, aimed at maintaining or improving competitiveness, while satisfying the customers, and driven by the learning process within the firm, between firms and external environment. As mentioned above, innovation scholars have classified innovation into types. The researchers present an argument that of all the types of innovation, organizational innovation influence relates to the readiness and openness of the firm to change and innovate.

Organizational Innovation According to Damanpour (1987), organizational innovation is not limited to change in the organization (structure and processes) of a firm within a defined period. Organizational innovation is defined as the use of new managerial working concepts and practices. It is obvious that organizational innovation can be viewed from different perspectives. It can be viewed from the firm structure, culture, interaction within and between firms. For this reason Coriat (2001) classifies organizational innovation as follows:

• Structural organizational innovation; • Procedural organizational innovation; • Intraorganizational; and • Interorganizational dimension The structural innovation takes place to produce changes in the firm’s structure, such as the staff responsibility, channel of communication, the hierarchical level and departmental division. The procedural innovation takes place in a firm to effect changes in the daily operation and routines. The interorganizational innovation does not only relate to innovations beyond the boundary of the firm alone, it also requires the participation and acceptance of other firms for it to be implemented. On the other hand, intraorganizational innovation takes place to effect changes in a particular division, department or within the whole firm. Wong and Chin (2007) conceived organizational innovation as the development or adoption of an idea or behavior into business operations that is new to the whole organization. They define organizational innovation as the actualization of new technology or new administrative practices in terms of new products or new processes. New products include tangible products and intangible services and new 70

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processes include direct processes and support operations in an organization. New technology and new administrative practices can either already exist or be newly developed. In this paper, the researchers define organizational innovation as a systematic positive change, through adoption or creation, made by a firm in terms of its structural characteristics, organizational creativity, managerial work practice and techniques, routine process and channels for the sole aim of increasing the firm’s competitiveness, market share and business performance. As far as an organization is concerned, innovation would mean the generation or adoption of novel ideas or behavior. Thus, to a firm, an innovation can be the creation or adoption of a new product or service, a new production technology, a new operation procedure or a new management strategy. Most successful innovations are the result of gradual changes in concepts and the methodology implemented continuously over time (Tushman and Nadler, 1986). Damanpour (1991) classifies organizational innovation into administrative and technical.

Innovativeness Wang and Ahmed (2004) identify multiple aspects of innovativeness; they define innovativeness as “an organization’s overall innovative capability of introducing new products to the market, or opening up new markets, through a combination of strategic orientation with innovative behavior and process”. Innovativeness reflects a firm’s tendency to engage in and support new ideas, novelty, experimentation, and creative processes that may result in new products, services, or technological processes. In his understanding of the term innovativeness, Foxall (1984) postulated that “Innovativeness is the capacity and tendency to purchase new products and services”, and further describes innovativeness as a personality trait which can be linked with obtaining acceptance for new products. It is not only vital, but also an extremely risky process which stresses the importance of a good understanding and acceptance of consumers of a new product and service. This concept is supported by Subramanian and Nilakanta (1996), who equally understand organizational innovativeness as an enduring organizational trait; this means that truly innovative organizations are those that exhibit innovative behavior consistently overtime. In other words, innovative firms exhibit a consistently high level of innovativeness not just for a short period of time, but the emphasis is on the mean number of innovations overtime, mean time of the adoption of innovations and consistency of the time of the adoption of innovations. A firm is considered innovative when it adopts innovation, but the extent to which the firm is innovative depends on the number of innovations adopted (Utterback, 1974; Daft, 1982; and Attewell, 1992). The definition of Rogers (2003) Innovation and Innovativeness: Difference and Antecedent Relationship

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is relative to the time of adoption of a firm. The first firms to adopt an innovation are considered most innovative. He defined innovativeness as “the degree to which an individual or other unit of adoption is relatively earlier in adopting new ideas than any other member of the system”. Gebert et al. (2003) define innovativeness as “the capacity of an organization to improve the existing products and/or processes, and the capacity to utilize the creative resources of the organization to the fullest.” They considered small improvements or incremental innovation, as part of firm innovativeness. From the behavioral perspective, Hurley and Hult (1998), define innovativeness as “the notion of openness to new ideas as an aspect of a firm’s culture”, implying that innovativeness is an integral part of the culture of the firm. Similarly, Foxall (1984) defined innovativeness as the “capacity and tendency to purchase new products and services.” This definition recognizes that firm innovativeness is composed of two aspects, technical and behavioral progressiveness. Lumpkin and Dess’s (1996) perception of innovativeness includes both behaviorrelated and product-related concepts. This implies that the firm’s innovativeness starts with a desire to try something new, to an actual commitment to master the latest in new products or technological advances. A firm’s tendency to engage in and support new ideas, novelty, experimentation and creative processes that may result in new products, services, or technological processes is explained by the firm’s innovativeness. The researchers define innovativeness as the inclination or the propensity to adopt innovative building materials, construction methods/process, and business systems that are new to the firm not just for profit making but towards meeting the needs of the customers or end users, sustainability and environment consciousness.

Technology-Related Definition of Innovativeness Innovativeness represents a basic willingness to depart from the existing technologies or practices and venture beyond the current state of the art (Kimberly, 1981). Innovativeness is defined as the company’s proclivity towards the adoption of new technologies, thus representing its ability to adapt to different environmental opportunities (Kitchell, 1995).

Behavior-Related Definition of Innovativeness Innovativeness indicates behavioral change and may refer to the degree to which an individual or other unit of adoption is relatively earlier in adopting new ideas than any other member of the system (Rogers, 1983). Innovativeness is considered to be either the ability of generating new ideas or the combination of existing elements for the creation of new sources of value or the receptivity to new ideas (Hurley and Hult, 1998).

Product-Related Definition of Innovativeness Innovativeness reflects the capacity of the company’s inclination to buy new products and services (Foxall, 1984). 72

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Difference Between Innovation and Innovativeness The term innovation is a broad concept and has been conceived differently by different scholars. Earlier attempts to capture what really constitutes innovation have resulted in different conceptualizations (Salavou, 2004). Innovativeness has been defined in a variety of ways. Utterback (1974) and Draft (1982) consider an innovative firm as one that adopts innovation. Rogers (2003) defines innovativeness in terms of time of adoption relative to other firms. Foxall (1984) defines innovativeness in terms of the capacity and tendency of a firm to purchase new products and services. Hurley and Hult (1998) define innovativeness as an innovative firm whose openness to new ideas is part of their culture. While Gerbert et al. (2003) define innovativeness in terms of improvement on the existing products and processes. Consequently, innovation and innovativeness are either distinguished from each other or used interchangeably (Damanpour, 1991). Nevertheless, innovation seems to incorporate the adoption or/and implementation of ‘new’ defined rather in subjective ways, whereas innovativeness appears to embody some kind of measurement contingent on an organization’s propensity towards innovation. Table 1 shows the diverse ways of understanding and conceptualization of innovativeness by scholars. Boer and During (2001); Crespell et al. (2006); and Table 1: Dimension of Innovativeness as Conceptualized in Previous Research Author

Market

Process













Miller and Friesen (1983)













Capon et al. (1992)

























Subramanian and Nilkanta (1996)













Hurley and Hult (1998)













Rainey (1999)













Lyon et al. (2000)













North and Smallbone (2000)













Boer and During (2001)













Wang and Ahmed (2004)













Crespell et al. (2006)













Knowles et al. (2007)













Schumpeter (1934)

Avlonitis et al. (1994)

Behavior Strategic

Business

Product

System

Source: Knowles et al. (2008) Innovation and Innovativeness: Difference and Antecedent Relationship

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Knowles et al. (2008, p. 24) use the same concept of product, process and business system for the dimensions of innovativeness. On the other hand, the business system that consists of behavioral, strategic and market-related innovativeness is incorporated in Wang and Ahmed’s (2004) definition.

Firm Innovativeness The diverse ways of understanding and interpreting the term ‘organizational innovation’ and the lack of a widely accepted and unified definition causes difficulties in designing and implementing measures and indicators that sustain validity over a wide coverage (Lam, 2005). Wang and Ahmed (2004) define organizational innovativeness as “an organization’s overall innovative capability of introducing new products to the market, or opening up new markets, through combining strategic orientation with innovative behavior and process”. However, researchers of organizational innovativeness like Danneels and Kleinschmidt (2001); and Sethi et al. (2001) still adopt only the product innovativeness in their scale, which of course is unidimensional. To this end, Wang and Ahmed (2004) observed that product innovativeness of an organization emphasizes the end result innovative capability but does not take into account other factors such as behavioral change of the organization, process innovation and strategic orientation towards innovation. As a result, their definition of firm innovativeness covers strategic opening of new market, new process of doing things, and change in the organizational behavior towards innovativeness. Their definition of innovativeness is consistent with the findings of Hovgaard and Hansen (2004), who examined innovation in forest product industry and identified products, processes and business systems to be the three aspects of firm innovativeness. Business system could be the opening or development of new market, marketing methods, introduction of new management system, while process could include manufacturing process and new administrative process towards innovativeness. The researchers define organizational innovativeness as the inclination or the propensity of a housing developer to adopt innovative building materials, construction methods/process, and business systems that are new to the firm and or the housing industry not just for the reason of profit making but towards meeting the need of the customers’ or end users’ sustainability and environment consciousness.

The Antecedent: Innovation or Innovativeness This part of the paper seeks to discuss the relationship between the two constructs in terms their being antecedent to each other. In other words, whether innovation takes place in a firm before innovativeness or the other way round. This can be argued on the basis of definitions and concepts of innovation and innovativeness 74

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discussed in the earlier part of this paper. Rogers (2003) defines innovativeness as “the degree to which an individual or other unit of adoption is relatively earlier in adopting new ideas than any other member of the system”. When innovation is adopted, innovativeness comes to be the base on time of adoption. In this case, innovation becomes an antecedent to innovativeness. Based on the definition of Knowles et al. (2008, p. 24), “Innovation is the introduction of new products, processes, or business systems” while innovativeness is “the propensity of firms to create and/or adopt new products, manufacturing processes, and business systems”. It is logical to say that innovation becomes the antecedent of innovativeness. We argue that the propensity of a firm to adopt or create will be determined or measured based on the innovations adopted or created. Although, it can also be argued that without the inclination or the propensity to innovate, there may be little or no innovation in a firm. However, since innovativeness is a sort of measurement, it will be determined based on the number of innovation or time of adoption. According to Lumpkin and Dess (1996) perception of innovativeness, both behavior-related and product-related concepts are included. The behavior-related concept implies that firm innovativeness commences from the desire to try something new, to the productrelated, that is the actual commitment to master the latest in new products or technological advances. We also argue that “extend or capacity to adopt, create innovation” (innovativeness) will be reflected by actual implementation of the innovation in the firm. This paper, therefore, suggests that innovation is antecedent to innovativeness.

Conclusion Innovation and innovativeness are two different constructs that should be treated differently irrespective of the perspectives or concepts a researcher adopts. Lack of a clear understanding between the two terminologies has resulted in an interchangeable use of the two constructs leading to inconsistent results in the previous innovation-related researches. Innovation is said to have occurred in a firm when there is actual implementation of the newly introduced or created process or new business system. Whereas, the capacity or propensity to create or adopt new products, process or new business reflects the firm’s innovativeness. On the basis of the definitions of innovation and innovativeness provided by scholars, the researchers suggest that innovation is antecedent to innovativeness. It follows that, for a firm to exhibit innovativeness and be called an innovative firm, it must first have adopted or created/introduced new product, process or new business. A Innovation and Innovativeness: Difference and Antecedent Relationship

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