With the rapid growth of today’s entrepreneurial environment, the competitive nature of this area is likewise dramatically increasing. Such changes directly lead to the constant need for new ideas conceived and developed by entrepreneurs. As a result, there is a demand for an innovative approach that is closely intertwined with the successful outcomes of any entrepreneurial venture. Innovation is an integral part of human development, as well as the specific company or organization with a process of management based on its characteristics and strategies. As it is often associated with the increase of an enterprise’s performance, it is more likely to be efficient in reducing the labor needed for the specific services. With that said, by analyzing its notions, typology, and relationship with the entrepreneurial system, one might conclude that Innovation plays a crucial role in sustaining successful entrepreneurial activity.
Defining the issue
Innovation is the critical element of technology entrepreneurship. According to Evers et al., Innovation should be viewed as an interactive phenomenon, where each of the organizations or companies and ventures fulfill their roles (85). Innovation, as the “life-blood of the company,” might also be perceived as the process of transformation of the idea into the successful realization that implies new products and services, distribution methods, innovating ways of the organization, or newly developed infrastructures (Zahra and Wright 618). The innovative approach implies the extensive process of searching for new insights and ideas to maintain the company’s efficiency. This approach engages an important set of factors, such as economy, finances, investments, human resources, and creative perception. As stated by Drucker and Maciariello, Innovation requires a “clear market focus,” which points out two essential aspects of innovative marketing (16). The first aspect is responsible for the challenges of market research, while the second one is in charge of the customers’ perception of value.
Furthermore, there are two models the innovative approach is based on, the closed and open models. Since the closed model, also known as the traditional model, is insufficient in the modern business environment with its high levels of competition, the open one is responsible for the new approach (Carvalho 175). The open, innovative model is based upon the programmed inflows and outflows concerning the knowledge to enhance internal Innovation and to develop markets for external use of Innovation.
Innovation is a wide-ranging process with its key elements. According to Evers et al., Innovation can be represented as an idea, practice, or object that embodies the process from the emergence of an idea through its formation and testing to the final point of its successful implementation (90). The idea can be used in both ways, commercially in a market or as a part of the business upgrading. It is worth noting that Innovation itself differs from the invention; however, they are tightly intertwined, as Innovation is in charge of undertaking into practice the invention’s idea. Besides, there is often a major lap before the invention can become an innovation and is settled through an entrepreneur. Consequently, the entrepreneur plays the role of the “passionate visionary” who is responsible for reconciling the factors needed for the successful Innovation production on the market. The entrepreneur should aim to reach great business opportunities and become an “innovative economic agent” (Evers et al. 91). With that said, one may trace the close relationship of this concept with the successful innovative approach and entrepreneurship, as the entrepreneur is responsible for leading Innovation into one’s business strategy.
The relationship between Innovation and entrepreneur
The central objective for an entrepreneur requires leveraging and managing the intellectual potential incorporated into human resources, inside and outside the organization, as well as maintaining an organizational mindset and culture with a focus on growth and success. Most importantly, Innovation makes a product more competitive, which provides an opportunity for the company to introduce it to a higher number of markets. Galindo and Méndez state that such advancement creates a stronger position for the entrepreneur and leads to higher profits (826). Hence, the innovation process functions like growth and profit improvement and can be stimulated and successfully fulfilled in terms of better economic activity as the outcome of new opportunities for entrepreneurship. Moreover, Innovation causes a so-called feedback effect (Galindo and Méndez 826). This suggests that entrepreneur’s innovations facilitate other entrepreneurs to implement their activity that results in more innovative outcomes.
Typology of innovation
To begin with, any entrepreneurial venture is generally involved in the correlation between different types of Innovation. As described by Audretsch et al., there is a particular typology of the innovative issue (748). Based on the empirical literature, those include technological, non-technological, organizational, and marketing innovations. New types of Innovation are linked to entrepreneurial activities and are based on the examination of societal needs and priorities (Edwards-Schachter et al. 4). Evers et al. classify two main types, such as process and product innovation, along with organizational and business model innovation (92). Product innovation, on the one hand, is the adoption of a good or service that is new or is considerably enhanced regarding its characteristics or estimated uses. Such Innovation implies significant moderations in “technical specifications, components and materials, incorporated software, user-friendliness or other functional characteristics” (Evers et al. 92). These innovations usually emerge at the beginning of the product lifespan, when possible outcomes and changes are being discussed.
Process innovation, on the other hand, is the application of new or considerably improved production or delivery method. This type of Innovation implies crucial changes in techniques, equipment, and software. They are generally projected to decrease unit costs of production or delivery, to enhance the quality, or to produce or deliver new or greatly improved products or services (Evers et al. 92). There is also a separate classification of the technology-based service innovations that provide processes that are more effective by the use of technology in situations when the service was initially delivered without technology.
With regard to the regional extent, the frequency of the innovative approach is considered smaller compared to the global economy. Karlsson et al. identify regional characteristics and their three types that regulate the progressive emergence of new innovation ideas, such as important knowledge sources, communication opportunities, and innovation competence (88). These characteristics are perceived to be critical conditions for the dynamic regional innovation process. Furthermore, Karlsson et al. classify the dominant sources of economic growth, the driving forces of creativity, innovation, and entrepreneurial activities. The so-called strategic hubs of the global economy include several holistic centers, such as centers of political power, financial system, centers specializing in the creation and allocation of resources, as well as dissemination of knowledge and innovations. Besides, the centers with the media sector, as well as the centers of creativity with arts and culture and leisure activities, are also part of the world’s economic development.
The linkage between Innovation, creativity, and entrepreneurship
As the mindset stimulated outcome, Innovation is tightly connected to the part of the mind responsible for its creativity as it involves the formation of new ideas. With this in mind, Edwards-Schachter et al. argue that the competencies of Innovation and creativity are integral elements of the entrepreneurial competencies, and together they can be analyzed as part of the processes concerning personal growth integrated with educational environments (12). The innovative approach is closely interlinked to the developed mindset of the entrepreneur based on the analytical and strategic insights aligning with the creative concept. It is possible to trace the main obstacles in developing an entrepreneurial mindset and competencies, which lies in the fact that Innovation and creativity are usually considered as traits in education.
Thus, it is believed that an individual is born or obtains specific characteristics related to one’s personality that help to become a creative and innovative entrepreneur. However, such a correlation can be learned and taught. As described by Edwards-Schachter et al., individuals escalate their beliefs into meaning systems that manage thinking, feeling, and acting. With beliefs representing strong presumptions, they become more relevant in the context of entrepreneurship due to implicit ambiguity in entrepreneurial endeavors and constant comparison with others in terms of social structure and practice (18). Even though Innovation engages creativity, those two aspects are not equal. Innovation acts in accordance with creative ideas and must end in its successful implementation with the consequent economic and social value creation in the market or society.
From the view of the socio-constructivist approach, Innovation concerns comprehensive aspects of problem solving, products and services advancement, organizational factors, and formation of values. Edwards-Schachter additionally states that Innovation is a “set of traits”, including self-motivation, results-oriented, and passionate approach with a strong sense of contribution, value, and humor as well (18). Therefore, Innovation is more likely to derive from initiative, creativity, and focused on a success mindset. Furthermore, the innovative process is related to innovative behavior that provokes cognitive processes to generate new ideas in business.
In conditions of complex business practices, it is essential to pursue well-balanced teamwork for the long-term success of the innovation application. Besides, there is such a phenomenon of creative destruction in the economic field (Audretsch 744). This is the case when entrepreneurs themselves present innovative solutions, which jeopardize current practice in the economy by depriving businesses of their existing products, production methods, and even companies. However, it creates a paradoxical situation, as such an approach leads to growth in the economy and reveals a new market. At the same time, it disrupts the position and incomes of established predominant companies. The instability of ideas and the successful innovations define the rise and fall of the economic waves, as well as the cyclical nature of economic expansion.
Lessons from the global financial crisis
From the perspective of the global financial crisis, it had indeed a devastating impact on the economy of practically all countries. In addition, the crisis destroyed the financial resources of companies that almost led to the banking systems destruction. This issue was analyzed by Hausman and Johnston, who traced the crucial impact of innovations in the economy, as well as its potential role in getting the United States out of the financial crisis.
To begin with, Innovation promotes a strong economic situation in different ways. First of all, it contributes through the creation of new job opportunities, which results in higher personal income of the worker that stimulates economic growth by purchasing products and paying more taxes. As described by Hausman and Johnston, innovative products and services provide national security and enhance living standards (2721). Therefore, innovations support spending and secure companies’ profits, along with improving trade imbalance. By producing innovative products, one may avoid the war of prices that decrease the profitability factor. This, in turn, leads to markets declining and a threat to weak organizations. Secondly, Innovation positively concerns profitability through “increased consumer spending” and “reduced competition” (Hausman and Johnston 2721). The innovation aspect is, by all means, significant in the economy field, burdened with two-digit unemployment rates that ignore efforts to improve them due to the stimulation of job growth.
The intermittent nature of the innovation process is positively connected to economic stability. Hausman and Johnston suggest that there is a strong possibility for unemployed workers to become innovative entrepreneurs in a case when getting a new job is difficult, as they are available to contribute to innovative businesses (2721). Moreover, it is worth noting the significant factors in the economic recession that foster Innovation as a way to restore. For instance, innovation trends in the United States have declining nature, and its discontinuity is a function of other trends in the US. Besides, poor investment into new knowledge creation leads to poor Innovation (Hausman and Johnston 2722). Innovation should also meet current consumer needs at a reasonable price with an emphasis on efficient commercial disposal.
Innovation success and entrepreneurship
While analyzing Innovation and its dimension, it is essential to learn the factors increasing and leading to innovative success. These factors include external and internal factors and better metrics (Hausman and Johnston 2725). External factors consist of funding, education, competitive factors, protection of property rights, and other legal issues. Internal factors are in charge of management issues, and better metrics imply innovation-stimulating metrics that involve long-term return appraisal and potential for business advancement.
Based on studied issues, it is vital to explore the possible ways to enhance levels of Innovation that directly influence entrepreneurial activity. As stated by Autio et al., by associating Innovation with entrepreneurship, many nations, states, and universities endorsed certain policies to intensify Innovation by entrepreneurial companies with the expectation of facilitation of economic growth (1097). There is a certain classification of the external and internal recommendations towards innovation success (Hausman and Johnston 2726). External suggestions include the provision of incentives for Innovation, education modification, and developing access to innovative resources. Internal suggestions include managing effort to contribute significantly to the economy to reflect current engines of its growth and creative destruction, mentioned above. Besides, internal recommendations imply investment in new skills and tools and encouraging risk-taking approach in Innovation.
Innovation is a complex issue to discuss in terms of the current competitive entrepreneurial environment. It has a diverse typological structure that defines Innovation as a multitasking factor of the global economy. Besides, Innovation is closely related to the entrepreneur, as one is a mediator of the innovation idea and its direct implementation. With that said, by analyzing the significant role of the innovation issue in entrepreneurial activities, one may conclude that both factors are inherently linked as the successful innovative approach that addresses the needs of society results in a successful business strategy and outcomes.
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