The Process of Innovation

SUMMARY The paper argues that innovation processes can be cognitive, organisational and/or economic. They happen in conditions of uncertainty and (in the capitalist system) of competition. Three broad, overlapping sub-processes of innovation are identified: the production of knowledge; the transformation of knowledge into products, systems, processes and services; and the continuous matching of the latter to market needs and demands. The paper identifies key trends in each of these areas: (1) increasing specialisation in knowledge production; (2) increasing complexity in physical artefacts, and in the knowledge bases underpinning them; and (3) the difficulties of matching technological opportunities with market needs and organisational practices. Despite advances in scientific theory and information and communication technologies (ICTs), innovation processes remain unpredictable and difficult to manage. They also vary widely according to the firm's sector and size. Only two innovation processes remain generic: coordinating and integrating specialised knowledge, and learning in conditions of uncertainty. The paper also touches on the key challenges now facing 'innovation managers' within modern industrial corporations, bearing in mind the highly contingent nature of innovation. 3 1. INTRODUCTION This paper concerns the processes (or more accurately 'processes') of innovation within (mainly) large corporations with headquarters located in the advanced industrialised countries. 1 The aim is to provide an interpretation of how innovation processes have evolved historically and the key challenges now facing 'innovation managers' within modern industrial corporations. 2 In so far as it is possible, the paper draws lessons from studies of innovation processes within and between firms, bearing in mind the highly contingent nature of innovation. It examines many of the different problems facing innovation mangers within the modern corporation and shows how these have been, and are being, reacted to. The structure of the paper explains its logic and focus. Part 1 presents a short introduction to the many theories and empirical studies of innovation. This is used in