Innovation or creativity or novetty refers to the process of devising a new idea, or thing or improving an existing idea or thing.
- Innovation like all human activities has a cost as well as benefits
- Innovation turns new concepts into realities, creating wealth and power.
- Innovation can also disrupt the status quo. E.g computerization i.e Creative destruction.
- Creative destruction occurs when innovations make long-standing arrangement obsolute and frees resources to be employed else where leading to greater economic efficiency.
Reasons for Opposing Innovation
- The entrepreneurs tend to have a practical concern that unforeseen innovation may cause a disaster e.g side effects e.g of a drug.
- Fear of loosing profits in the event innovation does not translate to the expectations.
- Where the entrepreneur held a monopoly position in the market, there is fear of losing authority and control.
- Fear of upsetting the moral and social value of demand for the product.
- Desire to preserve the existing market confidence.
- Fear of upsetting tradition in production management and market scope.
- Fear of opening a loophole to competition hence lose of business grip.
Reasons for Innovation
- Innovation is essential for the entrepreneur in solving the inefficiency problems.
- As a means of cost reduction and imposing significance social and market grip.
- Profit improvements are looked at from the innovation point of view though newer technology in management and production.
- To encounter competition by already established businesses.
- To facilitate opening up of new markets both locally and internationally.
- To facilitate diversification of products risks and losses.
- To protect current position of monopoly or success.
Requirements of Innovation
- Economic demand
People engage in innovation out of belief that the economic returns will be greater than its costs.
- Surplus capital
Provides the necessary time and startup costs for implementing a new idea.
- Ability to assemble and invest capital.
- Mobile capital which is stable.
Capital cannot serve unless it can move to potential innovator unless it can move to allow the various types of wealth to be created e.g title deeds – stability is provided by a rule of law.
- Availability of growth- fostering social institutions which facilitate the speed of technological advancement.
- Ability and willingness to think and act creativity (Entrepreneurs) I,e the philosophical and psychological requirements.
- Geographical and other circumstantial causes such as ethical issues.
Societies in which innovation is seen as a sinful or people are punished or are shunned to think differently than others are unlikely to experience innovation.
- The size of the firm.
Large firms have the advantage of introducing innovation since they can afford it. They tend to attract more talents employees to advice on new ideas.