The Gale of Creative Destruction
For many decades, American sociologists puzzled over the atavistic persistence of entrepreneurial values and aspirations in the labor force, despite the declining money returns of the entrepreneur role and its dwindling numbers. Given the nation's laissez-faire traditions, it was easy to understand entrepreneurial ambition as a cultural residual of an economically by-gone era. The founder of entrepreneurship research, (1958, 1978), claimed that Puritan theology had once encouraged believers to adopt the entrepreneur's role and to redefine the role's content. As a result, claimed, European capitalism received a stimulus that enabled it to break away from guild traditionalism, a restraint that frustrated capitalism elsewhere in the world. Weber identified a causally significant entrepreneurship because he linked theology, a non-economic determinant, to the supply of entrepreneurs.
In business and the culture hospitable to it, not much is more important than the moral status of entrepreneurship. If the entrepreneur is a rascal, rouge, the system that gives such a person a home is surely tainted.
Without the moral legitimacy of entrepreneurship – the process of initiating commercial ventures, ambitiously embarking upon business enterprise -- the spheres of commerce and business would turn out to be under a constant moral cloud.
When a political economic system lacks moral support for one of its essential ingredients, competing systems that lack this weakness become powerful even if not immediately viable options. They are what invite fierce loyalty from idealists who insist that justice must be pursued and evil must be erased.
Capitalism changes the standards of commendable behavior, making a role model of billionaire innovators, particularly if their earnings stem from contributions to production. For the rising wealth and power of the capitalist entrepreneurs enable them to purchase respectability, both through their impressive productive and accumulative accomplishments, and via good works they subsequently undertake with their wealth. In short, the free-market economy offers encouragement to productive entrepreneurship such as no other form of economy has ever provided. This is, then, plausibly, another crucial component underlying the dramatic growth performance of capitalism.
has argued that the US economy had been controlled by big monopolies since 1890’s and these monopolies were made by the technological economies, and is inevitable and desirable. This is referred by as lifeblood of competitive capitalism. He also viewed that competitive market structures were unwelcome and the real concept of competition had been misinterpreted by laymen, politicians and professional economist. also added that profit maximization as the motor force behind all economic activity and this profit came from innovation like the creation of a new product, new technology or a new form of business organizational structure.
In essence, the innovator of a new product or a new technology gains temporary monopoly profits while destroying its outdated competition. Innovation is essentially a "creative-destruction" process, however, since it results in higher levels of productivity concomitant with reduced prices. As illustration, the flat bottom river boat gave way to the steamship just as overland horse-drawn stages and freight wagons gave way to the railroads. In turn, the railroads underwent painful readjustments and bankruptcies due to the competitive pressures from the air transport and the trucking industries.
The concept of innovation has become more complicated in other ways as well. The first major scholar to address this topic, , defined innovation as encompassing the entire process, starting from a kernel of an idea continuing through all the steps to reach a marketable product that changes the economy. Now, there is not only a distinction between three major types of innovation (process; product/service; and business concept) but current scholars now distinguish levels of innovation (incremental to radical and sustaining versus discontinuous), no longer restricting the term to major innovations that change the economy. Finally innovation is no longer restricted to the process of creating something new from beginning to end but can include the capacity to quickly adopt externally created innovations that may be of benefit to the organization.
It is, of course, possible to incrementally improve one’s business strategy but (1996, 2000) contends that radical business concept innovation is now paramount. He claims that the current environment is hostile to industry incumbents and hospitable to industry revolutionaries. The fortifications that protected the industrial oligarchy have crumbled under the weight of deregulation, technological upheaval, globalization, and social change. What is now required to ensure organizational success is to continually revolutionize the basic organizational strategy, which progressively typically requires: Radically preconceiving products and services, not just developing new products and services, redefining market space, redrawing industry boundaries. If radical business concept innovation is successful in accomplishing these objectives, it is by definition discontinuous.
The primary drivers of innovation include: Financial pressures to decrease costs, increase efficiency, do more with less increased competition. In regards to shorter product life cycles and value migration there are stricter regulations. Industry and community needs for sustainable development through increased demand for accountability. Rising customer expectations regarding service and quality and greater availability of potentially useful new technologies coupled with the need to keep up or exceed the competition in applying these new technologies and the changing economy. Although cost reduction has been a major driver of innovation, other drivers are also important. Regulatory drivers have become more important in the last several decades. In addition, companies increasingly feel they must promote their image and this has become a major driver of environmental and sustainable development innovations. A good image can help promote both customer loyalty and a company’s growth strategy. As noted above, (1996, 2000) sees important recent change in both (a) the drivers of innovation and (b) the importance of radical business concept innovation for organization survival. Basically, he argues that a dramatic change in the overall economy has occurred and that this economic environment no longer protects established mainstream businesses. He further argues that organizations must develop an innovation competency if they are to survive: radical business concept innovation must become a core component of this competency.
The process of innovation and adaptation is essential to the survival of any organization. To stand still is, in effect, to go backwards as there will always be rival organization going forwards. All products have a finite life cycle. They will be displaced in the market by changing tastes and the emergence of better products; therefore firms must pursue a policy of creating new products that will meet changing needs, and for this some speculative research and development will be needs. In fact, in order to remain competitive in uncertain and turbulent times, innovation is a MUST for companies ( 2003).
So what is innovation? Innovation has been attributed with various definitions, such as that of the (1995) that defines the term as “the successful production, assimilation and exploitation of novelty in the economic and social spheres” (p. 9); or that of (1991), which described innovation as “The generation, development, and adoption of novel ideas on the part of the firm” (p. 556); or of (1973) that characterized innovation as “Any idea, practice, or material artifact perceived to be new by the relevant unit of adoption” (p. 10).
Broadly speaking, definitions of innovation can be classified in two categories: innovation as the final event and innovation as a process. In the first category fits the definition given by researchers (1973). With the latter, meanwhile, fits (1968) attribution of innovation, which they see as a process that proceeds from the conceptualization of a new idea to a solution of the problem and then to the actual utilization of a new item of economic or social value. (1987) adopt the latter definition and use the terms innovation and innovation process interchangeably.
Innovation has always being an important area of research for scholars studying Economic—an example would be Karl Marx whose theories helped revolutionize the viewpoints on economy, society, and politics, among others—innovation on increasing productivity (e.g. 1996) and creative destruction (e.g. 1943) to scholars of management science with focus on sources of innovation (e.g. 1988), on the dynamic nature of innovation (e.g. 1994) and many others. As one will see, the trend of research on innovation moves from the macro aspects of innovation, like how innovation impact the economy, country, and the world, to a more micro aspects of innovation, like the characteristic (sources, type, static and dynamic impact) of innovation in the market. The unit of analysis in innovation switches from industry and nation or country to individual and organization or firm.
An implied feature of innovation is that it must be useful ( 1998). Innovation is generally defined as the first application of a new product, process or service in the market, like an applied invention. This distinguishes an innovation from an invention, which may not have practical application (1998). Another main point of contention is whether innovation is a process, or an outcome. This difference may be of use, for example, when studying stages of innovation as an organizational process, or researching at what point firms become innovative.
At the present time, innovation does play a role in company operations in order to be and stay competitive. Products, services and business processes are all subject to change, inspired by new scientific, technical and organizational knowledge. Effective Innovation boosts the effectiveness of organizations and individuals ( 2004, p. 33). Effective innovation means innovation that changes and improves the company position in the market. It is a continuous process which does not die by the end of a certain product or service. This kind of innovation will result in the company gaining a competitive advantage over its rivals and competitors ( 1980).
Furthermore, innovation has rapidly assumed a position of prominence in world competition. Today's marketplace is characterized by fast-paced and unremitting competition on a global scale. To compete in this environment, organizations need a level of innovation to survive in the stiff competition of the market place. As competition becomes more global and time-based, corporations must develop and deliver better new products in less time (1997). The challenge for modern organizations is to revitalize through continuous improvement and development so they can successfully and continuously develop new products and new businesses. Internal or external drivers are the factors that force changes (1998), innovations may be done at different level in the structure of any organization ( 1997) and that reforms may be universal or limited (1994) in nature. Internal drivers for change could include evolving business requirements, organizational restructuring or revision to corporate strategy/business objectives. External drivers could include developments in technology, economic trends that affect the profitability/value for money of the relationship and the need for electronic or technical service.
The Learning Organizations
According to a study, with the initiation and implementation of processes of organizational learning in the company context innovation processes may be started which improve the performance of organizations in adapting to their environmental and producing new development in this respect. (:1990) Second, the company should render the processing of information in and by organizations more systematic, more efficient and more transparent for the benefit of organizational development. Third, the company should also intensify the production of knowledge and improve the management of knowledge and extend its basis and support and thus permit cultural, structural and strategic innovations through organizational learning.
Also according to (1990) as a rule, especially if a company have problems in designing their organization in such a way that they remain capable of learning and changing in the long run and thus ready for innovation. Owing their structures, they often lack the possibilities to develop and sustain organizational change as a continuous process. Yet in a company, unsystematic development activities and failures therein represent considerable risks which might easily threaten their entire existence. Thus, processes of organizational learning should also be used for innovations within and by a company or business. These processes might contribute to an improved ability to learn and to change and to enable better control of the organization and more flexibility and thus also express itself in an improved efficiency and performance and more organizational stability.
Since innovation can be described as the commercially successful exploitation of new technologies, ideas or methods through the introduction of new products, structures and processes, or through the improvement of existing ones. (1997) Innovation is therefore the commercialization of original knowledge as distinct from invention, which is the original knowledge itself. The interactive process comprises the networking process firms and the basic science infrastructure, between the different functions within the firm especially employees and employers, between producers and users at the inter-firm level and between firms and their wider institutional milieu. These network-relationships exist or can be commercially envisaged in research and higher education institutions, private R&D laboratories, and technology transfer agencies, chambers of commerce, business associations, vocational training organizations, relevant government agencies and appropriate government departments. There are three levels of learning concept of innovation: the system level where learning systems and its element, the regional level where learning regions as learning economies and finally, organizational level where learning companies as learning organizations.
Thus, a learning system is a complex of elements which are connected to each other within a common border. (:1998) They possess flexible structures and the ability to adapt themselves effectively to external changes and to continuously improve their own learning and problem-solving capabilities. Learning systems need three qualities of interaction in order to function. These qualities are: sensing, the spotting signs of change external and internal to the organization. The second quality is awareness, communicating the signs and explaining them so that others understand their implications. Lastly, responsiveness, it is mobilizing resources to respond to emergent while maintaining a steady course.
While learning economy according to (1998) entails three basic elements: innovation as an interactive process, tools and training that enhance individual productivity and social networks and norms that facilitate coordination and cooperation. Within this concept the learning economy uses all patterns of learning that directly foster the capability of the companies and their regional supply networks to create an innovative area for a sustainable development. Within this concept the learning economy uses all patterns of learning that directly foster the capability of the companies and their regional supply networks to create an innovative area for a sustainable development. These patterns are: learning by producing including by doing and learning by using, learning by searching and learning by exploring. At the same time, learning regions as learning economies are indicated by the capability of the regional actors to use regional networks to improve the capabilities for action within the region and utilize these as a learning systems and learning economy. Examples are the introduction of new methods of working in the factory, more effective networking relationships between the firms and the supply chain and the exploitation of synergies between public and private sectors. The innovative regional cluster will consist of firms, large and small, comprising an industry sector in which an innovation system consists of elements and relationships that interact in the production, diffusion and deployment of new and economically useful knowledge.
On the other hand, a study claimed that innovation in a company have external and internal barriers. (:2005) The external factors which have been mentioned most frequently as obstacles were legal regulations, bureaucracy, tax regulations and the number of competitors. A comparison of internal against external barriers to innovation shows that the external factors which cannot be influenced by the individual company have been mentioned far more often than the internal barriers which could be influenced. The analysis between innovative and not innovative companies showed that there is a different perception about external barriers to innovation. Innovative companies mention these external factors less often as obstacles than not innovative companies. This also reflects the company owners attitude towards change meaning that innovative people do not let their innovation activities depend on regulations or bureaucracy.
While the internal barriers to innovation listed by companies are more or less place factors which are always mentioned when companies are asked why they do not do something such as investment into human resource, time and cost. (:2005) More than half of the companies say that, besides employees’ attitude towards change and motivational factors, daily routines and the high cost risk of innovations are the main impeding factors for innovation. It is true that the capital base might be weal and therefore the high risk and uncertainty of innovation represent a major obstacle for them, but the analysis also shows that the innovative companies mention less these factors as obstacles than the companied which are not innovative. This results indicate again that the attitude towards change and new developments is crucial for the undertaking of innovation activities meaning that if there is a supportive company culture and a positive attitude of the company management the barriers to innovation are less impeding,
Another study said that obstacles to change are an expression not only of the identity of organizations but also of people’s individual identity. (:2004) Sustainable change processes are aimed at achieving a changed identity. During the process of innovation every enterprise experiences tensions between a desire to preserve the status quo and a desire for change. This is due to a number of reasons: Existing rules and patterns of thinking and action are persistent because they are proven, have been shown to work and because they are known throughout the enterprise. Adjusting the power structures within the organization produces those very tensions between preserving the status quo and the desire to change. Routine provides a sense of security, in that people can predict how others will react, and in that it is clear what is expected of each person. People do not have to go through lengthy deliberations before they can act. Routine is an important element in efficient and effective working.
Conclusion
While prescribed executive characteristics such as complexity and decentralization have been encapsulated elsewhere in paradigms of innovation, casual, culturally developed descriptions have not. The casual characteristics scrutinized here suggest the amount to which organizational standards encourages and commands behaviors connected with the innovation progression. It is imperative to think about casual controls on behavior in innovation studies, in view of the fact that innovation is an amorphous predicament. This denotes that neither the conclusion nor the methods of completing any unambiguous Endeavour to innovate can be forecasted with conviction. For that reason, innovation-related problems are not agreeable to resolutions using formal organizational methods, such as rules and procedures or appeals through the hierarchy.
On the other hand, organizations that look forward to be successful in innovating have got to one way or another guide and manage the process. Informal, inner absorbed controls, such as standards, can be an efficient means of motivating and leading the answer of amorphous predicaments. Standards have also been revealed to be a method of directing organizational behaviors in conformity with the principles and prospects of an organization's culture. These standards, if they are revealed to persuade innovation conclusions, should be integrated within existing paradigms sequentially to move in the trend of making available a more all-inclusive, incorporated paradigm of organizational innovation.
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