ABSTRACT

This article
reviews aspects of
contemporary
theory and research
on innovation and
social innovation. It
starts by exploring
the definition of
innovation and
social innovation.
A model outlining
the causes, nature
and consequences
of a more or less
acceptable for
innovation and
social innovation is
presented and
recent research is
AZILARINA MOHMED JOHARI cited to illustrate
DBA7143: INNOVATION AND ENTREPRENEURSHIP the various
dimensions.
Finally, the topic is
linked to the field
of work and
organizational
psychology and a
number of
theoretical and

2
1.1 Definition for innovation

Innovation through the dictionary give the meaning as ‘the introduction of new things, ideas,
or ways of doing something an age of technological innovation’.
Source: Oxford Dictionary

There are over forty definitions found in the recent survey for innovation. As an old historical

meaning was ‘early modern synonym for rebellion, revolt and heresy’. (Mazzaferro, 2018,
Mazzaferro and McLean 2017, Lepore, 2014, Emma, 2013, The Atlantic, 2019).

J.B Say the French economist at around 1800 give an earliest definition for innovation as
‘innovation “shift” economic resources out of an area of lower and into an area of higher
productivity and greater yield’. Thus, innovation in its modern meaning is ‘a new idea,
creative thoughts, new imaginations in form of device or method’. Meriam-Webster, (2016).
Innovation is often also viewed as ‘the application of better solutions that meet new
requirements, unarticulated needs, or existing market needs’. Maranville (1992).

‘Innovation takes place through the provision of more-effective products, processes, services,
technologies, or business models that are made available to markets, governments and
society’. Salgae and Vera, (2012).

‘Innovation is the ability to dictate and modify the ‘rules of the game’ which enables
organisations to gain entry to new markets and challenge established market leaders.’
Johnson, Scholes and Whittington, (2004); Brown and Eisenhardt, (1995).

Drucker (1985) explained innovation as a unique tool used by businessman to optimize the
opportunity in a different activity or service. It may be perceived as a discipline, to learn and
to practice. Hence, it is a specific instrument in entrepreneurship. Nevertheless, it doesn’t
have to be technical, nor to be a “thing” in common.

Innovation has become a crucial factor to global competitiveness and economic growth,
generating a strong impact on the gross domestic product (GDP) of advanced nations (Buesa

INNOVATION AND SOCIAL INNOVATION 1

et al., 2010; Canter et al., 2008). According to Schumpeter’s theory, economic growth is
based on innovations (product innovation, new production methods, new raw materials and
new organizational structures in industry) (Witt, 2002; Landströmet al., 2012).

Rogers (2003) explained, so long a new idea is fresh, it served the basis of business
innovation and it is concerning on three factor namely creation, development and new idea
implementation.

Figure 1.1 Factor for business innovation by Roger (2003)

New idea
implementation

Development

Creation

Source: Developed for this research

Minnesota Innovation Research Program, (MIRP) and extended study have examined how
innovation process explained in various forms. Van de Van, Polley, Garud and Venkataraman
(1999) found various common characteristic during invention, development and
implementation stage of the innovation journey.

Figure 1.2: Innovation journey from MIRP

Invention
Accross the field Within the firms
Development
Implementation

Source: Developed for this research

INNOVATION AND SOCIAL INNOVATION 2

Weill and Woerner (2013) explained, there are three trends that converging firm to push to
innovate, which is there is an increase of expectation from the “digital native”. Secondly, the
business has transformed into digitalization and finally the increase of customer’s voice,
collected throughout the social media such as comment, rating and complaint.

Figure 1.3: Trends that push form to innovate by Weill & Woerner (2013)

"Digital
Business
natives"
Digitalization
expectation
Customer
voice via
social
media

Innovate the Business

Model

Source: Developed for this research

Schumpeter (1934) defined innovation much thorough as below;

 a new form of industrial organization;
 introducing a new product or improving the existing one;
 opening the economy to new export markets;
 into a new raw material supplier; and
 introducing a new production method/process.

While Baregheh et at. (2009) explained innovation as ‘multistage process by which

organizations transform ideas into new or improved successfully marketed products, services
or processes to compete and differentiate themselves.

‘Systematic innovation therefore consists in the purpose-ful and organized search for
changes, and in the systematic analysis of the opportunities such changes might offer for
economics or social innovation’. Drucker (2008). The systematic innovation lead to

INNOVATION AND SOCIAL INNOVATION 3

innovative opportunity throughout seven sources for innovation opportunity as illustration
below.

Figure 1.4 Seven Sources for Innovative Opportunity by Drucker (2008)

Unexpected success, unexpected

Unexpected
failure

Between reality and what is suppose to

Incongruity
be

Innovation Based on the process need

Changes in industry structure or market

Changes
structure that nobody aware

Demographic Changes in population

Changes in Upon changes in perception, mood or

perception meaning

New
Scientific or nonscientific
knowledge

Source: Developed for this literature

1.2 Summary of definition - Innovation

To conclude, the extend literature on Innovation, it is evident that there is no consensus on

how specifically innovation is defined, what it is and what the economic effect is generated
by innovations, and the definition is constantly changing.

Following table is to summarize the definition for innovation throughout the development of
the era.

INNOVATION AND SOCIAL INNOVATION 4

 Table 1.1 Summary of Innovation
Historical Era Modern Era Information Era

Mazzaferro, 2018 Drucker (1985) Buesa et al., 2010;

Mazzaferro and McLean, 2017 Canter et al., 2008
Lepore, 2014 Tool for businessman to optimize
the opportunity in a different
Emma, 2013 Innovation has become a crucial
activity or service.
The Atlantic, 2019 factor to global competitiveness
Rogers, 2003
and economic growth, generating a
Historical meaning ‘early modern strong impact on the gross
synonym for rebellion, revolt and Fresh & new idea, as basis of
domestic product (GDP) of
heresy’ . business innovation, concerning on
advanced nations.
three factor namely creation,
development and new idea
implementation’. Witt, 2002; Landströme et al., 2012

Economic growth is based on

innovations - product innovation,
Meriam-Webster, 2016 Maranville (1992)
new production methods, new raw
materials and new organizational
J.B. Say (around 1800), ‘innovation The application of better solutions
for new requirements, unarticulated structures in industry
” shift” economic resources from
needs, or existing market needs’.
lower into higher productivity
area’. Salgae and Vera, (2012).

Weill and Woerner (2013)

‘Innovation is provision to more-
effective products, processes,
Trends that converging firm to
services, technologies, or business
push to innovate, which is there is
models for markets, governments
an increase of expectation from the
and society’.
“digital native”.
Johnson, Scholes and Whittington,
(2004); Brown and Eisenhardt,
(1995).

‘Innovation is the ability to dictate

and modify the ‘rules of the game’
for firm to entry to new markets
and challenge established market
leaders.’

INNOVATION AND SOCIAL INNOVATION 5

 Source: Developed for this research
To define innovation concept is still remain as a serious subject of debate and continuous
study (Mei et al, 2010, Baranskaite and Labanouskaite, 2020). Therefore, every single author
represents different attitudes while emphasize different criteria per aspects of the innovation’s
content (Carvalho & Sarkar, 2014).

1.3 Definition – Social Innovation

Term ‘social innovation’ in the early reference was made by Drucker (1987) throughout his
article titled ‘ Social innovation – management’s new dimension’ has emphasized ‘the impact
of non-technological innovations on the economy and society, giving a range of individual,
organizational and social movement examples on how positive societal change and
development has occurred’. Using the example of innovation by The General Electric
Company (G.E), he explained how a new entrepreneur company raised from scratch to
gigantic firm in the industries.

Another scholar, Kanter (1999) further substantial in defining social innovation where he
explained, ‘a partnership between private enterprise and public interest that produces
profitable and sustainable change for sides; innovations that have business as well as
community payoffs’.
Throughout his definition of social innovation adopted in the framework of the ‘Forum on
Social Innovations’, Kanter explained social innovation as ‘it can concern conceptual,
process or product change, organizational change and changes in financing, and can deal with
new relationship with stakeholders and territories. Hence, he has put an argument where
social innovation to answer social problem as below:

 ‘Identifying and delivering new services that improve the quality of life of individuals
and communities and,
 Identifying and implementing new labor market integration processes, new
competencies, new jobs, and new forms of participations, as diverse elements that
each contribute to improving the position of individuals in the workforce. Social

INNOVATION AND SOCIAL INNOVATION 6

 innovations can therefore be seen as dealing with the welfare of individuals and
communities, both as consumers and producers’.

In addition, Kanter (1999) suggested the government and non-profit sector to develop more
business-like ‘institutional infrastructure’, which he has connected social innovation as an
emerging from necessary cross-sector partnership, between business, non-profit organization
and government. As such, Kanter suggests ‘six characteristics of successful private-public
partnership as a clear business agenda, strong partners committed to change, investment by
both parties, rootedness in the user community, links to other community organization and a
long-term commitment to sustain and replicate the result’. This is later supported by the
recent research on cross-sector partnership, specifically public-private partnership (Selsky
and Parker, 2005, 2010). Illustration below to demonstrate Kanter’s suggestion.

Figure 1.5: Six Characteristics of Successful Private-Public Partnership for Social

Innovation

clear
business
agenda
strong &
long-term
commited
commitment
partnership
Successful
Social
link to other
Innovation investment
by both
company
parties

root to user
community

Source: Develop for this research

‘The term social innovation... refers to the generation and implementation of new ideas about
how people should organize interpersonal activities, or social interactions, to meet one or
more common goals. As with other forms of innovation, the products resulting from social
innovation may vary with regard to their breadth and impact’. Mumford (2002).
INNOVATION AND SOCIAL INNOVATION 7
Phills.J.A.J., Deiglmeier,K. and Miller, D.DT (2008) give explanation on social innovation as
‘a novel solution to a social problem that is more effective, efficient, sustainable... than
existing solutions and for which the value created accrues primarily to society as a whole
rather than private individuals’.

While Nicholls, A. and Murdock,A (eds) (2012) further define social innovation as ‘varying
levels of deliberative change that aim to address suboptimal issues in the production,
availability, and consumption of public goods defined as that which is broadly of society
benefit within a particular normative and culturally contingent context. What is abundantly
clear is that social innovation is complex and multi-faceted’.

‘Social innovation are new social practices created from collective, intentional, and goal-
oriented actions aimed at prompting social change through the reconfiguration of how social
goals are accomplished. They are ‘a collective creation of new legitimated social practices
aiming at social change’. Cajaiba-Santana,G. (2014).

‘Social innovation as the creation of long-lasting outcomes that aim to address society needs
by fundamentally changing the relationships, positions and rules between the involved
stakeholders, through an open process of participation, exchange and collaboration with
relevant stakeholder, including end-users’. Voorberg, W.H., Bekkers, V.J and Tummers, L.G.
(2015).

‘The application of innovative, practical, sustainable, business-like approaches that achieve

positive social and/or environmental change, with an emphasis on low-income or underserved
populations’. World Economic Forum (2013)

1.4 Summary for Social Innovation

“Social innovation is not the prerogative or privilege of any organizational form or legal
structure. Solutions often require the active collaboration of constituents across government,
business, and the non-profit world.” Soule, Malhotra, Clavier (2017).

INNOVATION AND SOCIAL INNOVATION 8

Table below is to explain the key points for summary of social innovation:

Table 1.2: Summary Definition for Social Innovation

Scholar Summary of Definition

Drucker, 1987 ‘The impact of non-technological innovations on the economy and society,
giving a range of individual, organizational and social movement.’
Kanter, 1999 ‘A partnership between private enterprise and public interest that produces
profitable and sustainable change for both sides’.
Kanter, 1999 Government & non-profit sector developed a business-like ‘institutional
infrastructure’ to connected social innovation as an emerging from
necessary cross-sector partnership, between business, non-profit
organization and government.’
Mumford, 2002 ‘Generation and implementation of new ideas about how people should
organize interpersonal activities, or social interactions, to meet a common
goals.’.

Phills.J.A.J., ‘Solution to a social problem that is more effective, efficient, sustainable’.

Deiglmeier,K. and
Miller, D.DT (2008)
While Nicholls, A. and To address suboptimal issues in the production, availability, and
Murdock,A (eds), 2012 consumption of public goods. It is clear that social innovation is complex
and multi-faceted’.
Cajaiba-Santana,G. ‘Social innovation are new social practices created from collective,
2014 intentional, and goal-oriented actions aimed at prompting social change
through the reconfiguration of how social goals are accomplished’.
Voorberg, W.H., ‘Social innovation as the creation of long-lasting outcomes that aim to
Bekkers, V.J and address society needs by fundamentally changing the relationships,
Tummers, L.G. 2015 positions and rules between the involved stakeholders’.
World Economic ‘The application of innovative, practical, sustainable, business-like
Forum (2013) approaches that achieve positive social and/or environmental change, with
an emphasis on low-income or underserved populations’.

Source: Developed for this research

Based on the literature studies for both innovation and social innovation, below diagram is to
explain the connection of the two studies. It is clear that throughout the timeline, social

INNOVATION AND SOCIAL INNOVATION 9

innovation was appeared during the modern era of innovation and it is keep expanding along
the innovation diversity.

Figure 1.6: Innovation and Social Innovation Timeline

Source: Developed for this research

1.5 Conclusion of literature review

The literature review has opened the idea and introduction of how innovation and social
innovation was triggered, factors that bring the opportunity on how it can be happen.

Following study will further details the key theories and principles that explaining the
concepts of both innovation and social innovation.

2.0 Theory, principles and concepts

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INNOVATION AND SOCIAL INNOVATION
0
Following study will further details the theories and principles for both innovation and social
innovation.

2.1 Key theories, principles on the concepts and areas of contestation –Innovation

As depicted in table 1.1, finding from literature review identify the concepts and gaps in the
following areas:

a. Summary of the concept – innovation: Early study defined innovation concept as new
in various factors mainly on product and production, Schumpeter (1934). Following
research in between 1960-ies to 1990-ies widen the concepts into new activity within
the business entity prior to the changes in innovation. The past twenty years shown
the innovation concept becoming greater ideas and bigger views that emphasizing the
innovation as a ‘new or significantly improved’ including ‘new creatives ideas and
inventions of application’ at various level.

Table 2.1 Innovation concept

Shumpeter, 1934 Mansfield, 1963; OECD, 2005 Decelle, 2004;
Steele, 1975; Sipe & Testa,
Danmanpour, 1992 2009; Pirnar, 2012;
Danmanpour, 1996 Gyuracz-Nemeth et
al, 2013
New: New activity for the New or significantly New creative ideas
 Products business unit, not the improved: and inventions of
 Production world, the process of  Goods, application as at
processes, creating change.  Services, any level.
markets,  Process,
 Raw material,  Marketing or business
 Forms of organization method,
organization of  Workplace
activities organization or
external relations.

Source: Developed for this research based on study material DBA7143

1
INNOVATION AND SOCIAL INNOVATION
1
The concept of innovation is summarized into four classifications. The table below show the
studies that supporting the concept of innovation of this for pillar.

Table 2.2 Classification of the concept of innovation

Economic Approach
New Value Creation Competitive Advantage
 Schumpeter (1934) – a new activity  Peter & Pikkemaat,  Howells (2007),
that leads to economic growth 2006 – and Meneses &
 Steele (1975) – Introduction of new Transforming and Teixeira (2011) –
subject methods Idea or Process into A way to maintain
 Drucker (1985) – Organizing and a Demanding a competitive edge
implementing new products or Product or Services and rejuvenate
services, new ways of doing things with Value Added. mature business.
 Tidd (1997) Innovare – to create or  Martinez-Ros and
make something new. Orfila – Sintes
 Danmanpour (1996) – does not (2009) – create new
always mean news in the world, it opportunities for
may be new to a business unit. added value.

 Johannessen et al. (2001) – Almost  Teixeira (2011) –

every definition of innovation Innovation must
focuses on renewal. create value for the

 OECD Oslo Manual (2005) – New or company.

significantly improved goods or

services, process implementation,
new marketing method or new
business organization method,
workplace organization or external
relations.
 Otterbacher (2008) - a combination
of professional management and
creativity.
 Gyuracz-Nemeth et al. (2013) – that
innovation management is the ability
to implement creative ideas in
problem solving.
 Pimar, 2012 – Application of new
creative ideas and inventions.
 Mei et al. (2010) – related to

1
INNOVATION AND SOCIAL INNOVATION
2
 something new.
 Pimar et al, (2012) – Improved areas
of business related to product,
service, process, marketing methods
or organizational structures are
identified as innovative approaches.
Management Approach
Interoperability Processes Within The Changes Social Progress
Company
 Lundvall (1992), Iorgulescu et al.  Steele (1975) -The  McCleeland
(2013) – Interaction between various rocess of creating (1961), LaPiere
collaborating production entities, change. (1965) – A
dissemination and use of new  Decelle (2004) – Renewal of Social
economically useful knowledge. Not necessarily a Behaviour.
 Johannesen et al. (1999) – An big change for a  Kline and
evolutionary process based on particular person. Rosenberg (1986)
knowledge. – A complex social
 Muller & Pharingoesophageal, 2001 phenomenon.
 Gyuracz-nemeth et al 92013) – Represents the
Includes not only typical totality of the
product/process manufacturing combined social
innovation but also market, process (not the
organizational and resources result)
innovation.  Collins & Fahy
 Hollenstein (2000) and Carvalho & 92011) is not the
Sarkar (2014)- cover several stages, result of economy
starting with the fundamental development but
introduction of new products and the rather a source of
introduction of new manufacturing sustainable
technologies in-house. economic and
social progress.
Psychological Approach (Workers, Knowledge, Skills and Creativity)
 Anderson et al. (2004)
 Orfila-Sintesa et al (2005)
 Tseng & Kuo & Chou (2008)
 Gyuracz-Nemeth et al. (20130 – Innovation knowledge is linked to people and their abilities

Technologies Approach (New Technology)

 Oslo Manual (2005)
 Van de Vrande et al. (2009)

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INNOVATION AND SOCIAL INNOVATION
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  Gassmann (2006)
 Von Hippel (2009)
 De Paulo, De Oliveira, Silveira Porto (2017)
 Chesbrough (2006)
 Van Dijk, Van Den Ende (2002)
 Lichtenthaler (2007) – Innovations are based on new technologies

Source: Developed for this research based on study material DBA7143

b. Finding from the literature review too, has identified gaps in two key areas:

1. The literature is silent on the most up-to date accounts of the nature and
characteristics of innovation to specific demographic, referring to Malaysia and South
East Asia.

2. No finding or no exact guidance at the global front, policy at government and firm
levels on innovation, perhaps it seems to be adequate. However, research work to
determine their effectiveness is still lacking.

2.2 Key theories, principles on the concepts and areas of contestation – Social
Innovation.

The driver to social innovation is a gap between what is existing and what there is supposed
to be, between the people’s needful and what is provided by the government, private firms
and other sectors. A gap which is frequently awaken by the emergence of new technologies
and new scientific knowledge, Mulgan (2007). The illustration below explains the most field
that give great opportunities for new creative solutions.

Table 2.3 Gap in Social Innovation Mulgan, (2007)

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INNOVATION AND SOCIAL INNOVATION
4
 Opportunity  New solutions
Rise of life expectancy  New way of organizing pensions, care and mutual support.
 New house model to cater continuous changing in housing
need
 Climate change – demand on rearrange the cities,
transportation systems, energy and housing to reduce carbon
emissions.
Growing diversity of countries  Demands innovative ways of organizing schooling, language
and city training and housing to prevent segregation and conflict.
Stark inequalities  Awaken by many society across the globe to be associated with
many social ills, from violence to mental illness.
Rising incidence of long-term  Illness such as arthritis, depression, diabetes, cancers which is
conditions known as chronic and acute.
 Demand a novel social solution as well as new models of
medical support.
Behavioral problem of affluence  Including obesity, bad diets and inactivity as well as addictions
to alcohol, drugs and gambling.
Difficult transition to adulthood  New ways for teenagers to a transition life into adulthood and
subsequently navigate into stable career, relationship and
lifestyle.
Happiness  Mismatch between growing GDP and stagnant well-being and
declining real welfare lead to new ways of thinking on public
policy and civic action.

2.2 Global Best Practice - Innovation

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INNOVATION AND SOCIAL INNOVATION
5
Every year, the Global Innovation Index(GII) ranks the innovation performance of nearly 130
economies around the world. Conducted throughout collaboration between Cornell
University, Institute Europeen d’Administration des Affaires (INSEAD) and World
Intellectual Property Organization (WIPO), GII has a theme for every assessment. Table
below to show the theme for the past 5 years.
Table 2.4: GII Themes For Past Five Years.
Year Theme
2019 Creating healthy lives, The future of medical innovation
2018 Energizing the world with innovation
2017 Innovation feeding the world
2016 Winning the global innovation
2015 Effective innovation policies for development

Source: Developed for this research

2.2.1 Key finding in GII 2019’s result.

The findings will give the top country’s performance in GII according to:
i. Top country in the regions, divided into seven regions.

Figure 2.1: Seven Region for GII 2019’s result.

2
1 6 3
4

5 7

Source: Developed for this research

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INNOVATION AND SOCIAL INNOVATION
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 Table 2.5: Top country performer in GII 2019 based on region.

REGIONS TOP PERFORMER

1. NORTHERN AMERICA 1. USA
2. CANADA
2. EUROPE 1. SWITZERLAND
2. SWEEDEN
3. NETHERLAND
3. SOUTH EAST ASIA 1. SINGAPORE
2. REPUBLIC OF KOREA
3. HONG KONG, CHINA
4. NORTHERN AFRICA & 1. ISRAEL
WESTERN ASIA 2. CYPRUS
3. UNITED ARAB EMIRATE
5. LATIN AMERICA & 1. CHILE
THE CARRIBEAN 2. COSTA RICA
3. MEXICO
6. CENTRAL & 1. INDIA
SOUTHERN ASIA 2. IRAN
3. KAZAKHTAN
7. SUB SAHARAN AFRICA 1. SOUTH AFRICA
2. KENYA
3. MAURITIUS

Source: Developed for this research

ii. Top country according to the income group: high income, upper-middle income,
lower-middle income and low income.

Table 2.6: Top 3 Country Innovation Economics by Region

Source: Developed for this research

iii. Malaysia’s scored in GII 2019: ranked in the number of 35 across the globe.

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INNOVATION AND SOCIAL INNOVATION
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 Table 2.7 : Malaysia’s Result in GII 2019

Source: Adopted from GII Report 2019

2.2.2 Best Country Performer: Switzerland

Switzerland is top in the world when it comes to innovation, according to an index by the
World Intellectual Property Organization (WIPO), the nation has come up for six years in
rows to be the top performance globally.

The British journalist Jo Fahy, wrote in article “Five reasons why Switzerland is top in
innovation” explained what drive the nation into the most innovative in the world as below:
• A Nation of inventors: Highest ratio of European patent application to population. In
2015, 873 applications per million inhabitants submitted
• World-class research institute: In 2016 Swiss Federal Technology Institute came 4th
in Europe in the Times Higher Education World Reputation Rankings
• Investment by multinational: Many corporations are based in Basel and investment
extended to research links between universities and industry.
• High profile green innovation projects: The Swiss solar-powered plane company,
Solar Impulse has drawn worldwide and long-lasting attention of the world. This is
one of the great examples to bring Switzerland in top in green innovation project
• Highly skilled employees: Global Innovation Index has put Switzerland in the third
place in the sub-category for 'knowledge intensive employment". In a laymen term,
employees here really know their stuff.

Figure 2.2: Five reasons why Switzerland is top in innovation. Fayh (2016)

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INNOVATION AND SOCIAL INNOVATION
8
 High profile
World-class
A Nation of Investment by green Highly skilled
research
inventors multinational innovation employees
institute
projects

Source developed for this research

2.3 Global best practice – Social Innovation

Social innovation index 2016 constructed by an Economist Intelligence Unit (EUI) and
sponsored by Nippon Foundation has assessed the capacity of 45 countries to enable social
innovation thoughout four pillars as determined below:

i. Policy and institutional framework

o Existence of national policy on social innovation
o Social innovation research and impact
o Legal framework for social enterprises
o Effectiveness of system in policy implementation
o Rule of law

ii. Financing
o Availability of government financing to promote social innovation
o Ease of getting credit
o Total public social expenditure

iii. Entrepreneurship

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INNOVATION AND SOCIAL INNOVATION
9
 o Risk-taking mindset
o Citizen’s attitude towards entrepreneurship
o Ease of starting a business
o Development of clusters

iv. Society

o Culture of volunteerism
o Political participation
o Civil society engagement
o Trust in society
o Press freedom

2.3.1: Result of Social Innovation Index 2016

Scoring 79.4% and being the top performer in the Social Innovation Index (SII), United State
of America is overall is not surprising and the country is also among the top ranking in
Global Innovation Index for several years in past.

Table 2.8: Social Innovation Index 2016

SOCIAL INNOVATION INDEX 2016

79.4
77.3
75.7
71.2
69.2
67.2
66.4

65.7
61.6
60.6
66

59.2

57.7

57.5
57.5

56.9
56.5
55.8
60

59

52.6

47.5
46.3
52

45.7
45.4
44.8
48

41.4
44

e y s l l a a a a
S A U K a d a a r k u m n d d a n y en n d l i a r ea n d a n d n d a l y i l e n d a e n d g a a n s i b i a i c n y a a i n i c si
U n m g i l a an e d l a r a o l a r w l a a I t h l a sr l a u ap y
a m f r e p R us
a l a r m e r t K n e l C e I o r t J al o A K S ta R
C en B e Ze F er w t ze u s h Fi No I c er Ir P o l
D G S i A ut t h P M Co th o
s
e w w o e u C
N S S N S o

Source: Developed for this research, adapted from SI INDEX 2016

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INNOVATION AND SOCIAL INNOVATION
0
The top 10 of the indexes consists mainly of rich Western nations: aside from the US, Canada
in third place and New Zealand in sixth, the others in the top 10 are all wealthy European
countries. Each of the top 10 has high per-capita income and human development indicators,
as well as stable democratic governance.

2.3.2: USA as the best practice in Social Innovation.

Report from the Social Innovation Index 2016 has shared the value of the country that can be
take as learning shared as below:

Figure 2.3: What Makes USA The Best Practice in Social Innovation

Initiate
Social
Pioneer in by
Innovation
thethe president
Fund of
incorporation
behavioural science

Source: Developed for this research

Initiate by the president: Created in 2009 by President Barack Obama, with the aim of
cultivating “bottom-up practices in cities and towns across the country where ordinary people
already are coming together to solve tough problems”.

Social Innovation Fund (SIF) provides matching funds to support high-impact social
Innovation.

Pioneer in the incorporation of behavioural science which

analyses human behaviour to identify barriers to service delivery or adoption, into social
policy.
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3.0 Theoretical framework.

The literature reviews have identified the relevant theories on innovation and social
innovation. Four key theories widely discussed in the literature for innovation which is
referring to economic approach, management approach, psychological approach and finally
technological approach. While the social innovation is focusing on the opportunity on how it
triggers the social innovation to be happen.

3.1 Economic approach

The first concept in innovation framework is economic approach. Several scholars agreed
that ‘new’ in economic approach lead to innovation. Schumpeter (1934) said, as long as there
is a ‘new activity’ that leads to economic growth, it is an innovation. Steele (1985) added the
idea by emphasizing the introduction of new subject methods.

Drucker (1985) point out the organizing and implementing new products or services, new
ways of doing things are those activities called innovation. Innovare to create or make
something new (Tidd, 1997) and Danmanpour (1996) said, it does not always news in the
world but it could be new to a business unit. Thus, (Johannessen et al 2001) Almost every
definitions of innovation focusses on renewal.

OECD Oslo Manual (2005) added as any new or significant improvement in goods or
services, process implementation, new marketing method or new business organization
method, new organization workplace or external relations are those called innovation. Such a
wide theories, it is then supported by Gyuracz-Nemeth et al (2013) where innovation is a new
ability to implement creative ideas in problem solving and (Pimar, 2012) a new creative ideas
and inventions.

Second concept under economic approach is value creation. Peter & Pikkemat (2006) said,
transforming and idea or process into a demanding product with value added is the concept in
innovation theory. Added by Martinez-Ros and Orfila (2009), it is a creation of new
opportunities for added value. Teixeira (2011) emphasis on innovation that must create value
for the company.
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Lastly, under economic approach came along the competitive advantage as suggested by
Howells (2007), and Menese & Teixera (2011), as a way to maintain a competitive edge and
rejuvenate mature business.

3.2 Management approach

Interoperability processes within the company mean the ability of diversification in the
company that is able to work together. Lundvall (1992), Iorgulescu et al. (2013) explained,
interaction between various collaborating production entities is a dissemination and use of
new economically useful knowledge. An evolutionary process based on knowledge
(Johannesan et al. 1999).

Muller and Pharingoesophageal (2001) Gyuracz-nemeth et al (2013) added the explanation as

it include not only typical product or process manufacturing innovation but also market,
organization and resources innovation. Hollenstein (2000) and Carvalho and Sarkar (2014)
said, interoperability cover several stages, starting with the fundamental introduction of new
products and the introduction of new manufacturing technologies in-house.

Changes in the organization is also part of management approach in innovation. Steele (1975)
defined innovation as the process of creating changes, however it is not necessarily a big
change if it is for particular person (Decelle 2004).

The third point under management approach is social progress. McCleeland (1961) LaPiere
(1965) explained the social progress in management approach of innovation as a renewal of
social behavioral and added by Kline and Rosenberg (1986) as a complex social phenomenon
as it represents the totality of the combined social process but not the result. Collin and Fahy
(2011) emphasized social progress are not the result of economy development but rather a
source of sustainable economic and social progress.

A gap which is constantly widened by the emergence of new technologies and new scientific
knowledge. These are some of the fields where we see particularly severe innovation deficits,
but also great opportunities for new creative solutions.

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Thus, opportunity as listed in below diagram is triggering the Social Innovation that is part of
the social process under this management approach.

Figure 2.4 Correlation of Social Innovation in Social Progress

SOCIAL
INNOVATION

Opportunity

City/nation Rise incidence Behavioural

Life Stark in Adulthood
growing of long-term problem Happiness
expectation equalities problem
Diversity condition affluence

Source: Developed for this research

Rising life expectancy – Climate change that demand new thing of rearranging the cities,
transportation, energy, housing and many more, that technologies has a decisive role to play
hence social innovation help to change behaviour.

Growing diversities of countries and cities – Demand on the changes and improvement to
prevent segregation and conflict.

Stark inequalities – Widened the societies upon social ills ranging from violence to mental
illness.

Rising incidence of long-term condition – Demand upon novel solutions as well as new
models of medical support for chronic disease and acute.

Behavioral problems of affluence – Including obesity, alcoholic, drugs and gambling.

Difficult transition to adulthood – Demand to aid teenagers facing adulthood and

navigation to more stable careers, relationship and lifestyles.

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Happiness - Demand to fill the gap between growing GDP and stagnant well being and
declining real welfare.

3.3 Psychological approach: workers, knowledge, skills and creativity.

According to Orfila-Sintesa et al.(2005), the human capital innovation suggests that the
adjustment of human capital skills is roughly equal to efforts in successful innovation
implementation. Updating human capital skills and capabilities emphasises the importance of
changes in training and investment in human resources (Cohen & Levin, 1989; Griliches,
1990; Pine, 1992; Van der Wiele, 2007) in successful innovation (Olsen & Connolly, 1999;
Sirilli & Evangelista, 1998). Therefore, innovation knowledge is linked to people and their
abilities.

3.4 Technological approach: a new technology.

Innovation are based on new technologies; this idea is supported by several scholars.
Gassmann (2006) said, the outside-in process enriches a company’s knowledge and
innovation base through the integration of supplies, customers, and external knowledge
sourcing. This process later be found as to increase a company’s innovativeness (Laursen and
Salter 2006).

As we have understood the concept of innovation approaches, we will later to understand

what caused and sources of innovation to trigger.

3.5 Sources of innovation

Based on Drucker (2008), there are seven sources of opportunity that triggering to
innovation.
The sources were divided into two part as demonstrated below:

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 i. Changes within the enterprise or industry or service sector. Visible to the peoples
inside the organization. There are four sources lies within:
1. Unexpected success, failure or outside event
2. Incongruity between reality as it actually is and reality as it assumed to be or
as it “ought to be”.
3. Innovation based on process need
4. Changing need of internal organization processes.

ii. Changes outside the enterprise or industry or service sector.

5. Demographics as the population changes
6. Changes in perception, mood and meaning.
7. New knowledge in both scientific and non-scientific.

To summarize, below figure explained the theoretical framework for innovation:

Figure 3.1: Theoretical framework for innovation.

Concepts New

Value Creation
Economic Approach

Competitive Advantage
Management
Approach

Interoperability
Psychological processor within the
Approach company

Technological Changes
Approach
Social progress

INNOVATION

Sources of Innovation (Drucker,2008)

Unexpected
Changes in perception
Incongruity

Demographic 2
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 Innovation

New knowledge
Changes

Source: Developed for this research

3.6 Stage of Social Innovation

Real life innovation is a discovery process that often leaves idea transformed and mutated.
Diagram below explaining how opportunity in every aspect bring the transformation in social
innovation.

Figure 3.2: Theoretical Framework for Social Innovation (Mulgan et al, 2007)

Source: Developed for this research

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 i. Social innovation in social organization

Generation of possibilities Prototype Growth

Practice, imagination, Start up, incubators, learning by Organizational growth,

beneficiaries and user inputs doing & pilot road test. emulation replication &
generate possibilities franchise to achieve scale

ii. Social innovation in social movements

Formation Campaigning & advocacy Legislation, habit change,

changed values
Small group, allies e.g. Movements to demonstrate unity,
campaign against slavery commitment. e.g. lack of food. Government endorsement
claims and pass legislation.

iii. Social innovation in social politics

Demands & campaigns Policy formulation & manifestos Public spending, programs,
legislation, new professions.
NGOs, party activists e.g. Politicians as a champion, minister
father’s rights take up issues. E.g extended school Bureaucrats and professional
then implement, provide
funding and authority.

iv. Social innovation in government

Generation of possibilities Piloting, testing, learning by doing Scalling up.

Creativity methods, Incubator, zones and pathfinder. e.g Growth, new structure,
consultations and model restorative justive or carbon franchises & spending programs
adaptation. e.g weekend markets. e.g urban road changing.
prisons

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 v. Social innovation in market

Embryonic niches Niche markets Co-option mainstream.

Enthusiasts produce & Small companies, missions related Multinasionals and majors buy
consume in what is almost a investment and consumer and in and achieve marketing clo
gift economy. shareholder activism develop niche
market.

vi. Social innovation in academia

Invention Difussion Incorporation.

New idea are developed on Ideas are tested in practice or spread The radical idea become
the margins of academia through academic networks. mainstream.

As we have examined the theoretical framework for both innovation and social innovation
before, the summarize is depicted as below figure;

Figure 3.3: Theoretical Framework for The Research

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 Source: Developed for this research

3.7 Innovation and Social Innovation Performance for Small and Mid-Size Enterprise
(SME) in Malaysia.

SME in Malaysia is chosen to be the subject to assess in the research. Therefore, four
research question is identified to be further investigate, as below;

Research Question 1: What are the key characteristics of innovation practices among SME in
Malaysia?

Research Question 2: How effective and how adequate the innovation policy on promoting
social innovation for SME in Malaysia?

Research Question 3: What are the most appropriate approaches for promoting social
innovation among SME in Malaysia?

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Research Question 4: What are the key challenges that Malaysian SMEs face in promoting
innovation?

3.8 Summary of theoretical framework and industry chosen.

The framework of the research study has found several gaps and research question of which
selected industry, SME in Malaysia has been performed and chosen. Subsequently, researcher
will develop research proposition to convey this study in following subject.

4.0 Research Propositions

Literature in the earlier writing has identified pertinent issues in the existing body of
knowledge on the research topic ‘innovation and social innovation’ and it is later extended to
SME in Malaysia’s context. Emerging from gaps in the literature, four Research Proposition
were formulated for testing by this research. For ease of reference, they are stated below:

Research Proposition 1: SME in Malaysia is positively adhering and practicing the innovation
and social innovation.

Research Proposition 2: Innovation policies effectively promote the innovation and social
innovation for SME in Malaysia.

Research Proposition 3: Malaysia has the leadership capacities to effectively promote

innovation and social innovation for SME in Malaysia
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Based on the three propositions above, the research could possibility initiated by using mixed
methodology of qualitative and quantitative.

4.2 Research Methodology

The methodological assumption relates to the techniques used to acquire the data required for
the research (Guba & Lincoln, 2004; Zikmund, 2003). There are several scholar that defining
the two principal approaches or paradigms, namely the qualitative and quantitative paradigm
(Parkhe, 1993; Carson et al., 2001; Bryman & Bell, 2007).

The use of words versus numbers is an obvious way to distinguish whether a research is
qualitative or quantitative; there is a broad consensus that is not an effective way to make the
distinction (Hammersley, 1992). The use of content analysis to convert text produced by
qualitative methods into numbers for quantitative analysis (Neuendorf, 2002; Weber, 1990),
in an opposite, the quantitative can be convert into qualitative analysis (Onwuegbuzie, Slate,
Leech, & Collins, 2007, 2009; Thoits, 1995).
Table 4.1 Quantitative Research and Qualitative Research
  Qualitative Quantitative
Purpose Explain and gain insight and understanding Explain, predict, and/or control
of phenomena through intensive collection phenomena through focused
of narrative data Generate hypothesis to be collection of numerical data. Test
test , inductive. hypotheses, deductive.
Approach to Inquiry Subjective, holistic, process- oriented Objective, focused, outcome-
oriented
Hypotheses Tentative, evolving, based on particular Specific, testable, stated prior to
study particular study
Research Setting Controlled setting not as important Controlled to the degree possible
Sampling Purposive: Intent to select “small, ” not Random: Intent to select “large, ”
necessarily representative, sample in order representative sample in order to
to get in-depth understanding generalize results to a population
Measurement Non-standardized, narrative (written Standardized, numerical
word), ongoing (measurements, numbers), at the end
Design and Method Flexible, specified only in general terms in Structured, inflexible, specified in
advance of study Nonintervention, detail in advance of study
minimal disturbance All Descriptive Intervention, manipulation, and

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 control Descriptive Correlation
Causal
Data Collection Document and artifact (something Observations (non-participant).
Strategies observed) that is collection (participant, Interviews and Focus Groups (semi-
non-participant). Interviews/Focus Groups structured, formal). Administration
(un-/structured, in-/formal). of tests and questionnaires (close
Administration of questionnaires (open ended).
ended). Taking of extensive, detailed field
notes.
Data Analysis Raw data are in words. Essentially Raw data are numbers Performed at
ongoing, involves using the end of study, involves statistics
observations/comments to come to a (using numbers to come to
conclusion. conclusions).
Data Interpretation Conclusions are tentative, (conclusions can Conclusions and generalizations
change), reviewed on an ongoing basis, formulated at end of study, stated
conclusions are generalizations. The with predetermined degree of
validity of the inferences/generalizations is certainty. Inferences/generalizations
the reader’s responsibility. are the researcher’s responsibility.
Never 100% certain of our findings.
Source: Adopted from McLeod, 2008
Guided by Baker (2008) and Abang (2013), the research is structured following the diamond
concept for research methodology shown in Figure 4.1

Figure 4.1 Diamond concept for Research Methodology

Source: Abang (2013)

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Paradigm represents the basic belief that guides the action of a researcher from the selection

of research topic until execution (Bryman & Bell, 2007; Taylor, Kermode and Roberts, 2007;

Weaver and Olson, 2006).

A paradigm may operate at three levels of application: philosophical, social and

methodological (Thompson and Perry, 2004; Ticebhurst & Veal, 2000).

4.2.1 Mixed method research

There are three principal types of research – exploratory, descriptive and explanatory
(Babbie, 1998; Ritchie, 2001). Relationship of the three dimension of research illustrate as
below:

Figure 4.2.1: Relationship of Dimension Research

Exploratory
research

Explanatory Descriptive
research research

Source: Developed for this research

The research purpose influences decisions on an appropriate design for its conduct (Cavana,
Delahaye & Sekaran, 2001; Cooper & Schindler, 2003; Zikmund, 2003), which is explained
in the table 4.2.1

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 Table 4.2.1 Dimensions of Research

Exploratory research Descriptive research Explanatory research

Become familiar with the basic Provides a detailed, highly Test a theory’s prediction
facts, setting and concerns accurate picture
Create a general mental picture of Locate new data that contradict Elaborate and enrich a theory’s
conditions past data explanation
Formulate and focus questions for Create a set of categories or Extend a theory to new issues or
future research classify types topics
Generate new ideas, conjectures Clarify a sequence of steps or Support or refute an explanation
or hypothesis stages or prediction
Determine the feasibility of Document a causal process or Link issues or topics with a
conducting research mechanism general principle
Develop techniques for Report on the background or Determine which of several
measuring and locating future context of a situation explanations is best.
data
Source: Adopted from Neuman, 2006, p.34.

Exploratory Research - Exploratory research is conducted to better comprehend the nature

of a problem when it is ambiguous (Babbie, 1998). Exploratory research usually falls into the
qualitative paradigm and the outputs provide patterns of the phenomenon of interest and
permits theory generation (Stebbing, 2007).

Descriptive Research - A descriptive study is appropriate for ascertaining and describing the
characteristics of the variables of interest in a specific situation’ (Sekaran, 2000, p.125).
Zikmund (2003, p.38) states that ‘the major purpose of descriptive research is to describe
characteristics of a population or phenomenon’.

Explanatory Research - Explanatory research explains why events occur and builds,
elaborates, extends or tests theory (Churchill, 1997). Explanatory research is usually
undertaken subsequent to exploratory or descriptive research.

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4.3 Data Collection Instruments

Based on the research design discussion in section 4.2, it is described that the research will be
performed in two stages. The first stage as in the literature review has completed the
exploratory approach that collecting the qualitative data, which has reaffirmed the research
problem.

The second stage, a descriptive approach is to continue the qualitative and quantitative data to
generalize the finding. The data collection instruments identified as (i) Focus group, (ii) Case
Study and (iii) Questionnaire Survey. Illustration in figure 3.5 to explain the data collection
instruments

Figure 3.10 Primary Data Collection Instruments

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 Qualitative /
Quantitative Data
Instruments
CASE STUDY

Primary Data

Quantitaive Data
Qualitative Data Instruments
Instruments
FOCUS GROUP QUESTIONNAIRES

Source: Developed for this research

4.3.1 Focus Group

Focus group is unstructured, free-flow interview with small group of people (Zikmun, 2003).
The members will encourage each other to talk, ask question, commenting on each other
experiences and points of view (Kitzinger, 1994)

The research aim to obtain the data from the group of discussion, therefore Focus Group
interviews was determined with many advantages. The two methods in Focus Group
identified as (i) the group interview, which focus on the several peoples to discuss the topic
and (ii) focused interview, which conducted the interview with selected interviewee that is
known to have involved in the particular situation, (Merton, Fisk & Kendall, 1956).

4.3.2 Case study

Researcher has to decide on the number of cases to be used; in between four to ten cases
often work well (Eisenhardt, 1989). Hedges 91985) however suggested four to six cases as a
reasonable minimum for a serious project.
4.3.3 The Questionnaire Survey

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A sample survey is used to obtain a representative sample from the target population
(Zikmund, 2003). Researcher decided to obtain the questionnaires survey to collect the data
upon a target population, however due to time and resources constrained, the population is
limited to colleagues at researcher’s work place, researcher’s colleague at City University of
Malaysia (CityU) and researcher’s close friends and family.

The questionnaire designed is based on the Propositions as discussed in Chapter 1 and

adopting the design as per suggested by Presser and Blair (1994),
Singh (2000), Tanur (1992), Ticehurst and Veal (2000), Neuman (2006), and Zikmund
(2003) were:
 Relevancy of the questions,
 Wording of the questions,
 Number of questions/Questionnaire length,
 Sequencing of the questions,
 Pilot testing,
 Measurement and Scaling

4.3.4 Sampling design and target population

A sampling design is the selection of an appropriate sample to minimize the gap between the
values obtained from the sample and the population (Kumar, 1996). The sampling criteria
and evaluate the relative importance of each criteria to choose a suitable sample design
(Zikmund, 2003). Through this scholar’s statement, researcher has designed the survey
sample in particular target population and the sampling method for deciding on the size and
composition of the sample.

The total category of subjects in a particular research project is known as the population
(Ticehurst & Veal, 2000). The sampling method chosen by the researcher is guided by the
sampling method as suggested by Davies (2005), which is to choose the non-probability
method. Comparison of sampling method is illustrated as per table below:

Table 3.6 Sampling Methods.

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 Consideration Design Type
Probability Non Probability
Cost More costly Less costly
Accuracy More accurate Less accurate
Time More time Less time
Generalizability Good Poor
Source: Adapted from Davis 2005

4.4 Data Analysis Procedures

Data analysis is a step in the process of converting raw data into information to permit
interpretation (Douglas, 1976). Qualitative and quantitative data were collected for this
research and the data analysis process for each is outlined below:

Qualitative Data Analysis

Qualitative data analysis is a dynamic, intuitive and creative process to permit inductive
reasoning, thinking and theorizing (Neuman, 2006), comprises of process of systematically
searching, arranging, coding and categorizing the interview scripts, observation notes, or
other non-textual materials to increase the understanding of the phenomenon (Bogdan &
Biklen, 1982). Focuses on the exploration of values, meanings, beliefs, thoughts, experiences,
and feelings characteristics of the phenomenon under investigation (Tashakkori & Teddlie,
2003).

Quantitative Data Analysis

The quantitative data analysis process started with the stages of checking, editing, handling
blank questionnaires, coding, categorizing, transcribing and data cleaning (Malhotra, 1999).

Summary for this study

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The overall presentation is the preliminary process of the research study. Although the
framework and study design has been performed, the literature review did not limits the need
of additional data and sources to be added later on.

Study of innovation and social innovation will bring value and new empowerment to SME in
Malaysia. Therefore, it will be a successful research that bring positive and benefits to many
stakeholders.

1.4 Reference
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