ADEKUNLE AJASIN UNIVERSITY, AKUNGBA-AKOKO ONDO STATE, NIGERIA

CENTER FOR ENTREPRENEURSHIP DEVELOPMENT (CED)

CCMAS ENT 211: ENTRPRENEURSHIP AND INNOVATION
LECTURE MODULE THREE

Concept and Dimensions of Innovation

Documentation started through means of writing. Again, writing started by writing on sand with
bear fingers. Today, computer is the popular means of documentation. Before computer, there
was qwerty typewriter, electric typewriter and even the computer has passed through stages. This
process could be described as innovative process because the typewriter was an older innovation
on documentation but today computer is the new innovation.
At the end of this module, the students should be able to:
• Differentiate the different types of innovations
• Evaluate your type of innovative ideas using innovative criteria.
• Should be able to apply the theories in managing business

What is Innovation?
Innovation is the process of translating an idea or invention into a good or service that creates
value or for which customers will pay. To be called an innovation, an idea must be replicable at
an economical cost and must satisfy a specific need.
Innovation involves deliberate application of information, imagination and initiative in deriving
greater or different values from resources, and includes all processes by which new ideas are
generated and converted into useful products.
In business, innovation often results when ideas are applied by the company in order to further
satisfy the needs and expectations of the customers. In a social context, innovation helps create
new methods for alliance creation, joint venturing, flexible work hours, and creation of buyers'
purchasing power.

Types of Innovation
Innovation can be divided into two broad categories:
• Evolutionary innovations – this can either be continuous and dynamic evolutionary innovation.
It is the type of innovation brought about by many incremental advances in technology or
processes.
• Revolutionary innovations - (also called discontinuous innovations) which are often disruptive
and new
Innovation is synonymous with risk taking and organizations that create revolutionary products
or technologies take on the greatest risk because they create new markets, while imitators take
less risk because they will start with an innovator's product and take a more effective approach.
Dimensions of innovation
Innovation has two dimensions which include: Technology and Market. These dimensions give
rise to 4 types of innovation

Incremental Innovation
Incremental Innovation is the most common form of innovation. It utilizes your existing
technology and increases value to the customer (features, design changes, etc.) within your
existing market. Almost all companies engage in incremental innovation in one form or another.
Examples include adding new features to existing products or services or even removing features
(value through simplification). Even small updates to user experience can add value,
Disruptive Innovation
Disruptive innovation, also known as stealth innovation, involves applying new technology or
processes to your company’s current market. It is stealthy in nature since newer tech will often
be inferior to existing market technology. This newer technology is often more expensive, has
fewer features, is harder to use, and is not as aesthetically pleasing. It is only after a few iterations
that the newer tech surpasses the old and disrupts all existing companies. By then, it might be too
late for the established companies to quickly compete with the newer technology.
There are quite a few examples of disruptive innovation, one of the more prominent being Apple’s
iPhone disruption of the mobile phone market. Prior to the iPhone, most popular phones relied on
buttons, keypads or scroll wheels for user input. The iPhone was the result of a technological
movement that was years in making, mostly iterated by Palm Treo phones and personal digital
assistants (PDAs). Frequently you will find that it is not the first mover who ends up disrupting
the existing market. In order to disrupt the mobile phone market, Apple had to cobble together an
amazing touch screen that had a simple to use interface, and provide users access to a large
assortment of built-in and third-party mobile applications.
Architectural Innovation
Architectural innovation is simply taking the lessons, skills and overall technology and applying
them within a different market. This innovation is amazing at increasing new customers as long
as the new market is receptive. Most of the time, the risk involved in architectural innovation is
low due to the reliance and reintroduction of proven technology. Though most of the time it
requires tweaking to match the requirements of the new market. In 1966, NASA’s Ames Research
Center attempted to improve the safety of aircraft cushions. They succeeded by creating a new
type of foam, which reacts to the pressure applied to it, yet magically forms back to its original
shape. Originally it was commercially marketed as medical equipment table pads and sports
equipment, before having larger success as use in mattresses. This “slow spring back foam”
technology falls under architectural innovation. It is commonly known as memory foam.
Radical innovation
Radical innovation is what we think of mostly when considering innovation. It gives birth to new
industries (or swallows existing ones) and involves creating revolutionary technology. The
airplane, for example, was not the first mode of transportation, but it is revolutionary as it allowed
commercialized air travel to develop and prosper. The four different types of innovation
mentioned here – Incremental, Disruptive, Architectural and Radical – help illustrate the various
ways that companies can innovate. There are more ways to innovate than these four. The
important thing is to find the type(s) that suit your business/company and turn those into success
Innovation Theory of Entrepreneurship
The innovation theory was first advocated by Joseph Schumpeter in 1934, while a dynamic theory
of entrepreneurship was first advocated by Schumpeter in 1949. Joeseph Schumpeter considered
entrepreneurship as the catalyst that disrupts the stationary circular flow of the economy and
thereby initiates and sustains the process of development.
Schumpeter introduced the concept of innovation as key factor in entrepreneurship in addition to
assuming risks and organizing factors of production. Schumpeter defined entrepreneurship as ―a
creative activity. An innovator who brings new products or services into economy is given the
status of an entrepreneur. He regards innovation as a tool of an entrepreneur. The entrepreneur is
also viewed as the engine of growth which sees the opportunity for introducing new products,
new markets, new sources of supply, new forms of industrial organization or for the development
of newly discovered resources.
Functions of Innovation
The concept of innovation and its corollary development embraces five functions:
i. The introduction of a new product with which consumers are not yet familiar or
introduction of a new quality of an existing product,
ii. ii. The introduction of new method of production that is not yet tested by experience
in the branch of manufacture concerned, which need by no means be founded uponThe
opening of new market that is a market on to which the particular branch of
manufacturer of the country in question has not previously entered, whether or not this
market has existed before,
iii. Conquest of a new source of supply of raw material
iv. The carrying out of the new organization of any industry.
Schumpeter is the first major theorist to put the human agent at the centre of the process of
economic development. He is very explicit about the economic function of the entrepreneur.
The entrepreneur is the prime mover in economic development; his function, to innovate or
carry out new combinations. Schumpeter makes a distinction between an innovator and an
inventor. An inventor discovers new methods and new materials.
On the contrary, an innovator is one who utilizes or applies inventions and discoveries in order
to make new combinations. An inventor is concerned with his technical work of invention
whereas an entrepreneur converts the technical work into economic performance. An
innovator is more than an inventor because he does not only originate as the inventor does but
goes much farther in exploiting the invention commercially.
Wilken added that the concept of the changes that an entrepreneur brings which includes:
i. Expansion of goods, products.
ii. Productivity of factors of production such as finance, labour, material.
iii. Innovation in production such as, technology, process changes and increase in human
resource productivity.
iv. Innovation in marketing area such as the composition of the market, size of the market
and new markets. According to Schumpeter, entrepreneurs are individuals motivated
by a will for power; their special characteristic being an inherent capacity to select
correct answers, energy, will and mind to overcome fixed talents of thoughts, and a
capacity to withstand social opposition. The entrepreneur has been the major mover
for economic development process.
Criticism of Innovation Theory
i. The theory seems one-sided as it puts too much emphasis on innovative functions.
ii. It ignores the risk taking and organizing aspects of entrepreneurship. An entrepreneur
has not only to innovate but also assemble the resources and put them to optimum use.
iii. ignored the risk-taking function, which is equally important. When an entrepreneur
develops a new combination of factors of production, there is enough risk involved.
Observations from the Innovation Theory
The theory supports the ―enterprising spirit of entrepreneur to innovate. It is the act that
endows resources with a new capacity to create wealth. Drucker says, innovation creates a
resource and it is endowed with economic value. Schumpeter ‘s views are particularly
applicable to developing countries where innovations need to be encouraged. The innovation
theory was propounded by Joseph Schumpeter who is regarded as father of innovation. The
 innovation theory looks at concept of innovation as key factor in entrepreneurship in addition
to assuming risks and organizing factors of production. The functions of innovation theory
were described and criticism of the theory was also discussed as one of it is that it ignored the
risktaking function. Observations from the theory were taken into cognizance. • Financing
Innovation and New Ventures • Change management • Technical Change and management
of Innovation
Class-Assessment Exercise
1. In what ways can an entrepreneur apply the theories of innovation in managing business?
2. How does innovation differ from invention?
3. Differentiate the different types of innovations

Selected References for Further Reading

Ynkamat, O. (2009). Theories of entrepreneurship. http://scrib.com/theories of entrepreneurship
Bathia, .D.( 2013). Theories of entrepreneurship. Retrieved from http://slideshare/theoriesof
entrepreneurship.html

Taylor, E. (2024). 15 theories of entrepreneurship: All you need to know about.

https://www.theknowledgeacademy.com/blog/theories-of-entrepreneurship/

Compiled for ENT 211 Lecture Module Three

by: David O. Ayeni (2024/2025 Academic Session ENT Coordinator)
23thrd January, 2025