ENTREPRENEURSHIP RESEARCH AND DEVELOPMENT CENTRE

KADUNA STATE UNIVERSITY, KADUNA

_______________________ ENT 301: ENTREPRENEURSHIP AND INNOVATION

MODULE 3: INNOVATION
This module is subdivided into three units as follows:

Unit 1 The concept of innovation

Unit 2: Dimensions of innovation
Unit 3: Change and Innovation
Unit 4: Theories of Innovation

Learning outcome
At the end of this module, Students are expected to:
1. explore the nature and scope of innovation
2. state the advantages/benefits of innovation
3. identify causes or forces responsible for change and appraise resistance to change
4. explore Strategies for Managing Change Resistance and be able to conduct a case
study
5. Discourse some of the theories of innovation.

UNIT 1 THE CONCEPT OF INNOVATION

CONTENTS

1.0 Introduction
2.0 Objectives
3.0 Main Content
3.1 The Concept of Innovation
3.2 The Nature and Scope of Innovation
3.3 Identifying the Concept
3.3.1 Innovation
3.3.2 Invention
3.3.3 Research, Development and Design
3.3.4 Entrepreneurship
3.4 Invention and Innovation-Any Relationship
4.0 Activities
5.0 Assessment

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6.0 Discussion
7.0 References/Further Readings

1.0 INTRODUCTION
This unit will attempt a broad-based overview of the concepts of innovation with
specific reference to the nature, scope and other related concepts such as
invention.

2.0 Objectives
At the end of this unit, you should be able to:
• explain the nature and scope of innovation
• identify some key concepts of innovation
• differentiate between invention and innovation.

3.0 MAIN CONTENT

3.1 The Nature and Scope of Innovation

The term “innovation” is a broad-based concept that embraces all such activities that
contribute to the efficient introduction and exploitation of new improved processes and
products which are critical to the competitive performance and long-term growth of any
industrial economy.

Innovation is anything that proposes an alternative to something that is done in a certain way,
brings economic and behavioral benefits, solves problems, or makes people's daily lives more
practical. It can be related to a product, service, process, market, means of production,
technology, or anything else that brings about a change that becomes sustained and
indispensable. For innovation to take place, people and companies use the countless
possibilities technology offers. Technology is the basis that supports and enables all types of
innovation, since without good tools innovation can come at the wrong time and lose the
potential to scale your business. Remember that to innovate is to go beyond and exceed the
expectations of stakeholders and the market. For this to happen, you need speed, quality, and
precision. Other concepts which are related to innovation are: invention, research and
development, (Needle, 1994). Governments and enterprises from time to time introduce
policies aimed at stimulating innovation and entrepreneurship. Such policies usually set the
pace for the development of new technologies, and new products design and development.
Whenever there are new technologies and new product, the need to adjust the organization
structure and adopt new marketing strategies necessarily arises. This thinking pre-supposes
that innovation is not continued to technological hardware of products and processes.
Innovation must be accompanied by significant changes in administration overtime. Several
authorities have tried a link between innovation and other related concepts such as marketing
and entrepreneurship. Peter Drucker, for instance, sees a close association between innovation
and marketing. He regarded them as the only true entrepreneurial function. Daft (1982),

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Damanpour et al (1989) as cited by Needle (1994) are of the opinion that technical changes will
impact very little unless they accompanied by changes in administration.

3.3 Identifying the Concept

As mentioned above, terms such as “invention”, “design”, “innovation”,
“entrepreneurship”, and “research and development” are used interchangeably.
This tends to suggest that the terms are all the same. This unit will attempt to
take a coursing look at these concepts.

3.3.1 Innovation
Innovation can be seen as the process through which new ideas and inventions
become a business reality in the form of new products, process, marketing
strategies and new methods of organization and management. Its importance to
business survival and growth is acknowledged by many firms through the
creation of special units such as research and development departments in the
manufacturing industry. Innovation operates in a variety of terms and variety of
contexts.

3.3.2 Invention
Invention is the act of creating something new and unique. Inventions are
irrelevant unless they are put into practice. Once an idea becomes a reality and
economically relevant, it ceases to be an invention and becomes an innovation.
An invention may give rise to:

• A new method of production

• A new process of manufacture
• New form of organization structure
• A new form of selling or marketing
• A new product etc.

Research, Development and Design

Research and development, commonly referred to as R & D, applies to a
department whose primary objective us creation and development of new
products and new ways of making they. It seeks to satisfy a market need by
developing new products and methods and finding uses for scientific and
technological inventions. It is a vital part of business clearly associated with
science and technology. R & D may also be seen as the organization of
innovation at the level of the firm.

Entrepreneurs are Crucial to the Process of Innovation

They are those whose initiates innovation. Entrepreneurs are responsible for
creating new products, services, markets and the means through which these
products are made service produced and markets reached. Entrepreneurs are

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often responsible for creating new forms of organization and new ways of
managing people. The entrepreneur operates by introducing such changes
directly by having the ability to organize physical information and human
resources to bring out innovation.

Invention and Innovation

Any Relationship Through the terms can be used interchangeably, it is pertinent to state that
innovation starts where invention ends. Invention refers to the making or creation of
something new, such as a new way to dye clothes, a new way to sells product or a new form of
entertainment. An invention becomes an innovation when the idea becomes a reality. That is
when the product is manufactured and starts selling. Innovation can be broadly classified into
three categories.

Product and Process Innovation

Product innovation refers to the development of a new product such as new mode of a car
while process innovation is concerned with how the product is made or delivered to the
customer e.g. robots in manufacturing industry.

• Innovation in the selection and use of raw materials as well as in marketing activities.
• A distinction can be made between basic innovation and innovations that are
modifications and improvements on existing products and processes.

Activities:

Assessment:
1. The resource person is expected to explain the nature and scope of innovation as well as
1. Invite trainees to explain their understanding of the concepts discussed above.
possibly identify some key concepts of innovation
2. Use group session(s) for the trainees to demonstrate understanding of the benefits and barriers
2. The resource person is anticipated to practically demonstrate the thin differentiate
to entrepreneurship
between invention and innovation to their understanding
3. The resource person is anticipated Identify the main challenges that may confront
management while embarking on innovative changes
5.0 Assessment:
1. Invite students to explain the nature and scope of innovation and to identify the key concepts of
innovation as were taught
2. Use group session(s) by their siting arrangement and ask them to demonstrate the thin
differentiate between invention and innovation as were well-taught
3. Ask the students to individually Identify some of the challenges that may confront management
while embarking on innovative changes

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6.0 Discussion:
1. Having examine the answers given by the students from the assessment questions (1,2
and 3), the resource person should then discuss the results with the students.

7.0 REFERENCES/FURTHER READINGS

Rogers, E.M. (1962). Diffusion of Innovation, New York: Free Press.

Rothwell R &. Zegveld (1981). Industrial Innovation and Public Policy, London:
Frances Printer.

Unit 2: Dimensions of innovation

1.0 Introduction
2.0 Objectives
3.0 Main Content
3.1 Advantages of Innovation
3.2 Major Types of Innovation
3.3 Dimensions of Innovation
4.0 Activities
5.0 Assessment
6.0 Discussion
7.0 References/Further Readings.

Introduction:
This unit intends to equip the students with the knowledge related to the benefits/advantages
and the major types of innovation and by extension identify some of the practical examples of
innovation in contemporary ventures

Objectives
This unit aimed at identifying some of the key elements in innovation. At the end of this unit
students should be able to:
• enumerate and discuss some of the advantages/benefits of innovation
• explore and explain major types of innovation
• classify and elucidates some of the feasible dimensions of innovation in contemporary
ventures

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3.0 Main Content
Advantages of innovation
When a sector, segment, or brand decides to innovate, it contributes to the development of
society as a whole. But, in practical terms of a commercial organization, a company that
innovates, mainly in its processes, gains many advantages, such as:

1. Keeping processes organized: By being innovative in how you perform processes,

especially if you use technology, you create standards and systematize the best work
method for your brand. And this is crucial for strategies to be successful, results to be
achieved, and goals to be reached.
2. Developing creativity: With innovation, a company shows that it is open to changes and
that employees can contribute with new ideas and see in practice the benefits new
things can bring to the day to day.
3. Increasing the business’s competitiveness: By adopting strategic resources, a company
becomes more attractive to customers, partners, and talents and gains a competitive
advantage in the market.
4. Increasing productivity: Innovation proposes more effective processes, more
production control, effective strategy, and more engaged employees.
5. Adding value to a product or service: When you innovate, you boost the marketing of
products and services, because you bring something different and unique for your target
audience.
6. Increasing profits: With more productivity, a more attractive business, and more
effective management, your business will consequently see greater profits.

Major types of innovation

Essentially, there are three types of innovation: radical, incremental, and disruptive. They may
vary depending on the niche, market, brand essence, services, and products offered. Whenever
a company wants to innovate, it is important to know these varieties.

1. Radical Innovation: As the name suggests, a radical innovation really changes the
circumstances of a brand, whether in terms of market or of business dynamics. It can
occur due to a complete change in a company's positioning, work method, processes,
services, and products offered, or how it relates to customers. An example of radical
innovation would be Apple's iPhone. When it was released, smartphones already
existed, but Apple included features that changed the market and made it more
popular.

2. Incremental Innovation: Another type of innovation is incremental innovation. It adds

new features to a product, brand, or production methods without promoting a very
drastic change. It is usually an evolution of an innovation already implemented by the
brand that complements and offers improvements, be it to employees, customers, or
features of a business. An example of incremental innovation is Gmail, which was
created with the purpose of sending emails quickly – but over time, different features

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 were added to improve the customer experience and make it more useful and
competitive.
3. Disruptive Innovation: Technological and behavioral changes have favored the
emergence of disruptive innovation in recent decades. This type of innovation follows
the market more than a specific brand, product, or service. It can be leveraged by
something a company has offered and, as a result, made their name, but, in general, it is
a scalable change that reaches many people at the same time. Examples of disruptive
innovation include Netflix, as the market used to rely on companies like Blockbuster for
movies and TV series. Netflix started offering DVD-by-mail rental services but decided to
innovate. It started offering video streaming services through a monthly subscription
and, in doing so, drove Blockbuster out of the market. In addition to being innovative,
this also gave Netflix a predictable monthly revenue.

Dimensions of Innovation
Since we have succeeded in exploring the major type of Innovation, this unit intends to identify
and explains some of the dimensions of innovation as follows:
1. Product Dimension of Innovation: Easily noticed, product as a dimension of innovation
actually brings something new to the market. Television, for example, was something
innovative when it was invented, bringing image, sound, and entertainment into
people's houses. It was a radical innovation that, with acceptance of the public, became
disruptive and over time began to rely on incremental innovation. The whole world
followed the release of different kinds of TV: color, cable, flat-screen, and, today, smart
TV.
2. Service Dimension of Innovation: A visible example of service as one of the dimensions
of innovation is food delivery. For a long time, in order to eat something from a
restaurant, customers needed to walk into the place or order takeout. That's when the
market innovated and offered delivery service so that customers could order whatever
they wanted with just a phone call. Over time, it became possible to order food on
websites, and now we can order food on mobile apps at our fingertips.

3. Business Model as a Dimension of Innovation: Innovation in the business model is

another dimension of innovation which is very common in startups. A simple example
would be marketplaces. Virtual stores like Amazon mediate between buyers and sellers.
Another example would be virtual banks. Today, there are many financial institutions
with no physical facilities for customer service and whose transactions are all performed
online.

4. Technological Dimension of Innovation: Technological dimension of innovation is the

most evident dimension of innovation. The advance of technology brings about many
opportunities. Thinking back a few centuries, the Industrial Revolution springs to mind
as a good example, since it changed production methods in companies, work methods,
and even workers’ lives. In a modern context, though, the primary examples are the
internet and smartphones, which revolutionized not only products and services, but also

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 society's behavior. Technological dimension of innovation, in the case of Industry 4.0
technologies, enables us to take steps that would otherwise be unachievable with
human power alone.

5. Logistical Dimension of Innovation: For a long time, it would take up to a month to

receive a letter by mail. For international products, it would take an average of three
months. To change this, companies and distributors innovated in logistics, creating
storage points and strategic distribution centers. Today, there are apps to hire delivery
services and even delivery drones

6. Marketing Dimension of Innovation: Ways of acquiring new customers have evolved,

and we are seeing more and more innovations in marketing. Sometimes, the way you
advertise can be innovative. With the creation of social media, for example, lots of
brands innovated by advertising on those platforms instead of newspapers and
television.

7. Organizational Dimension of Innovation: Organizational dimension of innovation brings

several other dimensions of innovation. They concern structural changes and practices
that improve productivity, services, products, and processes. Home offices are an
example of organizational dimension as are management software, customer service
chatbots, and trainee programs in which employees get to know all departments of a
company before actually working in one of them.

4.0 Activities:
4. The resource person is expected to identify and explain some of the
advantages/benefits of innovation
Assessment:
5. The resource person is anticipated to practically demonstrate the three major types of
3. Invite trainees to explain their understanding of the concepts discussed above.
4. Useinnovation to theirfor
group session(s) understanding
the trainees to demonstrate understanding of the benefits and barriers
6. The resource person is projected to Identify some of the commonest dimensions of
innovation that can easily be traced among cotemporary ventures around

5.0 Assessment:
1. Invite students to list and explain clearly, some of the advantages of innovation as
were taught
2. Use group session(s) by their siting arrangement and ask them to identify and
demonstrate the thin differentiate among the major types of innovation as were
well-taught
3. Ask the students to individually Identify some of the feasible dimension of
innovation of any latest venture

6.0 Discussion:
Having examine the answers given by the students from the assessment questions (1 2, and 3),
the resource person should then discuss the results with the students

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7.0 References/Further Readings.
Okpara, F. (2005). The Practice of Entrepreneurship, Precision Publishers Limited,
Enugu,
Nigeria.

Rogers, E. M. (1995). Diffusion of innovations (4th ed.). New York: Free Press.
Scott D. Anthony Synopsis by Rod Cox (2005): Using the Theories of Innovation to See
What's Next?
Unit 3: Change and Innovation
1.0 Introduction
2.0 Objectives
3.0 Main Content
3.1 Forces Responsible for Change
3.2 Resistance to Change
3.3 Critical Change Areas
3.4 Strategies for Managing Change Resistance
3.5 Case Study: Mungo's Service Station
4.0 Activities
5.0 Assessment
6.0 Discussion
7.0 References/Further Readings.

1.0 Introduction:
Most entrepreneurs and business managers have seen change becoming a regular aspect of
organizational life and they must constantly monitor and respond to these changes
appropriately. But the fact still remains that for entrepreneurs to respond optimally to
these changes within the organizational context they need to first understand the forces
responsible for these changes. Secondly, they must acknowledge the need for change and
ability to cope with it or resist it and become a victim of change. In this unit of the module,
we shall look at how organizational change can be managed with emphasis on its meanings,
causes of changes or the forces responsible for change, resistance to change, and managing
resistance to change.

2.0 Objective:
At the end of this unit, students should be able to:
• understand the meaning of changes
• identify causes or forces responsible for change
• appraise resistance to change
• classify Critical Change Areas
• explore Strategies for Managing Change Resistance
• conduct a case study

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Change Defined
Change is defined as the transformation in patterns of organizational activity. It is seen as
modification of those forces keeping a system’s behavior stable. It refers to an overhaul of both
internal and external environments of an organization. From the foregoing, one finds that
organizational change involves a shift from the usual mode of organizational activities towards
another that is adjudged to be more suitable and efficient. This means that there exist a new
set of attitudes, behavior, technology and organizational arrangement. Entrepreneurs and
managers should note the various elements in the organization are immediately faced with new
wave of change.

Forces Responsible for Change

It is imperative for entrepreneurs to identify and know those factors that bring change
within the business environment where they carry out their business operations. Identifying
and knowing these forces responsible for change or factors that bring changes,
entrepreneurs can then identify a variety of options available for them to survive, grow, and
sustain competitive advantage. These forces responsible for change are:

1. Economic Factors: Entrepreneurs should note that economic factors have imparted
very serious effects on consumers’ behavior or attitudes of buyers of goods and
services. With the anticipation of any future inflation, a buyer now tends to buy and
save or prefers using all what they have to buy what is available and possible. Thus,
saving or stocking against the near future. Consequently, just as organizations are
trying to be current and also have latest information on economic changes or issues
which are published regularly, entrepreneurs should also do the same since these
information are very vital for the continuity and survival of their operations. In brief
the economic factors are: business cycles, GNP trends, interest, money supply,
inflation, unemployment, disposable income, energy availability and cost, etc.

2. Change in Technology: The emergence of some technological devices, such as

thinking computers, robotics, computer engineering, miracle drugs, space
communications, lasers, cloning, satellite networks fiber optics, electronics money
transfer etc., have altered the frequency of operations of organization. These
changes have influenced both local and international business activities.
Entrepreneurs are therefore encouraged to buy into technologies that can
completely change or improve the total operational standard or life of their
ventures.

3. Social – Cultural Causes: Social, cultural, demographic and geographic factors could
have very serious effects on the products, services, markets and customers of an
organization if ignored or not considered by the organization in its operation. For
instance, there are a lot of changes in the family structure, marital life, and self-
dependence. Also, an entirely different view of social class in terms of minority and

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 majority groups as per discrimination has emerged. All these and other social,
cultural, demographic and geographic related factors have created the need for
different types of products, services, and strategies by companies as well as
entrepreneurs to get along with these changes.

4. Political and Legal Changes: Political and legal changes are the other set of major
environmental variables that can influence the external audit of an organization or a
venture. A summary of some of the political / legal changes that should be noted by
entrepreneurs are monopolist legislation, environment protection law, taxation
policy, foreign trade regulations, employment law, government stability, etc.

5. Intense Competition: This exists among ventures or businesses that offer similar
products or render similar services. Entrepreneurs should note that there is the need
for them to obtain vital information about their competitors. Such information
include: quality of products/service offer by competitors, financial information,
weakness and external opportunities etc. This information will enable the
entrepreneur and his/her venture not only to improve his/her products/services but
also allow entrepreneur to gain competitive advantage over his/her competitors.

Resistance to Change
An entrepreneur tends to resist change because it is easier to follow known paths
already well-established and learned than to change or learn and adapt to new methods
where the outcomes may not be as certain. Some of the factors that increase
entrepreneur resistance to change include:
1. Uncertainty about the Impact of Change: One of the major reasons why an
entrepreneur will resist change is because of the uncertainty about the impact of
change. For instance, the change would be resisted by an entrepreneur, if it could
mean unfavorable change in government policy as related to its business operation
or difficulties experienced when forced to a new location.

2. Economic Implications: An entrepreneur will resist the change when forced to a new
location as this may affect the cost of acquiring a new location, loss of customers
which may affect his/her market share or profit, cost of operation in some cases.

3. Lack of Proper Communication: If the need for the change is not communicated to
entrepreneurs and small business owners in time and in an acceptable manner, then
it can lead to resistance. For instance, government policies in areas such as taxation,
environment protection laws, trade regulations, etc. should be well communicated
to these small business owners and entrepreneurs to enable them see reasons for
the change.

4. The Group Resistance: Sometimes, the individual entrepreneurs and small business
owners resist change because the group, to which they belong, resists it. The

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 individual entrepreneurs usually comply with the group norms and codes and
support the group attitudes. For instances, when government in some states in
Nigeria decided to relocate or renovate some of business districts where these
entrepreneurs or small business owners carry out their business operations, some
individuals could see the need for this change but if the groups they belong do not
see the need, they have no other option than to fully support the group to which
they belong.

5. Emotional Reasons: One of the major reasons for change resistance by an

entrepreneur is the emotional turmoil that a change may cause, especially if the past
experiences of changes have not been useful.

Critical Change Areas

A brief outline of what the future may hold for change in small business operations
in seven critical areas of planning during the current world economic environment as
are outlined by as follows:

1. Capital. It will be more difficult and expensive to obtain and might become virtually
unavailable to many small businesses at any price.

2. Raw materials. They will also be increasingly costly and difficult to obtain. Smaller
firms may have to rely on larger inventories or switch to more abundant substitutes.

3. Labor. This is the most plentiful resource for a business. Abundant labor will be
substituted for scarce capital.
4. Technology. Technology will become more important to small business in the future
than in the past. Small business will continue to profit from technological advances
which will bring products that it can help to manufacture, market, or use to improve its
own performance. However, capital and energy constraints may hinder the flow of new
technology.

5. Markets. Markets based on products which consume large amounts of

increasingly costly resources will tend to decline, while those which make smaller
demands on irreplaceable resources or actually conserve them will tend to flourish.

6. Government regulation. Regulation is almost certain to increase, as government

regulatory agencies struggle to keep the country prosperous.

7. Management. Entrepreneurs will have to exhibit greater professionalism and

foresight if they are to guide the small business sector through the period of
economic scarcity.

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Strategies for Managing Change Resistance
Some of the strategies for managing change resistance include:
1. Education and Communication: if entrepreneurs do not have adequate information

or the information that they have is inaccurate about government policy relating to
their business operations, then it is necessary to educate them about the change, its
process and its working. This education can be carried out through training classes,
meetings and conferences.

2. Participation and Involvement: Participation of entrepreneurs and small business

owners in change of government policy relating to their operations would ensure
commitment to implementation of such change. Also, entrepreneurs should ensure
the participation of their employees in certain organizational change process.

3. Negotiation and Agreement: Managing change resistance requires the need for
negotiation agreement with all concerned stakeholders. This is so, as some
individuals or groups may end up as losers due to the change and where such
individuals or groups have considerable power to resist.

4. Timing of Change: The time of change goes a long way to determine the level of
change resistance. It is suggested that entrepreneurs should choose the time when
the organizational climate is highly favorable to change, when there is need for
organizational change.

5. Leadership: The credibility and prestige placed upon the entrepreneur could also
influence the employees to be involved in the change process. In the same manner,
credible government leaders could also influence entrepreneur to be involved in the
government policy change process relating to the entrepreneurs’ business
operation.

3.5: Case Study: Mungo's Service Station

Three years ago, Mungo bought a service station from an old man who had run the
station for 16 years using old machines and hand driven pumps. The sales were the best
of any service station in the town. The former owner had been a very popular man in
the area and had many loyal customers. Some of this popularity rubbed off on the new
owner but there were a lot of people in the area who didn't like Mungo.

As soon as Mungo took over the service station, his business began to decline. Within a
period of three years, almost all old customers had left for the nearby service station
and few new customers come to the service station. The biggest reason for losing sales
was the attitude Mungo had towards his customers. For example, when a boy came to
the station with his bicycle tyre and wanted air for an inflated bicycle tyre, Mungo told

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 him "I'm here to sell gasoline, not to give air, ask your father to buy you a bicycle pump,
don't bother me".

Another time a man on his way to a wedding stopped for gasoline. Mungo sold him
gasoline but was in such a hurry and seemed to be very tired because of the hand pump
he was using; he didn't check the oil or wash the windows. When the man asked Mungo
to do these things, Mungo did them in bad humor and grumbled about all the work he
had to do. He cleaned only the windshield in spite of the fact that all the windows were
dusty.

After several instances like these, word got around about Mungo's bad personality.
Nobody wanted to buy gasoline from Mungo's service station. The successful business
Mungo had taken over went broke after three years as most of the customers shifted to
a nearby service station.

Questions from case study

• What things will make an entrepreneur popular?

• The service station had been a success for 16 years before Mungo took over. Why
did it go broke within three years after Mungo became the owner?
• "..... Never argue with a customer. Adopt the attitude that the customer is always
right no matter how wrong he is". Discuss with reference to this case study.
• What should Mungo have done to attract more customers?
• What other factors could have influenced the customers to shift to a nearby new
service station?

Activities:

1. The resource person is expected to identify and explain some of the forces responsible
for change
Assessment:
2. The resource
5. Invite trainees person is anticipated
to explain to practically
their understanding of thedemonstrate criticalabove.
concepts discussed change areas and
resistance
6. Use to changefor
group session(s) to the
their understanding
trainees to demonstrate understanding of the benefits and barriers
3. The resource person is projected to Identify some of the strategies for managing
resistance to change
4. The resource person is likely conducting the case study with the students and show
them how to answer

5.0 Assessment:
4. Invite students to explain clearly, the concept of change and to identify some of the forces
responsible for change
5. Use group session(s) by their siting arrangement and ask them to identify some of the critical
change area within and resistance to change as were well-taught
6. Ask the students to individually Identify some of the strategies for managing resistance to
change

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 7. Group the students to provide answers to the case study questions to be marked

6.0 Discussion:
Having examine the answers given by the students from the assessment questions (1 2,3 and
4), the resource person should then discuss the results with the students

7.0 References/Further Readings.

Alec Couros For Dr. Cyril Kesten (2003). Innovation, Change Theory and the Acceptance
of New Technologies: A Literature Review

Chandan, J.S. (2005). Management theory and practice. New Delhi: Vikas Publishing
House PVT Ltd.

UNIT 3 THEORIES OF INNOVATION

CONTENTS
1.0 Introduction
2.0 Objectives
3.0 Main Content

3.1 Definitions of Diffusion of Innovations Theory

3.2 Rationale Behind the Diffusion of Innovation
3.3 Importance of the Diffusion of Innovation
3.4 Factors that affecting the rate of innovation diffusion
3.5 Examples of the Diffusion of Innovations Theory
3.6 Innovation or Dynamic Theory
3.7 Element/composition of innovation (Joseph Alois Schumpeter)
3.8 Behavioral Characteristic of Entrepreneur (Joseph Alois Schumpeter)
3.9 Critical Evaluation of J. A. Schumpeter Theory:
4.0 Activities
5.0 Assessment
6.0 Discussion
7.0 References/Further Readings

1.0 Introduction

Innovation is the successful development of competitive advantage; it is the presence of

innovation that distinguishes the entrepreneur from others. Innovation must therefore,
increase competitiveness through efforts aimed at the rejuvenation, renewal, and redefinition
of organization, their markets or industries, if businesses are to be deemed entrepreneurial.
Innovation is very germane in business today, without which, organizations will not be able to

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gain competitive success or advantage. This unit, therefore, is to expose the students reader to
Definitions of Diffusion of Innovations Theory; Rationale Behind the Diffusion of Innovation;
Importance of the Diffusion of Innovation; Factors affecting the rate of innovation diffusion’;
Examples of the Diffusion of Innovations Theory; Innovation or Dynamic Theory;
Element/composition of innovation (Joseph Alois Schumpeter); Behavioral Characteristic of
Entrepreneur (Joseph Alois Schumpeter); Critical Evaluation of J. A. Schumpeter Theory

1.0 Objective:

At the end of this unit, students should be able to:

• Understand the definitions of Diffusion of Innovations Theory

• Appraise the Rationale Behind the Diffusion of Innovation
• Identify Importance of the Diffusion of Innovation
• Highlight Factors affecting the rate of innovation diffusion
• Spot some of the Examples of the Diffusion of Innovations Theory
• Understand the meaning of Innovation or Dynamic Theory
• Classify Element/composition of innovation (Joseph Alois Schumpeter)
• Explore Behavioral Characteristic of Entrepreneur (Joseph Alois Schumpeter)
• Analyze Critical Evaluation of J. A. Schumpeter Theory:

3.1 Definitions of Diffusion of Innovations Theory

The diffusion of innovations theory is a hypothesis outlining how new technological and other
advancements spread throughout societies and cultures, from introduction to widespread
adoption. The diffusion of innovations theory seeks to explain how and why new ideas and
practices are adopted, with timelines potentially spread out over long periods. The way in
which innovations are communicated to different parts of society and the subjective opinions
associated with the innovations are important factors in how quickly diffusion—or spreading—
occurs. Important to understand when developing market share, this theory is frequently
referred to in the marketing of new products.

Diffusion of Innovation (DOI) is a theory popularized by American communication theorist and

sociologist, Everett Rogers, in 1962 that aims to explain how, why, and the rate at which a
product, service, or process spreads through a population or social system. In other words, the
diffusion of innovation explains the rate at which new ideas and technology spread. The
diffusion of innovation theory is used extensively by marketers to understand the rate at which
consumers are likely to adopt a new product or service.

The theory was developed by E.M. Rogers, a communication theorist at the University of New
Mexico, in 1962. Integrating previous sociological theories of behavioral change, it explains the
passage of an idea through stages of adoption by different actors. The diffusion of innovations
theory describes the pattern and speed at which new ideas, practices, or products spread
through a population. The main players in the theory are innovators, early adopters, early

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majority, late majority, and laggards. In marketing, this diffusion of innovations theory is often
applied to help understand and promote the adoption of new products. This application of the
theory usually focuses on identifying and recruiting influential early adopters to help
accelerate consumer acceptance.

3.2 Rationale Behind the Diffusion of Innovation

The adoption of a new product, service, or idea is not an overnight phenomenon – it does not
happen simultaneously across all people in a social system. According to research, consumers
who adopt an innovation earlier demonstrate different characteristics than someone who
adopts an innovation later. Therefore, for marketers, understanding the characteristics of each
segment that will either help or hinder the adoption of an innovation is important. In the
diffusion of innovation theory, there are five adopter categories:

1. Innovators: Characterized by those who want to be the first to try the innovation.
2. Early Adopters: Characterized by those who are comfortable with change and adopting
new ideas.
3. Early Majority: Characterized by those who adopt new innovations before the average
person. However, evidence is needed that the innovation works before this category will
adopt the innovation.
4. Late Majority: Characterized by those who are skeptical of change and will only adopt
an innovation after it’s been generally accepted and adopted by the majority of the
population.
5. Laggards: Characterized by those who are very traditional and conservative – they are
the last to make the changeover to new technologies. This category is the hardest to
appeal to.

Rogers provides the distribution of the five adopter categories as follows: Innovators represent
the first 2.5% of the group to adopt an innovation, followed by 13.5% as early adopters, 34% as
early majorities, 34% as late majorities, and finally,16% as laggards. Note that the size of the
laggards category is much larger than that of the innovators category on the opposite end of
the spectrum.

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3.3 Diffusion of Innovation: Innovators
Innovators are those who want to be the first to acquire a new product or service. They are
risk-takers, price-insensitive, and are able to cope with a high degree of uncertainty. Innovators
are crucial to the success of any new product or service, as they help it to gain market
acceptance.

For example, individuals who stay overnight outside a movie theatre to be the first to purchase
the first showing to a movie are considered innovators.

Diffusion of Innovation: Early Adopters: Early adopters are those who are not quite as risk-
taking as innovators and typically wait until the product or service receives some reviews
before making a purchase. Early adopters are referred to as “influencers” or “opinion leaders”,
and are often regarded as role models within their social system. They are key in helping the
spread of a product or service achieve “critical mass”. Therefore, if early adopters of a product
or service are small, the total number of people who adopt the product or service will likely be
small as well. Individuals who wait a couple of days and spend some time reading reviews
before going to see a movie are regarded as early adopters.

Diffusion of Innovation: Early Majority: Early majorities represent the majority of the market –
34%. Early majorities are not risk-taking and typically wait until a product or service is tested or
used by a trusted peer. These individuals are prudent and want to purchase things that are
proven to work. Individuals who go to a movie after it’s been out several weeks and gotten
good reviews and made profits at the box office are early majorities.

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Diffusion of Innovation: Late Majority: Late majorities also represent an important percentage
of the market – 34%. Late majorities are the last large group of consumers to enter the market.
They are deemed conservative and are often technologically shy, very cost-sensitive, skeptical,
and cautious in making a purchase. In addition, late majorities are often peer pressured into
purchasing the product or service. People who wait for a movie to become available online or
on Netflix are regarded as late majorities.

Diffusion of Innovation: Laggards: Laggards are the last to adopt a new product or service.
They resent change and may continue to rely on traditional products or services until they are
no longer available. In other words, they typically only adopt the new technology when virtually
forced to. Laggards perhaps finally catch a hit movie when it’s shown on network TV.

3.4 Importance of the Diffusion of Innovation

The diffusion of innovation theory explains the rate at which consumers will adopt a new
product or service. Therefore, the theory helps marketers understand how trends occur, and
helps companies in assessing the likelihood of success or failure of their new introduction. By
utilizing the diffusion of innovation theory, firms can predict which types of consumers will
purchase their product/service and create effective marketing strategies to push acceptance
through each category.

3.5 Factors affecting the rate of innovation diffusion

Basically, rates of innovation diffusion are affected by some forces or factors as follows:
1. The mix of rural to urban within a society's population,
2. The society's level of education,
3. the extent of industrialization and development.

Different societies are likely to have different adoption rates—the rate at which members of a
society accept a new innovation. Adoption rates for different types of innovation vary. For
example, a society may have adopted the internet faster than it adopted the automobile due
to cost, accessibility, and familiarity with technological change.

3.6 Examples of the Diffusion of Innovations Theory

While the diffusion of innovations theory was developed during the mid-1900s, most new
technologies in human progress, whether it is the printing press during the 16th century or the
internet in the 20th century, have followed a similar path to widespread adoption.

The diffusion of innovations theory is extensively used by marketers to promote the adoption
of their products. In such cases, marketers generally find an early set of people passionate
about the product. These early adopters are responsible for evangelizing its utility to
mainstream audiences.
A recent example of this method is Facebook. It started off as a product targeted at students
and professionals in educational institutions. As students' use increased beyond school, the
social media site spread to mainstream society and across borders.

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The diffusion of innovations theory is also used to design public health programs. Again, a set
of people are chosen as early adopters of a new technology or practice and spread awareness
about it to others. However, cultural limitations often impede such programs from being
successful.

During the last years of 90’s the mobile phones were introduced to common people even
though it was there in market the cost was much higher. Roger’s theory of diffusion of
innovation can be apprehended by understanding how the people accepted and get used for
mobile phones. When it was introduced, it wasn’t something which comes with 500+ killer
applications as today it was merely a portable land line

3.7 Innovation or Dynamic Theory

This theory was developed by Joseph Alois Schumpeter. According to Joseph A. Schumpeter,
the effective function of an entrepreneur is to start innovation in venture. According to this
theory, the entrepreneurs emerge because of individuals having certain psychological elements
i.e., will power, self-intuitions, tolerance capacity. The entrepreneur is a person who has
creative nature. He regarded the entrepreneurship as a catalyst who checks the static
conditions of the economy, there by initiates and thrusts a process of economic development
i.e., innovation. He carries economy to new height of development.

3.8 Element/composition of innovation (Joseph Alois Schumpeter)

According to Joseph Alois Schumpeter, innovation includes the following:

1. Introduction of new goods,

2. Introduction of new methods of production,
3. Opening of a new market,
4. Discovering a new source of raw materials,
5. Carrying out a new source of an organization.

According to Joseph Alois Schumpeter, an entrepreneur is an innovator who desires to earn

profit through innovation. An entrepreneur is neither technical man nor a capitalist but simply
an innovator. He introduces something new in the economy. He is motivated by establishing his
psychological power. An entrepreneurship is formed for establishing his industrial empire. He
has burning desires for creative activities.

Schumpeter made it clear that an entrepreneur doesn’t have a single person but equal to an
organization. “What matter is the behavior not the actor?” He emphasized more on
technological innovations rather than on organizational innovations. “Entrepreneurs are
certainly not economic men in the theoretical sense.”

3.9 Behavioral Characteristic of Entrepreneur (Joseph Alois Schumpeter)

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According to Joseph Alois Schumpeter, the following characteristics that appear in the behavior
of an entrepreneur are as follows:
1. An institutional capacity to see the things in a way which afterwards proves to be true.
2. Energy of will and mind to overcome static habits, desires and emotions.
3. The capacity to withstand social opposition.

Although, this theory also included other characteristics i.e., risk taking, superintendence and
coordination, he emphasized that these attributes without the ability to innovate will not make
an individual as an entrepreneur.

3.10 Critical Evaluation of J. A. Schumpeter Theory:

In this theory, the main theme is the innovation. He makes a distinction between an innovator
and an inventor. According to him, an inventor discovers new methods and new materials. But
an innovator is one who applies inventions and discovers in order to make new combination.

With the help of new combination, he produces newer and better goods which yields
satisfaction as well as profits. Schumpeter’s concept of entrepreneurship is quite broad based.
It includes not only the independent businessmen but also executives and managers who
actually undertake innovative functions.

Activities:

7. The resource person is expected to Clearly explain the definitions of Diffusion of

Assessment:Innovations Theory as well as Innovation or Dynamic Theory
7. 8. Thetrainees
Invite resource
to person
explain is anticipated
their to Spot
understanding of and discuss Rationales
the concepts discussed Behind
above. the Diffusion
8. Useofgroup
Innovation andfor
session(s) Identify Importance
the trainees of the Diffusion
to demonstrate of Innovation
understanding of the benefits and barriers
9. The resource person is anticipated to Highlight Factors affecting the rate of innovation
to entrepreneurship
diffusion and clarify Examples of the Diffusion of Innovations Theory
10. The resource person is anticipated to Classify Element/composition of innovation
(Joseph Alois Schumpeter) and in details explain the Behavioral Characteristic of
Entrepreneur
11. The resource person is anticipated Unsympathetically analyze some of the Critical
Evaluation of Innovation or Dynamic Theory (J. A. Schumpeter Theory)

5.0 Assessment:
1. Invite students to explain their in-depth understanding of Diffusion of Innovations Theory
and Diffusion of Innovation
2. Ask the students to highlight factors affecting the rate of innovation diffusion and to
Spot some of the Examples of the Diffusion of Innovations Theory
3. Engage the students to explain rationale behind the diffusion of Innovation and to
enumerate element/composition of innovation (Joseph Alois Schumpeter)

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 4. Use group session(s) by their siting arrangement and ask them to conduct a Critical Evaluation
of J. A. Schumpeter Theory as were well-taught

6.0 Discussion:
2. Having examine the answers given by the students from the assessment questions
(1,2,3 and 4), the resource person should then discuss the results with the students.

7.0 References/Further Readings

Drucker, P. (1985). Innovation and entrepreneurship. New York: HarperCollins.

Hisrich, R.D., Peters, M.P & Shepherd, D.A. (2008). Entrepreneurship (7th edition).
Singapore: McGraw-Hill.

Hitt, M.A. Ireland, R.D. and Hoskisson, R.E. (2003). Strategic management:
Competitiveness and globalization (5th edition). USA: Thomason South-Western.

Oghojafor, A. (2000). Strategic Planning: A guide. Lagos: Malthouse Press Ltd.

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