Innovation and Firm Competitive Advantages

Abstract

Innovation provides many advantages in terms of competitive advantages; however, many firms fail to seize innovation opportunities. There are different types of innovation, namely product innovation, process innovation, architectural innovation, marketing innovation, service innovation, organisational innovation, and transformational innovation. The different types of innovation offer different opportunities across the product life cycle. In this chapter, some interesting questions are posed: (a) is it necessary to invest in all the different types of innovation, (b) can a firm benefit from one or two of the different types of innovation and (c) how important innovation timing is to extract maximum value across the product life cycle. Responses to these questions are explored, and insights are provided. Interesting lessons are provided to firms as these lessons may enable firms to improve innovation opportunities and competitive advantages.

1. Introduction

In a firm, there are different types of innovation, namely product innovation, also referred to as new product development (NPD), process innovation, architectural innovation, marketing innovation, service innovation, organisational innovation, and transformational innovation [1]. These different types of innovation offer different competitive advantages; it is essential to understand better when and how firms can derive competitive advantages from these different types of innovations. Trott [2] positions that the different types of innovation may be time and market-dependent. Porter [3] argues that to achieve competitive success, firms in a particular economy, meaning a specific nation or country, must possess “competitive advantage in the form of either lower costs or differentiated products”. Porter [3] further argues that to “sustain competitive advantage, firms must achieve more sophisticated competitive advantage over time, through providing higher-quality products and services or producing more efficiently”. Moreover, Porter [3] positions that the influence of the nation, economy or country influences the industry segments rather than the firm. Considering this Porter [3] highlights that many researchers have not fully answered the question of: Why do firms based in some nations, economies, or countries innovate more than others? To this end, we borrow from Schumpeterian economic growth theory, which states that economic growth arises from competition amongst firms. The competitive advantages may differ in terms of different economies; for example, world countries may claim more competitive advantages stemming from NPD, while less developed countries may claim competitive advantages stemming from other types of innovation. However, these are not mutually exclusive. Notwithstanding that different economies give rise to different types of innovation, some firms are more innovative than other firms, and as such, these firms are more risk-seeking and continually innovate, taking new products and services to market. These firms can and may extract innovation value across different types of innovation spanning the entire product life cycle (PLC). Such firms also have the necessary resources to exploit the different types of innovation across the PLC. Other firms are less risk-seeking and may be risky; moreover, they may not possess all the resources to enable them to exploit the different types of innovation across the PLC. Kay [4] argued that while competitive advantage can come from the possession of assets, size, etc., it is increasingly becoming apparent that firms that can mobilise knowledge, technological skills and experience to create new products and services are at an advantage. These knowledge, skills and experience reside in firm capabilities. In other words, firms need to possess the necessary capabilities to develop competitive advantages in the goods and services they produce. It is important to note that while firms develop these capabilities, they always stick to their core competencies and ensure capabilities are built to protect their core competencies.

Core competencies are the resources and capabilities that enable a firm to develop and or sustain competitive advantages. Some firms are more product-driven, and therefore, their core competencies reside within NPD; other firms, while they develop new products, are more comfortable and excel in process innovation, and hence they invest more in infrastructure and sophisticated manufacturing systems and techniques. Other firms may feel more comfortable outsourcing marketing and service innovation and prefer to focus on NPD and/or process innovation. Whatever the firm decides to do, it is essential that they stick to their core competencies.

Porter [3] further argues that firms gain and sustain “competitive advantages in international competition through improvement, innovation, and upgrading”. Porter [3] further describes innovation as inclusive of “both technology and methods, encompassing new products, new production methods, new ways of marketing, identification of new customer groups, and the like”. Within this chapter, we explore how firms may explore and exploit the different types of innovation specific to the risk appetite, availability of resources and core competence. Ahmed et al. [5] highlights that “the development of technology and innovation has increased rapidly over the last few decades giving rise to intense competition. Siriram [6] positions that “innovation creates opportunities to improve productivity, reduce waste and thus improves competitive advantages”.

The PLC, as depicted in Figure 1, shows the different phases of innovation. First, a product goes through a period of infancy. This is also referred to as the fluid phase [2] within the fluid phase NPD in the industry is the highest. There is much competition amongst different products as well as between competitor firms. This is the era of the explosion of different designs; it is the era of radical product innovation [2]. In this phase, the dominant design has yet to emerge. The dominant design is a technology management concept that was introduced by [7], identifying vital technological features that win the allegiance of the marketplace. The emergence of the dominant design signals scientific maturity and acceptance of agreed-upon standards based upon which typical scientific research can proceed [8]. This phase favours firms that have the capabilities to mobilise knowledge, technological skills, and experience to create new products and services. This is the phase of NPD. New products help capture and retain market shares and increase profitability in those markets [9]. Moreover, there is a strong link between market performance and new products [9]. In the twenty-first century, this phase is characterised by short product cycles, which in some cases are in mere months. Therefore, firms must continually innovate by bringing new products to market. Innovation does not end once the dominant design has emerged; innovation now occurs downstream.

Figure 1.

PLC [1].

Once the dominant design has emerged from Figure 1, we see the phase of growth. This phase is the phase of process innovation. Process innovation is about finding better ways to produce products in ways that no one else can or in ways that can be better than anyone else. This can also be categorised as a source of competitive advantage [9]. This phase is the transitional phase, which is characterised by the standardisation of design, and it gives rise to process innovation [2]. For example, the Toyota production system and other such equivalents offered productivity improvements which could not be rivalled by competitors [9]. Process innovation can also be a barrier to entry as firms can introduce sophisticated technologies in the manufacturing process, which require huge investment and mastering these technologies can also be a huge learning curve. Competitor firms may need more risk appetite or capabilities to enter into such markets, and hence, process innovation in such industries becomes a barrier to entry.

From Figure 1, the next phase in the PLC is one of maturity, where the product and market have matured, and product and process innovation have diminished; this is where firms explore opportunities for organisational innovation. This phase is also referred to as the specific phase, which is characterised by the contraction of competitors. It is the era of incremental innovation where small changes are made to extend the product’s life. Firms may explore other ways to take products and services to the market where firms adopt different business models in terms of how best to structure the business to able to react quicker to market requirements in terms of ease of accessibility to products through more accessible distribution channels, lower business operating costs and so forth. In this phase, the market is more sensitive to price. In terms of process innovation, many strides have been made in adopting manufacturing methods that reduce costs. Organisational innovation is also about reducing business operating distribution and logistics costs, amongst others. Organisational innovation does not occur at the end of process innovation; it is a parallel process to process innovation. Some firms that are more aggressive and confident about NPD may initiate organisational innovation in the infancy or product innovation phase.

From Figure 1, also in the maturity phase, firms explore opportunities in service innovation. Service innovation is where firms can offer better service, which is faster, cheaper, and higher quality, which is also a source of competitive advantage [9]. Service innovation occurs throughout the PLC, during the product development phase once the dominant design has emerged, emphasising beyond being able to capitalise on price advantages but also being able to offer benefits in design, customisation, and quality [9]. The rise of the internet has enabled the scope of service innovation to grow enormously. Services can be customised for mass markets or customised to individuals who are able to pay high prices.

Marketing innovation can be described as the “firm’s ability to adopt different marketing approaches that will enable the firm to be more effective in the use of channels of communication to facilitate the delivery of goods and services to serve its customers better”.

In NPD, there is much uncertainty regarding the capabilities of new products and whether new products fit the needs of potential customers [10]. Marketing innovation can play a significant role in reducing these uncertainties and can enable the firm to develop new relationships with potential new customers to understand their behaviour and learning requirements [1]. “Leveraging marketing resources such as brand name, reputation, and loyalty can also play a significant role in driving product diffusion” [1]. As pointed out by [1, 11], marketing innovation goes beyond NPD, and manufacturing firms have achieved competitive advantages through product differentiation and cost leadership through marketing efforts.

Transformational innovation does not fit into the PLC. Transformational innovation is of such a nature that it can destroy existing markets and firms [1]. It is a rare and powerful form of innovation that creates opportunities for many generations [1]. Transformational innovation rarely stems from existing industries, firms, and products because such entities have vested interests in established innovations; therefore, it stems from outside entities with no vested interest in existing innovation investments and infrastructure” [1]. Due to the sheer potential of the failure of transformational innovation, large firms do not favour venturing into transformational innovation activities on their own, and they instead rely on technological advancements of start-ups or other partners or suppliers to initiate transformational innovation because the risks are so high. Furthermore, transformational innovation requires capabilities and expertise that the firm does not possess [1, 12].

From Figure 1, the last phase is the phase of decline, where the product has reached the end of its life, and only a little value can be extracted from this phase. Only some firms will invest further in products, processes, marketing, organisational or service innovations in this phase of the life cycle. This phase is the end of the life of the product.

Having given a brief overview of the different types of innovation, in this chapter, we explore managing technological innovation in firms, the innovation portfolio, innovation processes, and the diffusion of innovation. Insight into some interesting questions are as follows: (a) is it necessary to invest in all the different types of innovation, (b) can a firm benefit from one or two of the different types of innovation and (c) how important is the timing of innovation to extract maximum value across the PLC; are also provided.

2. Managing technological innovation in firms

It is prudent to delve further into the definition of the different views of innovation. [13] describes technical innovation as “the embodiment, combination, or synthesis of knowledge into new products, processes, or services”. Siriram [14] positions that “innovation is a mechanism enabling firms to adapt to changing environments, and it is closely related to a firm’s performance as well as its competitive advantage. Innovation may provide opportunities for firms to manoeuvre in turbulent environments” [15], which may include leverage networks, amongst other things [14]. Innovation creates opportunities to improve productivity as well as reduce waste [16] and hence improve competitive advantage [6]. Hesselbein and Johnson [17] positioned that “innovation is a change that creates a new dimension of performance”. Whilst these views are not exhaustive, there are many variations of the definition of innovation, and the body of knowledge is quite broad, and it is not the intention to cover this body of knowledge in this chapter. It is, however, important to highlight that almost every industry or a set of leading firms has faced a period of discontinuous change in which they fail to maintain market leadership in the new emerging technological era [18].

It is acknowledged that innovation is complex, and many firms fail at it; however, innovation is essential to the sustainability of the firm. There are many examples of firms that were once winners but have later become losers as they have lost their competitive edge. Examples of firms that have such challenges include “Xerox in the US, Michelin in France, Philips in Holland, Siemens in Germany, EMI in England, and Nissan in Japan” [18]. There are many factors which have led to this situation. Sometimes, the factors that lead to a firm’s success are the same factors that lead to its demise [19]. Katz [18] highlights that it is “the leadership strategic focus, valued propositions, structures, policies, rewards and corporate success” that were once the criteria for success and competitive advantage at a certain period can become the stumbling blocks in another period as technological and market conditions change over time. To this end, we refer to [20], who positioned there are five stages of competitive transient advantage: launch, ramp-up, exploit, re-configure, and disengage. Where transient embraces the idea of constant change and evolution. Therefore, instead of firms relying on a single competitive advantage like product innovation, firms develop capabilities that enable them to develop competitive advantages across different competitive advantages, as in the case of this chapter, which is the different types of innovation. There are parallels between these stages and the stages in the PLC. The launch is the same as the infancy or fluid phase; ramp-up is the same as the growth phase; exploit and re-configure can be seen as spanning both the growth and maturity phases, and disengage can be seen as the same as the decline phase. McGrath [20] argues that while exploiting a transient advantage is advantageous for competitive advantage, business leaders must be cautious of building up excessive assets and people, which prevent the business from moving to the next advantage. In such cases, firms often remain stuck in current operations, favouring existing innovations. This is mainly because they have vested interests and cannot easily transition to more disruptive innovations that will make current innovations obsolete. It is essential that it is acknowledged that there is a need to develop capabilities that are easily transitioned across the PLC.

To this end, Katz [18] also points out that industry forces and corresponding organisational priorities operate differently between the different types of innovation, Katz [18] refers explicitly to product and process innovation; however, this can be extended to the other types of innovation such as architectural, marketing, service, and transformation innovation. Tushman and O’ Reilly [21] also argued that firms should take “a broader focus on innovation, simultaneously producing streams of innovation over time to succeed over multiple innovation cycles”. This implies that firms need to invest across the different types of innovation to survive. Tushman and O’ Reilly [21] also emphasises that “innovation streams emphasise the importance of maintaining control over core product subsystems and proactively shaping dominant designs while generating incremental innovations, profiting from architectural innovation, introductions that re-configure existing technologies, and most importantly introduce other radical product substitutes”. Moreover, Tushman and O’ Reilly [21] positions that for firms to sustain their competitive advantage, they must simultaneously operate in multiple modes of innovation; they state that firms that are able to operate in multiple modes of innovation are referred to as ‘ambidextrous organisations’.

Ambidextrous firms organise themselves for different modes of operation, first for managing the business with consistency, efficiency, and reliability and second for managing the business for new innovations and thinking [18]. Each of these modes of operation requires different kinds of business organisational structures. This is where organisational innovation can also be the source of competitive advantage. For incremental, sustained and competence-enhancing innovations, organisational structures can fit the current mode of operation, which requires centralised control, formalised roles, standardised procedures, structures, and an organisational culture structured more around efficiency. On the opposite end, there are high levels of innovation in the infancy of the fluid phase of the PLC, where the focus is on more novel types of discontinuous innovations which require a different type of organisational structure. Such an organisational structure is more entrepreneurial and favours skunkworks, a start-up spirit, and an innovative and creative thinking organisational structure. Such organisational structures are small and favour decentralisation and fluidity in roles, networks, and work processes. In such an organisation, employees have a culture of pushing the boundaries rather than adhering to standardised processes and organisational routines.

In ambidextrous firms, there are two opposing views. The business or that part of the organisation that is focused on the status quo is often more profitable and focused on efficiency and sees the entrepreneurial part of the business as inefficient, risky, and out of control. This challenges business leaders in ambidextrous firms as they must manage both cultures for sustainable competitive advantage. Business leaders need to have a balanced approach. They need to safeguard the current business, which is more conservative, while at the same time giving the entrepreneurial business the freedom to be innovative and creative so that the future of the business can be secured through more innovative products and ideas which the future market will eventually demand. Some firms have the necessary resources to operate in these different types of businesses separately and distinctly. However, they still need to decipher how to integrate strategies, accomplishments, and markets [18]. The risk of separating the entrepreneurial business is that it comes all too easy to shut down or sell off the smaller unit; this can often happen through changes in leadership where new leadership steps in and finds some of the entrepreneurial innovations too risky. In other cases, where appropriability is weak, the new innovations are often easily commercialised by competitors, and hence, the entrepreneurial entity is at risk of being shut down [18]. There are motivations for separation given the different cultures and work orientations between the two; however, clear thought needs to be given in terms of how the successful entrepreneurial business can be integrated back into the larger organisational structure.

Another motivation to separate entrepreneurial business from existing business is the case for transformational innovation, which is of such a nature that it has the potential to destroy existing business due to the risk associated with such a type of innovation. The benefits, if successful, are enormous, but the risks are equally significant. Transformational innovation has the potential to disrupt existing industries and firms, and as such, firms opt to initiate such types of innovation through start-ups which are external to the firm. Ambidextrous firms have the risk appetite for such a type of innovation. They also have the necessary resources, capabilities, capacity, and organisational culture to venture into this type of innovation.

3. The innovation portfolio

From an innovation portfolio perspective, firms must have a portfolio of innovations with different innovations in different stages of the PLC. This is the same concept as not having all your eggs in one basket. Firms must diversify their investments and ideally have different pockets or buckets for innovation. Some innovations in NPD, others in the process innovation stage and so forth in that way they can capitalise across the PLC. It was pointed out by [1] that NPD is approximately 50% of the PLC; therefore, firms need to invest in process innovation, organisational, marketing and service innovation to capitalise on the second half of the PLC. Firms spend vast sums of money on NPD, and NPD is itself risky. Not being able to capitalise on the total PLC is not being effective, and it will hamper the competitive position of the firm.

A strategic alignment map can be used to obtain balance in terms of the different types of innovation. From Figure 2, we can see a portfolio of the different innovation types. In the infancy phase, there are mainly product innovations which are either radical or disruptive in nature. There can be many products in this stage of the PLC as the dominant design has yet to emerge, and firms could experiment with different types of products. However, it is optional that firms invest in more than one type of domain-specific product because NPD is expensive and also very risky. Some firms with the available funding and other resources may opt for more than one innovation in NPD. The level of investment in this phase can also vary depending on the available resources and risk appetite of the firm. Firms can make large, medium, or small investments. In this phase, there is also an opportunity for radical marketing innovation. In the growth phase of the PLC, we see growth in the radical and disruptive products; we also see the opportunity for architectural innovation, which is novel combinations of existing products; we also see incremental process innovation; some firms can opt for radical or disruptive process innovations. Disruptive marketing and service innovation are also opportunities here. In the maturity phase, most of the innovation will be in the process marketing and service innovation phase because the product has already matured. Finally, in the decline phase, the product is at the end of its life cycle, and service innovation is the main area that some firms may invest in; however, it is also an option to refrain from investing further in this phase of the PLC.

Figure 2.

Strategic alignment map reflecting portfolio of innovations.

The strategic alignment map gives a graphical representation of the portfolio of investments. It indicates that firms have investments in the different innovation types across the PLC. Taking this approach to innovation also will indicate gaps in the different types of innovation. For example, in Figure 2, in architectural innovation, we do not see any novel combination of existing products which can further extend the life of the product. Another example of the decline phase is that we are still seeing significant investments in service innovation. Is this necessary? In this way, firms can take a holistic view of the different types of innovation across the product life cycle. As such, they can determine the necessity to invest in the different types of innovation, providing answers to question (a) Is it necessary to invest in all the different types of innovation? As well as identifying the benefits and return on investment of the different types of innovation and answering question (b) Can a firm benefit from one or two of the different types of innovation? Identifying when to invest in the different types of innovation and responding to question (c) how important is the timing of innovation to extract maximum value across the PLC. For example, in the growth phase, we see much innovation which requires large, medium, and small investments across the different types of innovation from product, architectural, process, marketing and service innovation; the question arises: does the firm have the necessary resources and capabilities to run multiple streams of innovation across one PLC? Note that the firm may not be limited to a single product. There may be multiple products, and as such, investing this much in one product or more will place significant constraints on the firm’s resources, capabilities, and capacities. Firms must be cautioned that while they may be eager and willing, there is a risk of doing too much too soon.

4. Innovation process

In terms of the innovation process, we focus on the technology-push process and the market demand-pull process, as these two innovation processes are relevant for obtaining a better understanding of the driving factors for innovation. Takayama and Watanabe [22] position the concept of technology-push and market-pull, where the firm and market act and react to changes in the broader environment by responding with new products. Technological innovation is the catalyst for technology, that is, product innovation, whilst market-driven product innovation has emphasised the importance of market needs and customer needs [22]. In terms of novel, unique technology products, product innovation is the major driving factor to introduce new products to the market; it is also recognised that market knowledge can also stimulate NPD. Therefore, it may be concluded that technology and market knowledge contribute to NPD. Takayama and Watanabe [22] also highlights that many strong firms have lost their strong position in the market when new products have emerged. The question then arises: why cannot leading firms maintain their position in the market? To better understand this problem, it is necessary to delve further into the concept of technology push and market pull.

Technology push is the traditional research-based model. Developments in science and technology drive this model. More investment in research and development is believed to lead to more innovation [23]. This approach is purely a technological view where the market, to a large extent, is seen as secondary [23]. Pharmaceutical Industries favour this approach. It is a very linear and sequential approach. This approach rests on NPD, and as in pharmaceutical industries, NPD and process innovation occur simultaneously. Marketing innovation is about keeping abreast of market and customer needs and feeding this information to the product development teams. In technology, it is also possible to capitalise on organisational and service innovation. Organisational innovation will evolve around how the firm should structure itself to improve collaboration between marketing and product development teams. Service innovation will evolve to deliver products and better service to customers better. Service innovation will encompass ease of access to products; it will involve delivering products and services economically and, as such, will focus on the cost, quality, speed, dependability, and flexibility of delivery that are the dimensions of the Sand cone model.

In demand-pull, marketing takes the lead. In this model, the market forms the source of new innovative ideas [23]. Some of the challenges here are that this approach is prone to incremental innovation to meet market needs, and new technologies seem to lag, which has the potential to become radical innovations [24]. Lead users have been used quite successfully to improve NPD. The market leader is in the best position to collect technology requirements, and market needs through the collaborative networks already in place. The market leader is well-positioned to identify the next technology product and collect sufficient information [22]. Takayama and Watanabe [22] also hic is sometimes a failure factor for successful Ncese failures as follows:

1. A new product can either be a differentiated product or a superior product.

2. The existing product can either act in direct opposition to NPD, enhancing or hampering.

3. For a new superior product, the existing product’s position is enhanced.

4. For a new differentiated product, the existing product position is hampered.

5. A strong existing product significantly hampers the development of new products with differentiated points but enhances the development of new superior products.

While technology-push is predominately focused on NPD, demand-pull and marketing knowledge can significantly enhance NPD. Demand-pull has a strong incremental innovation around products; it also has a focus on process and service innovation.

5. Diffusion of innovation

It is also important to understand how innovation diffuses across the PLC; to this end, we refer to the body of knowledge on appropriability and complementary assets. Appropriately is defined as the ability to generate rents, and complementary assets are the competencies and resources required to enable innovation to diffuse. The regime of appropriability refers to the environmental factors which exclude the firm and market structure that govern the innovator’s ability to generate profits from the innovation [25]. Teece [25] argues that “the most important dimensions of such a regime are the nature of the technology and the efficacy of the legal mechanisms”. It is widely known and accepted that patents are the weakest form of protection. Bar a few exceptions, as in the chemical, pharmaceutical and simple products, they offer little protection to the innovator. In industries where innovations are embedded in processes, trade secrets are a viable source of protection compared to patents, for example, in the case of McDonald’s and Coke. Another mechanism that could be used to protect the leakage of profits is tacit knowledge, which is not easily codified and transmitted. Tacit knowledge is difficult to articulate and can also be transferred through learning by doing; hence, it offers good protection to the innovator. Oversimplified, one may state that an appropriability regime is tight or weak, where tight appropriability regimes are difficult to replicate and easy to protect and weak appropriability regimes are difficult to protect and difficult or impossible to protect.

Complementary assets can be grouped into two categories, namely competencies and resources. Competencies include, for example, manufacturing capabilities, sales, and service expertise. Resources include, for example, brand name, distribution channels, and customer relationships. Teece [25] takes a value chain approach to complementary assets and argues that complementary assets occur downstream and include capabilities, which include, amongst others, manufacturing capabilities, sales, and service expertise. Later, Taylor and Helfat [26] expanded the definition of complementary assets by [25] to include tangible, intangible, and organisational capabilities. Where tangible assets are things that one can feel, see, and touch, intangible assets are things like brand name and reputation, and organisational capabilities are the things that a firm is good at and has the necessary capabilities to do such things well. Organisational capabilities can be further emphasised to progress towards distinctive organisational capabilities, things that the firm can do better than others and, as such, charge a premium for this, and this is then a source of competitive advantage.

In the infancy phase, there are multiple competing products; therefore, complementary assets are limited as firms do not wish to invest in complementary assets that may not be useful if the product innovation is unsuccessful. However, in this phase, the innovator may have a high-risk appetitive and may have high confidence in the innovation; therefore, this is an opportunity to buy up complementary assets before complementary asset holders realise the true value of the complementary asset. In this way, the innovator can protect themselves from being held hostage by the complementary asset holder. In the growth phase, the dominant design has already emerged, and complementary assets are more readily available. In this phase, the innovator has more options in terms of choosing partners to take the product to market. In the maturity and decline phase, complementary assets are abundant, and the product innovation has lost its uniqueness and been surpassed by other newer innovations. In this phase, the product innovator has many options for complementary asset holders.

6. Conclusions

In this chapter, we explored the different types of innovation. We divulged into how to manage innovation in firms and, in so doing, introduced the concept of ambidextrous firms, that is, firms that can explore and exploit multiple streams of innovation simultaneously. We also cautioned against the challenges of operating both a current profitable business that is focused on efficiency and a more entrepreneurial business that is focused on the future and more risk, seeing as there is a clash in terms of the organisational culture. In addition, we positioned the concept of the strategic alignment map to give firms a holistic view of the portfolio of the different types of innovation across the PLC. A strategic alignment map enables the view to identify areas which are over-invested and areas that are under-invested, and as such, firms can take a portfolio approach to manage the different types of innovation across the PLC. We also alluded that firms in first-world economies experiment more with NPD than less developed economies, where these less developed economies engage more with the other types of organisations. This is mainly because less developed economies do not have the factor conditions in the economies and do not have the economies of scale and scope to invest in NPD. Notwithstanding this, there are cases where there has been excellent NPD from less developed economies.

The innovation process in terms of technology and demand or market-pull innovation was also emphasised. It was highlighted that this should not be a linear process between the two, and these are also not mutually exclusive but are complementary and interdependent. Finally, diffusion of innovation was discussed, emphasising two important concepts, namely appropriability and complementary assets. We have also provided interesting insights into the different types of innovation. It is positioned that it is necessary to invest in more than one type of innovation across the PLC as the risk of not doing so restricts the firm from capitalising across the PLC. The benefits of investing in the different types of innovation were also highlighted, and moreover, the timing of when to invest in what type of innovation was also discussed.

Innovation is difficult, and many firms struggle with innovation. Therefore, it is important that firms take a broader view of innovation and explore opportunities across the different types of innovation and, as such, derive competitive advantages across the PLC and not only restrict themselves to product and process innovation. It was also emphasised that transformational innovation is of such a nature that it is often not ventured into established structures and firms and often initiated start-ups which are separated from the firm. This is due to the high risk associated with such types of innovation. However, it is recognised that transformational innovation stems from newcomers, and firms must be weary for long-term survival.

Conflict of interest

“The authors declare no conflict of interest.”