The Nature of Innovation Essay Example | Topics and Well Written Essays - 3000 words

The Nature of Innovation - Essay Example The regulations on the issuance of patent rights, government procurement, research, and development, established innovation as a continuous organized activity of business rather than a random foray into intermittent flashes of creativity. Today, it is more than an industrial undertaking; it is, rather, a priority in national, and international, economic development. Probably the first cogent definition of innovation is that advanced by Schumpeter (1938, pp. 63-66) as falling into one of five forms, namely: (1) product innovation, or new products from the viewpoint of consumers; (2) process innovation, involving either new methods of production or new ways of managing the distribution and flow of commodities; (3) new markets opened up; (4) new sources of raw materials or intermediate goods; and (5) new organisation of an industry’s competitive structure. According to Schumpeter, these five forms all involve the transformation process attendant to innovation because they lead to â€Å"creative destruction† - that is, old forms are destroyed and new ones emerge to take their place. Other authors tend to categorize differently although generally along the same lines; for instance, the more recent study of Frame and White (2004) classifies innovation into four categories: new products, new services, new processes, and new organizational forms. Of special interest in this discussion is that interface between technological and financial innovation, and how the product of this fusion is used in the advancement of economic activity. While the term technological innovation has been so commonly understood as to be almost a redundancy, the concept of â€Å"financial innovation† is still unfamiliar to many and nebulous to many more. The term’s import could be deduced from the primary function of finance, which is the facilitation of the â€Å"allocation and deployment of economic resources in an uncertain environment†.