The Conception of Innovation

Theoretical and practical understanding of innovation and it’s significance for

business has been changing and improved during last decades. However, there was no

dominated theory and concept of innovation distinguished and no mutual agreement

found among academics and entrepreneurs on how to conduct an innovative process

successfully.

Conway and Steward (2009) have stated that innovation represents a delivery of a

new product to the market or the introduction process of new ideas that can solve firm

problems. Ideas that are designed to reorganize, reduce costs, improve the organization's

networks, develop new systems are also considered to be an innovation as well as the

generation, acceptance and implementation of new ideas, processes, products or services.

According to Lewin and Massini (2003) and Nelson and Winter (1982), innovation

emerges from two main sources: i) internal research and development (R&D) which is

based on the company's expertise and knowledge, and ii) the imitation of innovations that

were introduced by other companies. R&D not only provides new opportunities and

enables new methods of production but also supports the penetration to new markets and

re-creation of company’s operations and processes which would enable to serve new

markets (Knight, Cavusgil, 2004).

The importance of innovation activity is not negotiable and has been mentioned in a

number of academic studies (Damanpour et al., 2009; Prajogo, 2006; Ganotakis and Love,

2012; Bogers and West, 2012). Innovation is defined as an economic stimulus, scientific

and technological progress and social development condition. Therefore, innovative

activities which interrelate creativity, education and entrepreneurship are considered to

be productive activities directed towards any system, process or product transition from a

lower level to a higher level. These transformations aim to meet the changing needs of

society and keep up in the competition with other market participants.

According to Schumpeter (1963) and Drucker (1985), innovation is entrepreneurial

area which aims either to radically change the product using an invention or apply