Each company developing innovation or willing to do it the future must be concerned
about innovation development process so that investment in innovation would bring
maximum benefits in the short-term and in the long-term. The establishment of a certain
innovation process structure is an important step before implementing innovation.
Referring to the established structure innovative company collects the knowledge essential for innovation development and it’s transformation to goods or services.
Afterwards these competencies can be employed in company’s growth and increase of
profit and market share.
Innovation value chain (IVC) is a conceptual framework and modeling tool that
enables to highlight the strengths and weaknesses of company’s innovation performance
features. Innovation value chain is generally used to analyze the performance of high-
tech sector companies where the key factor of successful growth is the development of
radically innovative products or services (Ganotakis and Love, 2012).
New technology-based firms entering innovative products to the market not only
improves their performance but also raises an overall competitiveness of the economy,
even in the recession. If a greater share of companies would offer innovative goods or
services and implement innovation in company’s organizational structure (new ways to
produce goods or provide services, improvement in operational capabilities and
marketing, etc.), it would not only contribute to fill the gap of productivity that results
because of competitors, but also confront the future pressure from developing countries
(Porter and Ketels, 2003).
The significance of innovation value chain is described as a compilation of
information through product and process innovation and showing the most important
links in the entire innovation process. The result of innovation value chain reflects in the
company’s growth and productivity outcomes when company implements different types
of innovation. The knowledge of innovation value chain helps companies to prioritize
necessary innovation, focus the management on weak links of the innovation value chain
and to the relationship of the company’s operating processes. It is stressed that external
research and development complements internal research and development and
knowledge resources of supply chain therefore investment to the external R&D can bring
a non-direct benefit from innovation (Ganotakis and Love, 2012). According to Hansen
and Birkinshaw (2007), in order to improve innovation, companies’ directors should look
at innovation as a process from the idea to the outcome and focus on three innovation
value chain stages: first, to generate ideas; second, to select the best ideas and develop
products, and third, to spread the innovative products across organization, local channels
and customer groups.
Ganotakis and Love (2012) provides innovation value chain scheme (see Figure 1)
which is based on Roper et al (2008) study. Innovation value chain is interpreted as
companies three key relations: first, collection of different information required for
innovation; second, transforming accumulated knowledge to the physical state of
innovation; and third, the use of innovation and it’s impact on the company's growth and
productivity rates.