Innovation is the process of exploration, assimilation, and transformation of new and old knowledge for generating new unique value-adding products and processes, leading to superior firm performance through value creation and appropriation by the innovating firm. While extant innovation studies have focused on the impact of innovation on either value creation or value appropriation, studies analyzing both aspects together are under-explored. Establishing a linkage between value creation and appropriation requires understanding the various stimulus which catalyze the innovation process in a business firm. The studies limited themselves to either at country level, industry level, or firm level. This study focuses to bridge this gap by exploring the impact of innovation on both value creation and value appropriation, and also understand how the three levels influence each other's innovation output.
Top1. Introduction
Innovation research is divided into three classes, input, output, and the process through which firms innovate (Aniruddha & Mital, 2016; Keupp et al., 2011; Crossan Apaydin, 2010; Adams et al., 2006). The input side of innovation research focuses on exploring factors that either stimulate innovation or are consumed in the innovation process, like physical assets, knowledge, financial capital, and human capital (Paraskevopoulou, 2012; Arora & Nandkumar, 2012; Heeley & Jacobson, 2008). The output stream of innovation research focuses on the various kinds of tangible outputs which are created from the innovation process, like products, rents, assets, and intangible outputs, like knowledge, processes, and technologies (Schwartz et al. 2012; Kotha et al., 2011; Mellahi & Wilkinson, 2010). The process stream of innovation research explains the dynamics of conversion of the inputs into output; it explores the capabilities, processes, routines, mechanisms, and systems involved in innovation (Davis & Eisenhardt, 2011; Brunswicker & Hutschek, 2010; Damanpour, 1991).
The input stream of innovation can be further divided into two categories namely the factors which are transformed during the innovation process like resources, capabilities, and technical knowledge (Aniruddha & Mital, 2016; Keupp et al., 2011; Crossan and Apaydin, 2010; Adams et al., 2006) and the factors which stimulate innovation in a firm by creating conditions necessary for innovation like economic & technological environment, financial conditions, customer needs and supplier developments (Benner & Ranganathan, 2012; Intarakumnerd & Chaminade 2011). These factors do not participate in the firm’s innovation process but merely act as initiators, creating a need to innovate (Aniruddha & Mital, 2016; Ritchie & Melnyk, 2012; Intarakumnerd & Chaminade, 2011; Kim & Pennings, 2009; Montalvo, 2006). A few studies have focussed on analyzing the factors which stimulate innovation however they have only analyzed individual stimuli (Peters et al., 2012; Keupp et al., 2011). Research highlighting the difference between these two categories of the innovation input stream and examining all are still also limited (Blind, 2012; Smith & Crotty 2008).
Innovation stimulus can be triggered either from the external environment or internally within the firm (Montalvo, 2006; Saiki., 2006; Bessant, et al., 2005). This study builds upon the industrial organization view, specifically focusing on the stimuli which are external to the firm and are responsible for creating an environment suitable for innovation (Ritchie & Melnyk, 2012; Hobday et al., 2012; Pick & Rasool, 2011; Intarakumnerd & Chaminade 2011; Kim & Pennings, 2009; Montalvo, 2006; Bertschek, 1995; Cohen & Levin, 1989). Firms competing in industries subject to innovation stimuli are likely to be more innovative than those competing in industries that are not (Benner & Ranganathan, 2012; Intarakumnerd & Chaminade 2011; Bessant, et al., 2005).