Article Review On Innovation Barriers

Published Date: 02 Nov 2017

This article review was based on 10 academic journal articles and focused on the topic of barriers to innovation. The findings on different articles showed that the barriers to innovation can either be associated with internal affairs of the company or external factors which are out of the control of the firm.

Majority of the articles were focused on the barriers that exist on new product/ service diffusion and adoption. These barriers could be categorized in different groups including market related barriers, barriers caused by stakeholders, barriers that exist in banking industry and some general barriers such as risk perception, knowledge deficit and firm’s size.

Moreover, the other articles in this review studied the barriers in process innovation which is divided into two groups of barriers to innovation for existing processes or in developing new processes. Another interesting topic was barriers to innovation in SMEs. Moving on, the R&D related issues and barriers had been discussed, the importance of using R&D for achieving innovation and the problems SMEs face while they try to make use of R&D activities for innovative performance. The two final articles which had been reviewed carried certain new findings which had not been available in any other article and these two talked about barriers to business model innovation and vertical integration which can act as a barrier to innovation itself.

The common finding that had been mentioned in majority of these articles were the importance of communication and commitment to experimentation in organizations whom are aiming to walk on innovative path. And the area for further focus and research should be the important role SMEs place in innovation.

Introduction

Basically innovation occurs when there is a change in the process of thinking which leads to certain modifications in the product itself, the process of production, the position of the product in the market and / or the mental paradigm of customer towards the product or service (Tidd, et al, 2005). Systems or managerial innovation can also take place which are introduced changes into organization structure of the company in different aspects of it. Such as administration process, purchasing or management (Wikipedia). These changes can either take place incrementally or radically in the organization. It is also important to be able to distinguish innovation from invention and the key difference is that innovation involves expectations about market performance and profitability (Wikipedia) and is part of an economic system which can be commercialized whereas invention is only "an idea of an innovation" which may never get commercialized (Tidd, et al, 2005).

Achieving innovation is not an easy task and due to this reason innovation management is always one of the main concerns for organizations and they constantly try to innovate in order to be unique amongst their competitors, to be able to make more profit or to survive in the market (Tidd, et al, 2005). There are always certain obstacles and barriers on the path towards achieving innovation which companies deal with. Some of these barriers can be controlled and influenced by organizations themselves whereas some barriers are external and cannot be easily managed. In this article review however, we will look at various types of innovation barriers that exist.

Purpose of Review

This report is aimed at having a wider perspective on different innovation barriers that organizations deal with. These barriers can occur during the diffusion and adoption process, it can be external barriers caused by stakeholders and barriers can also exist during R&D stage, etc. This article review will therefore goes more in-depth on this concept and discuss various innovation barriers in more detail.

Research Method and Data

The data collection method of this report is secondary source and the following report constitutes the review of 10 articles chosen from the time frame between years 2009 to 2010. The reason behind the very short time frame in which all these articles had been gathered; is the fact that this concept is somewhat new and recently scholars started having more focus on it. The 9 journals in which these articles were extracted from are as follows: Industrial Management and Data Systems, Journal of High Technology Management Research, Journal of Product Innovation and Management, Journal of Service Marketing, Journal of Engineering Technology Management, Journal of Small Business Management, Small Business Economic, Technovation, Long Range Planning.

Literature Review

The review of articles had shown that the main barriers to innovation usually occur throughout the diffusion and adoption process of new product or service or during transfer of new technologies into the markets or mind of customers. Diffusion barriers can be defined as any type of obstacle that hinders innovation’s diffusion into market. These barriers may have a negative influence on the firm’s level of sales, speed of diffusion or overall market potential (Talke & Hultink, 2010). There are different aspects of these barriers and each of them is caused by different sources which are as follow:

Barriers in Technology Adoption Process/ Diffusion

Market Related Barriers

The researches identified certain market related barriers for technology adoption or product diffusion; these barriers include certain regulations or restrictions governing markets that might prohibit entry of these new technologies into markets. Another main barrier is the lack of focus and knowledge of the firm on the end users of the products. When the firm does not have sufficient knowledge on final clients’ needs and is unable to clearly define end-user needs, no matter how technologically complex and innovative the product they are offering is; it is not what the customer needed on the first place. Moreover, especially in the cases when the technology which is being introduced is complex, the firm must fully demonstrate and introduce the technology to the potential users otherwise this complex technology itself will act as a barrier towards adoption process (Albors-Garrigos, et al, 2009).

Barriers Caused by Stakeholders

An interesting piece of finding brought up the argument that a diffusion process can be successful when all the possible barriers to it have been taken into account and this includes addressing the activities of different stakeholder groups such as customers, suppliers and competitors that might act as a barrier. Basically lowering diffusion and entry barriers will lead to increase in market success of new products (Talke & Hultink, 2010).

Starting from customers as one of the stakeholders, three barriers had been identified which first one is the existence of perceived uncertainty by customers regarding the innovation’s cost-value ratio, new product’s expected benefits or usage options particularly when the product is highly innovative. Secondly, sometimes the resistance that some customers have towards adopting new product might lead to a negative word of mouth about the new product to other potential customers. And finally lack of or improper communication with customers and educating them about new product also acts as a barrier towards adoption (Talke & Hultink, 2010).

Moreover, while considering any external parties such a suppliers and dealers, first of all it is important to be able to differentiate their nature of relationship and to find out whether it’s a constructive interaction or competition. Basically whenever a new product tries to entre market there will be uncertainties about innovation characteristics and the expected market acceptance and benefits offered by this new product, etc. If the company manage to reduce these knowledge deficits for external parties then they have a higher chance to be able to diffuse into the market otherwise they might face barriers to market success which are caused by lack of support by suppliers and dealers such as insufficiency of suppliers in providing the components on time and with a high quality which will put the successful market launch in risk. If the sales agents do not support this product innovation the distribution of the product will be endangered. And insufficient service offerings such as training, consulting, and installations which is normally undertaken by proper service providers can also act as a barrier to product adoption (Talke & Hultink, 2010).

Amongst all types of stakeholders dealing with competitors while trying to have innovation diffusion is the trickiest one. Since from one hand, cooperation with competitors is essential during diffusion process as they increase the attractiveness of innovation by providing compatible value adding offers. But on the other hand, they can act as barriers in favor of their own new product by having aggressive price cuts, trying to imitate firm’s innovation, establishing new standards for the markets, making radical changes to their existing products or have suprise announcements on their offerings (Talke & Hultink, 2010).

Adoption Barriers in Banking Industry

Technological innovation also occurs in banking industry while they try to introduce new technology driven services offered by them, such as online-banking. The studies showed that the barriers to adoption by customers towards these services are mainly caused by stresses from safety and security aspects of these services. Basically two major types of customer-driven barriers had been identified in banking services which are functional barriers that includes barriers related to the perceived risk, value and usage and psychological barriers which are associated with image in the mind of customer and tradition (Lee, et al, 2009).

The researches had also shown that identifying these barriers in customers is helpful in defining the segments they are in and is very practical in market targeting. There are many evidences in various researches that having effective communication with customers or other involved parties is one of the key activities that remove many barriers to innovation diffusion (Lee, et al, 2009).

Moreover if we look at diffusion and adoption barriers in general, these barriers can be categorized in four groups:

Risk Perception:

Basically since the product or service is new to the market and it hasn’t been tested before some degree of risk is involved. The risk can also be associated with the investments which are specific to that asset, the channel conflicts and the resistance of supply chain or the fear from unanticipated barriers that can arise throughout the process (Johnson, 2010).

Lack of Trust and Knowledge

Lack of trust plays an important role while dealing with new technologies, especially when the end users do not have enough knowledge on the functionality and characteristics of the new product and service. They usually try to rely on the opinion of early adopters to see what their reaction is about this new product/ service. One of the examples of this lack of trust can be seen when online services had been introduced which was radically different with the previous traditional services (Johnson, 2010).

Firm’s Size:

Especially in the case of small to medium sized companies they face obstacles and barriers such as lack of support from the industry, problems in implementation and lack of organization resources such as time, ICT and money (Johnson, 2010).

Barriers in Process Innovation:

Another source of innovation that we can name of, is process innovation and similar to any source of innovation some barriers are involved on the path of achieving it. Process innovation can be characterized into two groups and consequently each group has its own barriers to deal with:

Improving Existing Processes:

There are three main barriers associated with innovation for existing processes. The first one is shortage of staff and time. Since majority of labor especially in the businesses that market demand and operating costs are high, are preoccupied in different stages of production and there will be little manpower left and no enough time to concentrate on improving the existing processes or to collect information on innovative energy efficient technologies. This is also the case for smaller projects that receive less staff. The second barrier is lack of prioritization. The competition that exist from other prioritized projects such as capital investment in new capacity which usually leads to higher internal rate of return than improvement projects usually get investment funds first. And finally, the third barrier is that in many cases people believe that relying on the existing processes and configuration which had been proven to be functioning well is more important than the benefits that new technologies are associated with (Ren, 2009).

Developing New Processes:

The first barrier being the unfavorable economic conditions which usually lead to uncertainty about market conditions or low profit margins that discourage investing in developing new processes. The second barrier is the lack of necessary tools which are required for decision making and modeling process for developing new processes. And finally the fear of job insecurity is another barrier towards developing new processes since it is a risky task and it involves the need for high investment in capital and time (Ren, 2009).

Barriers to Innovation in SMEs:

Innovation is necessary for small firms like any other firm size, since if they do not put innovation as one of main company strategies they might be at risk of losing market to competitors due to selling obsolete products. The researches have shown that majority of barriers to innovation in SMEs are in some way associated with cost and only a small portion is associated with human resource and managerial aspects (Madrid-Guijarro, et al, 2009). These barriers are divided into two groups of internal and external barriers:

Internal barriers:

The internal barriers include lack of sufficient financial resources, poor human resources, which includes employee resistance, weak management commitment that shapes a culture that does not support innovation. The other barriers are being on a weak financial position and higher costs and risks all due to the small size of the firm (Madrid-Guijarro, et al, 2009).

External barriers:

The firm’s external environment is influenced by various factors such as government policy, economic uncertainty and global competition. An effective management and communication is required otherwise these factors might act as a barrier such as arising turbulence, lack of opportunities for having external partners, low access to or lack of information and lack of government support specially in the case of smaller firms (Madrid-Guijarro, et al, 2009).

R&D Related Barriers to Innovation

A prerequisite for innovation is being able to first of all understand the latent needs of customers which requires very effective marketing and R&D activities and of course a good integration of these two departments. There are however certain barriers towards achieving this goal which includes inefficient communication between these two departments (Albors-Garrigos, et al, 2009), their incongruent goals, in some cases physical separation, cultural and personality differences of the staff and in the cases when these two departments are in separate organizations the organizational differences can also act as a barrier. However the researches found that the use of IT, both in decision making and communication can eliminate and hinder many of these barriers (Song & Song, 2010).

Moreover, even though recently the technological achievements of SMEs have received attention from researchers, the findings have shown that they usually shy away from R&D activities and their size itself act as a barrier to them for undertaking R&D activities which this is mainly due to lack of financial resources or strategic external relations (Taymaz & Ocdogruk, 2009).

Barriers to Innovation in Business Models:

As it had been already mentioned, the difference between an invention and innovation is the fact that innovation needs to be commercialized. In order to do so, companies need to commercialize their new technologies and ideas through business models. However, unfortunately companies usually do not have the required ability to innovate the business model itself. The main barriers to innovation of business models are the conflicts that might arise between the innovated and existing business model the company use, the confusion of the manager about what actually is the right type of a business model and the conflict with the standard arrangements of the firm’s assets which managers usually prefer to keep and avoid any new configurations that might threaten the on-going position of the company (Chesbrough, 2010).

Since root of majority of these barriers is due to the conflict between existing and new technologies, they can be overcome by commitment to experimentation (Chesbrough, 2010).

Vertical Integration as a Barrier:

Another interesting barrier to innovation that had been mentioned in an article was vertical integration. The findings in this article pinpointed the fact that in order to have an innovative performance, the need to collect information from external knowledge sources exists. Since this study showed a positive relationship between innovative performance and external knowledge souring. But on the other hand, the study revealed a positive relationship between the vertical integration and innovative performance up to a certain level of integration which diminishes afterwards and forms a U-shaped relationship. Furthermore the results revealed that higher levels of integration in firms may act as a barrier to external knowledge acquisition.

Discussion and Conclusion

This article review was based on 10 academic journal articles and focused on the topic of barriers to innovation. The findings on different articles showed that the barriers to innovation can either be associated with internal affairs of the company or external factors which are out of the control of the firm.

Majority of the articles were focused on the barriers that exist on new product/ service diffusion and adoption. These barriers could be categorized in different groups including market related barriers, barriers caused by stakeholders, barriers that exist in banking industry and some general barriers such as risk perception, knowledge deficit and firm’s size.

Moreover, the other articles in this review studied the barriers in process innovation which is divided into two groups of barriers to innovation for existing processes or in developing new processes. Another interesting topic was barriers to innovation in SMEs. Moving on, the R&D related issues and barriers had been discussed, the importance of using R&D for achieving innovation and the problems SMEs face while they try to make use of R&D activities for innovative performance. The two final articles which had been reviewed carried certain new findings which had not been available in any other article and these two talked about barriers to business model innovation and vertical integration which can act as a barrier to innovation itself.

The main issue that had been concentrated on majority of these articles was the importance of communication between all the departments in the organization and all outside stakeholders which in some way will relate to the innovation. Since if a proper communication will not take place between all these related parties the success of innovation will get threaten. Another finding which was common in majority of these articles was the emphasize on importance of commitment to experimentation in organizations if they want to be successful in their innovation programs.

The area that I believe scholars should have more focus on, is the study of barriers to innovation in SMEs especially when it comes to developing countries, the strategies they should follow in order to avoid them and the policies government should place in their favor. Since SMEs play a very important role in the economy of each country and they can have very high contribution to innovation if these barriers are removed or even reduced.