Innovation spans several fields within the social sciences and humanities: management, economics, geography, sociology, policy studies, psychology, and history. Consequently, the rapidly increasing body of literature on innovation is characterized by a multitude of perspectives based on or cutting across existing disciplines and specializations.
Scholars of innovation can come from such diverse starting points that much of this literature can be missed, and so constructive dialogues missed. The contributors to this handbook are leading academic experts within their particular field.

Each of the twenty-one articles focuses on a specific aspect of innovation. These have been organized into four main sections, the first of which looks at the creation of innovations, with a particular focus on firms and networks. Section Two provides an account of the wider systematic setting influencing innovation and the role of institutions and organizations in this context. Section Three explores some of the diversity in the working of innovation over time and across different sectors of the economy. Section Four focuses on the consequences of innovation with respect to economic growth, international competitiveness, and employment.

INNOVATION IN MAKING

Most innovations occur in firms or other types of organizations. This section surveys our current knowledge of the organizational structure and context of the process of innovation. Chapter 2 provides a historical perspective on the development of innovative firms, from the small and medium-sized firms of the First Industrial Revolution through the multi-divisional diversified industrial firms of the US and Japan in the twentieth century to the current debate on the “New Economy” and network-based business models. Chapter 3 deals more extensively with the role of networks in innovation in the subsequent chapter. Chapter 4 discusses innovation processes within firms and uses an extensive survey of the relevant literature to provide an analytical perspective on the factors affecting the performance and management of innovation within the large firm. A complementary chapter (Chapter 5) focuses on firms’ experiences with organizational innovation. Finally, Chapter 6 deals with an indispensable prerequisite for the study of innovation, the measurement of innovation-related activities, particularly in firms.

THE SYSTEMIC NATURE OF INNOVATION

A central finding in innovation research is that firms seldom innovate in isolation. Interaction with customers, suppliers, competitors, and various private and public organizations is essential, and a “system perspective” is helpful in understanding and analyzing such interaction. Chapter 7 traces the development of such an “innovation system” perspective, particularly with respect to nations (so-called “national systems of innovation”), and discusses the achievements, shortcomings, and potential of this approach. It also considers the role of some basic activities of such systems, e.g., R&D and education. Following this, Chapter 8 examines one of the central organizations in national systems of innovations: universities. Chapter 9 focuses on another aspect of innovation systems, finance, discussing the varied approaches adopted on the relationship between finance and innovation.

An essential feature in innovation systems is the conditions for the appropriation of the economic returns to innovation. Chapter 10 provides a historical overview of intellectual property rights and surveys the extensive literature on this topic. The following two chapters deal with the boundaries of systems of innovation. As mentioned in Chapter 7, these boundaries do not have to be national but may be regional, global, or sectoral (“sectoral systems” are discussed in more detail in Part III of this volume). Regional systems of innovation are analyzed in Chapter 11, and Chapter 12 examines the “globalization” of innovation and the role of multinational enterprises in this process.

HOW INNOVATION DIFFERS
The existence and significance of differences across industry and overtime in the structure and organization of the innovation process have been a central topic in the literature on innovation.
A well-known distinction in many discussions of innovation processes is between so-called “Schumpeter Mark I” industries, characterized by numerous small, entrepreneur-led firms, and “Schumpeter Mark II” industries, which are dominated by large, oligopolistic firms with extensive organized R&D. As pointed out in Chapter 13, however, such differences are the results of lengthy processes of historical change and depend on both technological and institutional factors.

Chapter 14 extends this analysis to a sample of contemporary “high-tech” industries and shows how differences in innovation and industrial dynamics may be analyzed as the interplay within different “sectoral innovation systems” among technology, actors, and institutions.

 

Chapter 15, in contrast, looks at so-called “low-tech” and “medium-tech” industries, which are often assumed to be less innovative than their “high-tech” counterparts. However, it emphasized that innovation (often involving different processes) is also pervasive within these sectors. Similar findings are reported in Chapter 16, which surveys the rapidly expanding literature on innovation in services.
Chapter 17 discusses the diffusion of technology, which is closely related to innovation and underpins the pervasiveness of innovation throughout the economy.re

 

INNOVATION AND PERFORMANCE
Economists have dominated the literature on the relationship between innovation and economic performance. The first chapter in this section focuses on an issue that has received more attention than any other in this area, the relationship between innovation and economic growth (Chapter 18). Economists have adopted different frameworks for analyzing this relationship; the two most relevant approaches are “evolutionary” and “new growth” theories. These approaches differ less in their views of the importance of innovation for growth, which is acknowledged in both, than on the precise mechanisms through which innovation affects growth. A remarkable way through which innovation spurs growth is through the diffusion of technology from the developed to the less-developed world (so-called “late-comers”). Fagerberg and Godinho (Chapter 19) provide a historical and interpretative survey of the literature on catching-up by “late-comers,” focusing on the role of innovation in the outcome of such processes. A related issue is that of changing patterns of competitiveness and the role of innovation in this context. Cantwell (Chapter 20) examines the literature on innovation and competitiveness. Although the competitiveness issue has spawned numerous controversies since the 1980s, a perhaps even more hotly debated issue, particularly within Europe, concerns the employment effects of innovation. Pianta (Chapter 21) provides an extensive survey of the large empirical literature on this subject. The section—and the entire volume—concludes with Chapter 22 on science, technology, and innovation policies.