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Innovation and Employment

Process versus Product Innovation

Charles Edquist, Leif Hommen and Maureen McKelvey

Which kinds of growth lead to increased employment and which do not? This is one of the questions that this important volume attempts to answer. The book explores the complex relationships between innovation, growth and employment that are vital for both research into, and policy for, the creation of jobs.
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Chapter 2: Specification of Basic Concepts

Charles Edquist, Leif Hommen and Maureen McKelvey


Definitions may be neither right nor wrong, but they may be useful or not, depending upon their purpose. Conceptual clarity is, however, a virtue because it enables us to evaluate and compare research. For this reason, we will first specify some central innovation concepts in a way that makes them useful for the study of employment effects, which are discussed in Part II (Chapters 3, 4 and 5). The key distinctions used here are between product and process innovations. With respect to product innovations we distinguish between material goods and intangible services and, regarding process innovations, between technological and organizational innovations. The first distinction, between product and process, is well established in the literature, having originated with Joseph Schumpeter. He defined product innovation as ‘the introduction of a new good ... or a new quality of a good’ and process innovation as ‘the introduction of a new method of production ... [or] a new way of handling a commodity commercially’ (Schumpeter, 1911: 66). Dividing products into the categories of goods and services is a long-standing convention in the economics literature. The distinction between technological and organizational process innovations is also well established (see, for example, Utterback and Abernathy, 1975).1 Thus the original vision of Schumpeter and the legacy of heterodox economic theory and research help us advance a differentiated conception of innovation. Certainly, a differentiated conceptualization of innovation would be of great practical utility within evolutionary and institutional economics, including the SI approach. Such a conceptualization is important because it helps...

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