CHAPTER 2 LITERATURE REVIEW AND THEORETICAL FRAMEWORK
2.1 Theoretical Background
2.1.1 Innovation Perspective
In 1912, Schumpeter introduced innovation and distinguished it from invention; the distinction was significant at the time. Innovation was defined as the introduction of a new product or product quality, a new technique of manufacturing, the opening of a new market, and the conquering of a new source of raw materials (Schumpeter, 1934). In his book Business Cycle, he defined innovation as “doing things differently within the scope of economic life”, and furthered clearly pointed out five situation of innovations, including production innovation, technology innovation,
market innovation, resource allocation and organization innovation (Schumpeter, 1939). Schumpeter (1951) considered that innovation is a business concept that occurs predominantly in enterprises. Generally, enterprises must combine multiple forms of information, capabilities, skills, and resources to achieve innovation. Innovation and technological development are evolving and being implemented at an unprecedented rate. Globally, entrepreneurs are implementing the commercialization process resulting from invention and technical transformation. In the past few decades, people’s conception of the innovation process has evolved from the “technology-driven” and
“demand-driven” mode to the “coupling” mode, and finally to the “comprehensive”
pattern that is prevalent today. As a result of the globalization of the Internet, communications, and electronics, innovation is becoming more rapid and decentralized, with organizations and individuals increasingly collaborating through networks (Abouzeedan, Busler, & Hedner, 2009). Entrepreneurs are essential for the development and implementation of innovation. Government and relevant agencies should also encourage innovation and entrepreneurial policies (Norrman & Klofsten, 2009). Therefore, innovation research will grow to dominate economics, business, and other fields.
2) The Content and significance of enterprise innovation
Utilizing and continuously optimizing the allocation of its own resources and social resources, and carrying out invention and innovation from the two levels of enterprise operation and management is enterprise innovation (Gronum, Verreynne, & Kastelle, 2012). Lendel and Varmus (2011) considered that enterprise innovation is a vital component of enterprise management and a crucial factor in determining the enterprise’s development direction, scale, and velocity. Enterprise innovation consists mostly on the following aspects.
Concept innovation is the premise of various innovation of enterprises.
In the development of enterprises, enterprises leaders should have new ideas, new breakthroughs and new measures in the aspects of management concept, business concept and production concept, so that the concept of enterprises can keep pace with the growth of the market (Tsichritzis, 1997).
Institutional innovation refers to the introduction of new organization to take the place of the old organization to suit the new situation or new characteristics which enterprises are facing (S. Chen, Tao, & He, 2012). Advanced enterprise institution can manoeuver the work aggressiveness of diverse individuals and advance the management and technical innovation development (Hargrave & Van de Ven, 2006).
Management innovation is the cornerstone of enterprise innovation.
Innovation in management is exemplified by the widespread implementation of knowledge management, which makes management more scientific and methodical (Birkinshaw, Hamel, & Mol, 2008). Through management innovation, enterprises can integrate talents, capitals, technologies, and other resources, optimize various production factors and production conditions, and enhance their strength and competitiveness (Mol & Birkinshaw, 2009).
Product innovation is essential for company innovation. It enables enterprises to satisfy consumers’ demands for growing materials and maintain the sustainability of their development (Danneels, 2002).
Technological innovation is the core of enterprise innovation.
Technological innovation includes the invention of production technologies, the development of new technologies, and the application innovation of current technologies (Cantwell & Kosmopoulou, 2003). The competitiveness of enterprises is reliant on technologies, and the tendency toward enhancing technical innovation has become unavoidable. Independent R&D and innovation are crucial strategies for enterprises who are committed to enhancing the level of technical innovation, so that they can achieve competitive advantages in the fierce market competition (David J Teece, 2010).
Marketing innovation is a process of achieving breakthroughs or changes of marketing elements in certain aspects in combination with the resource conditions and business strength of enterprises for the sake of confronting the change of marketing environment (Yongmin Chen, 2006). Marketing innovation is committed to supplying customers with high-quality products and services, so enabling enterprises to keep and expand their market share and preserve their competitive advantage, thereby increasing their profitability (Tinoco, 2010).
3) Innovation Related Research
Under the background of digital technology, digital technology innovation, process innovation, organization innovation, marketing innovation, and business model innovation are vitally critical parts of digital innovation (Hinings, Gegenhuber, & Greenwood, 2018). Digital technology, digital platforms, and digital infrastructures have altered the innovation process. It not only generates new chances for inventors and entrepreneurs, but also has far-reaching effects on the creation and acquisition of value (Nambisan, Wright, & Feldman, 2019). Digital tools can not only affect output and process efficiency, reshape the entire innovation process, and realize the new configuration of personnel, teams, and enterprises, but they can also help enterprises in innovating their business models and distribution channels, and delivering more value to their customers (Falco, Renzi, Orlando, & Cucari, 2017). The use of digital platform can enhance research productivity, hence enhancing the nation’s global innovation and economic standing (Lazarev, Varkulevich, & Andreev, 2021).
The innovation of enterprises can be reflected in these aspects as follows.
(1) Innovation in enterprise operation management, such as the implementation of enterprise resource planning system (ERP), can serve as a platform for enterprise management innovation and assist enterprises in reducing costs, enhancing business efficiency, and optimizing capital operation (Kemp & Low, 2008).
(2) Innovation in product R&D, for instance, pharmaceutical enterprises use AI, big data, and other technologies in drugs R&D and clinical trials to reduce costs and the drugs R&D cycle (Q. Zhou, 2021).
(3) Innovation in production and manufacturing management, such as the applications of intelligent manufacturing, can effectively improve the existing manufacturing industry, shorten the product development cycle, reduce costs, and increase productivity, as well as promote the development of a new manufacturing mode and the internal needs of upgrading the manufacturing industry. Intelligent manufacturing’s effect on the manufacturing industry’s competitiveness is becoming increasingly important (J. Davis et al., 2015).
(4) Innovation in customer management, as well as cooperative innovation with customers or end-users, is gaining significance for enterprises as they develop new services and products (Greer & Lei, 2012). For instance, the deployment of customer relationship management system (CRM) can realize the integrated operation of the market, sales, and after-sales support, significantly enhance labor productivity, cut operating expenses, and boost the order transaction rate of enterprises (Rigby & Ledingham, 2004). Digital marketing is an innovation in marketing. Internet, communication technology, and digital interactive media can be utilized to accomplish marketing objectives. In addition, enterprises can expand new markets and discover new consumers in the most efficient and cost-effective manner (Desai, 2019).
In addition, Tornatzky and Fleisher, in their research on the impact of innovation on corporate transformation, proposed the TOE theoretical framework, which takes into account not only the characteristics of technology but also organizational and external factors (Drazin et al., 1991). The theoretical framework of TOE is shown in Figure 2.1. This model has a transparent and adaptable structure, which provides a solid theoretical perspective for the research of innovation driving factors and their impacts, and is commonly utilized for the analysis of innovation influencing factors. Bin and Hui (2021) made use of the TOE to study the influencing factors of SMEs’ DT. Patil (2021) used the TOE to study the application of industry 4.0 by manufacturing enterprises. Additionally, the TOE was utilized to examine the success factors of promoting the DT of manufacturing enterprises (Vogelsang et al., 2018).
For the purpose of guaranteeing that pharmaceutical enterprises can meet customers’ needs and gain competitive advantages in the fierce market competition, the leading pharmaceutical enterprises have begun to investigate digital innovation and DT. Therefore, it is necessary to examine the DT of pharmaceutical enterprises on the innovation perspective, and digital innovation is also a significant factor influencing the DT of pharmaceutical enterprises.
Figure 2.1 The Theoretical Framework of TOE Source: Drazin et al. (1991).
2.1.2 Collaborative Innovation Theory