Exploring the Different Types of Innovation for Firm Competitive Advantages

Over the past several decades, there has been much debate on innovation and how innovation contributes to a firm’s competitive advantage and firm performance. Innovation can be competence-enhancing or competence-destroying. From a firm perspective, innovation can be classified into at least two broad categories, namely technological innovation, which is predominately new product development (product innovation) which includes architectural innovation from a product perspective and non-technological innovation, which includes at least process innovation, organizational innovation, marketing innovation, and service innovation. From an industry perspective, there is transformational innovation which is of such a nature that it destroys whole industries and changes the nature of society. In this chapter, we explore how the different types of innovation can be better understood and how they complement each other so that the firm can derive competitive advantages from the different types of innovation and improve firm performance.