Innovation is a certain kind of innovation in the economic sphere of human life. Their role is quite high, as they are responsible for technological progress in production, which affects the quality of products. The functions of innovation are the basic elements through which the concept manifests itself.
The essence of the definition
The term combines two definitions - innovation and novation. The meaning of the basic concept is formed precisely on the basis of these two elements.
Innovation implies the emergence of something new that did not exist before. Innovation is an already achieved change, a definite result of the introduction of innovations.
The first option may take the form of some research, development or specific material wealth.
The second is formed due to discoveries, inventions, patents or the results of some research. Simply put, the two processes are interconnected. As a result, they shape innovation.
The concept and functions of innovation are firmly interconnected, since the latter show the main goals of introducing innovation into production.
The essence of the definition has the following features:
- it is a finished action, a result expressed by material good;
- it is an innovation aimed at improving production;
- an innovation that involves a certain investment of finance in engineering and technology.
Invention and discovery - correlation of concepts
The main functions of innovation do not include the invention of something or discovery. It is important to understand the difference between all three concepts, so as not to confuse them later.
The first involves the latest devices, equipment, parts or tools. They must be created by man.
The second is formed due to the acquisition by a specific person of hitherto unknown knowledge, random observation of phenomena or processes unprecedented in anyone before.
It is accepted that innovation, in the sense, contradicts discovery.
The main differences between the concepts:
- As a rule, a discovery or invention serves as the basis for the creation of something, and innovation is already taking place in a well-established, established production. She is modernizing it.
- Innovative processes are planned by a group of people for a considerable period of time, and a discovery can be made in a few minutes by one person. Sometimes, he does not even have to be an inventor, the main thing is to get at that time and at that place.
- The discovery sometimes has no purpose, if done without preparation, by accident. Innovative progress is achieved in order to benefit later, to establish production, to increase work efficiency, as well as the quality of products.
The appearance of the term
The concept and functions of innovation were developed by the Austrian scientist Josef Alois Schumpeter at the beginning of the 20th century. In his study, a famous scientist looked for new ways of economic development, considered probable new innovations, as a result of which he fully described this process. His work helped to improve many industries for the better, it completely destroyed the established opinions regarding the ways of modernization.
The scientist suggested that there can be only five variations of changes:
- introduction of new technologies and technical means for production;
- creation of products with properties still unknown;
- the use of the latest raw materials;
- complex changes in the production itself, as well as new methods of material and technical support;
- search for new markets.
The concept of J. Schumpeter began to apply in the 30s, saying that the process is possible only if five points are observed, as well as taking into account the functions of innovation. He also believed that innovation is the main source of profit, for this reason it is so important.
Today, the role of the term has increased significantly. This is due to the fact that it is a significant weapon of competition in the market economy. Innovation leads to several consequences:
- The cost of goods decreases, respectively, and its total value.
- Profit increases significantly due to increased demand.
- New needs are emerging.
- Financial savings of organizations are growing.
- The status or rating of production becomes higher.
- New markets are emerging. In particular, external.
Innovation Features
The concept most clearly manifests itself in functions. They are responsible for ensuring that the properties of innovations fully manifest themselves in this plane. They also show the main purpose of the definition in a particular country and its role in the life of each person.
Various innovations are a product in many markets, and they are often implemented for money, that is, a kind of exchange takes place. Such funds fulfill a number of properties that help the entrepreneur or investor-seller in the future to continue to sell such a product. This is due to the fact that the finances received are able to cover all expenses and help in creating new innovations, they are profit, therefore, a person has a motivation for further identical exchanges.
On this basis, innovation performs the functions of:
- Reproduction.
- Investment.
- Stimulating.
It is the complex of all three that is very important for innovative progress.
Reproduction
The functions of innovation management include reproduction, which suggests that such progress is the main source for financing production and its subsequent expansion.
All the finances received for this innovation help create entrepreneurial profit. The latter concept, in turn, is the basis for establishing the effectiveness of progress, as well as a source of diverse resources.
All amounts can be used to increase the volume of activities associated with production and trade.
The essence of the function is formed from the constant profit from the implementation of innovations, as well as from their use as the basis for obtaining finance.
Investment
This function, as the name implies, is aimed at ensuring that the funds received are ultimately allocated to capital. This will be the basis for subsequent profit. Capital is used in all sorts of options, often as an investment in investments or in the creation of new innovations.
The essence of the innovation function of such a plan is the direction of capital in investment.
Stimulating
This option is aimed at the fact that the businessman sets a specific goal, reaches it and immediately makes a profit. For example, he wanted to introduce innovation in a specific commercial entity, and he did it right away, since such production needs urgent modernization.
Such moments serve as a good motivation for the entrepreneur, because of which he will constantly monitor demand in the future, improve his proposals using the latest technologies.
Thus, the stimulating function assumes that the businessman has motivation to follow up as an investor-seller.